HS Dent | The Assault on Free Trade Continues…

The HS Dent Financial Blog

RSS

The Assault on Free Trade Continues…

By Charles Sizemore⋅ March 20, 2009 ⋅ ⋅ Post a comment

When the United States, as self-appointed guardian of global free trade, does not honor her treaty commitments, it should come as no surprise that her trading partners retaliate in kind. Today we see news that Mexico–America’s third-largest trading partner–has slapped new tariff of 10% to 45% on 89 U.S. products in retaliation for the closure of the U.S. border to Mexican trucks. On the editorial page of the Wall Street Journal, we read that “With the cost of imported U.S. products now higher, Mexicans will substitute these U.S. brands with products from Europe, Canada, and Latin America. The retaliation appear to take care not to punish Mexican consumers or producers not give new protection to any special interest in the domestic market. It’s purpose is to focus Washington on its Nafta commitments.”

A second Wall Street Journal article added that “Many of the choices of products are aimed at specific members of Congress” who pushed hard for the closure. Make no mistake, this is not a cynical payoff to Mexican oligarchs disguised as a cry for “fair trade.” This is a justifiably indignant trading partner that is not at all happy about the United States failing to honor its agreements. This is payback time. And frankly, Americans sick of the bailout culture being cultivated at home should side with Mexico on this issue, whatever their views on immigration, drugs, etc.

Among the many items facing retaliatory tariffs, we find:

Cherries

Christmas trees

Coffee makers

Curtain rods

Mineral water

Pears

Peeled onions

Potatoes

Soy sauce

Statuettes and other decorative articles

Manicure / pedicure products

Sunglasses

Sunflower seeds

Shampoo

Toothpaste

And many more. So, at a time when American domestic consumption is plunging due to a horrific financial crisis coupled with a natural, demographic-induced slowdown in spending, we exacerbate the problem by starting a trade war with one of our biggest trading partners. And all to appease a handful of Teamster union activists.

We’ve said it in prior posts, and we’ll say it again here. Regretably. the golden age of globalization and free trade has likely passed. Even if all the gains are not reversed, the momentum has been lost. It may be another generation before it returns…if it ever returns.

Print this post

Discussion

5 comments for “The Assault on Free Trade Continues…”

Why should globalisation return? It destroys local industries and make countries overly dependant on each other. It is a waste of fuel too.

Posted by rstrauss | March 20, 2009, 10:55 am
“Free trade” was a bad deal from the getgo. All we’ve gotten is unfair trade, constant trade deficits, and a bleeding of American money and jobs to nations who have a fraction of the labor costs, regulations, and taxes that our businesses have to deal with. You can’t ever compete with such an “unlevel” playing field.
We were much better off in the 50’s and 60’s when we made almost all our own goods here instead of importing everything from elsewhere. I’m no fan of the teamsters, but they’re right on this one. Why should we allow Mexican trucks with, no doubt, inferior safety quality standards, loaded with who-knows- what (drugs, weapons, terrorists perhaps?) into this country, putting our already struggling truckers out of business? No way. This globalization interdependence game has to stop now. India has it right as one of the only nations that has not played this “free trade” game, makes its own products for internal consumption, is not dependent on other nations for it’s prosperity, and as a result is not suffering nearly as much from the current economic meltdown.
Aside from the economic negatives of “free trade”, we have placed ourselves at the mercy of others from a security standpoint. What if America had let her steel, auto, and other manufacturing industries die from foreign competition when WWII broke out? Who would we have gone to for tanks and planes? Japan? To have placed ourselves at the mercy of others for energy and practically every vital product is insane. We need to stop importing goods and begin again to be as independent as possible. There’s your job growth! Hopefully enough Americans will be on board so we can get the delusional climate-change environmentalists and the big government socialists out of our way. Let Mexico “retaliate”, even with their oil. Maybe that would force the Obama-ites to realize that we need to develop our own energy sources, oil, nuclear, and natural gas. And I don’t mean wind. We’ve got plenty of that coming out of Washington.
What does it take to convince people that “free trade” is a loser?

Posted by bunkyboy | March 21, 2009, 7:01 am
rstrauss,

Adam Smith and David Ricardo would disagree with you here. The laws of competitive advantage harness the productive ability of a country to its full capacity. We would not have the advanced economy we have today if we had to waste our labor and capital on the low value added products and services that we import.

CLS

Posted by Charles Sizemore | March 21, 2009, 9:08 am
Bunkyboy,

We have a treaty obligation to allow Mexican trucks enter the country. If this is undesirable, we should amend the treaty, but to simply not honor a treaty commitment out of political convenience sets a very bad precedent. Furthermore, though India has survived this current economic rout more or less intact, India is hardly the model to follow. The Indian model of “self sufficiency” has reduced the vast majority of that country to abject poverty and has reduced the choice and standard of living of virtually all.

If protectionism is such a fine idea, perhaps the richer states should slap tariffs on the poorer ones. I’m sure Michigan would love to see tariffs on the non-union cars produced in Alabama and Texas!

CLS

Posted by Charles Sizemore | March 21, 2009, 9:31 am
Economic history generally, and of the Great Depression in particular, clearly support your view Charles. I hope we don’t choose India as our role model. Protectionism will make this downturn, already destined to be severe, far worse.

Posted by garyca | March 21, 2009, 10:24 am