No trade agreement is necessary for a government to adopt this ideal policy [true free trade]. And because real-world trade agreements universally fail to achieve complete free trade, real-world trade agreements are universally less than ideal. Each such agreement can and should be criticized for failing to achieve an ideal that is economically not only possible, but easily economically possible and immensely beneficial.
But political realities being unavoidable – and freer trade being superior to not-freer trade – freer trade is an acceptable real-world outcome. In my assessment (as in the assessment of many others), most so-called free-trade agreements make trade freer. (A more-accurate name for them would be “freer-trade agreements.”) And for this reason such agreements deserve the support of proponents of free markets if the only plausible option is the status quo of not-freer trade.
For free-market proponents to oppose freer trade because it isn’t fully free trade is akin to opposing cuts in marginal tax rates because the proposed cuts don’t eliminate taxes altogether. It’s akin to opposing legalization of marijuana if not all drugs are legalized. Or akin to a refusal to join with, or to support, those who oppose raising the minimum wage on the grounds that those opponents aren’t actively working for a complete abolition of minimum wages.
It is true that NAFTA, WTO agreements, TPP, and other such bilateral and multilateral freer-trade agreements leave in place many trade barriers and specify the always-too-slow timing of tariff reductions. But these arrangements are no more instruments of “managed trade” than are government policies that prohibit the sale of some drugs, sex, and body organs – and impose taxes on the sales of all other goods, – instruments of “managed consumption.” While I argue for eliminating all of these promotions and taxes, if such elimination isn’t politically feasible, then any move to reduce the number of prohibitions and the rate of taxation will make market freer and, hence, worthy of the support of proponents of free markets.
Don Boudreaux, “Bonus Quotation of the Day…”, Café Hayek, 2016-11-22.
April 20, 2017
February 15, 2017
Andrew Lilico discusses the potential benefits to Canada, Australia, New Zealand, and the UK if these countries work on forming a four-way free trade deal:
The idea of CANZUK begins with a free-trade agreement, free-movement area (the freedom to live and work in each others’ countries) and defence-partnership agreement. O’Toole favours all three of these main planks, and he’s right that it all makes perfect sense.
The CANZUK countries, working closely together, would make a formidable contribution to world affairs. They would have the largest total landmass of any free-trade zone. They would collectively constitute the fourth-largest market in the world, after the U.S., EU and China.
Their combined military spending would be the world’s third largest, well ahead of Russia, and on European Geostrategy’s geopolitical power index, the CANZUK countries collectively have a strength around 70 per cent of that of the U.S. — and nearly twice that of China or France. With a combined global trade footprint nearly twice as big as Japan’s, the CANZUK countries would have substantial influence in opening up global markets and guiding global regulation across a range of issues from banking to shipping to the environment.
What makes CANZUK a natural union is perhaps self-evident. Canada, the U.K., Australia and New Zealand share a similar culture, similar values, and analogous legal, business and social systems that allow us to get along easily and interchangeably. (The term CANZUK was originally a term diplomats used to refer to these four countries because of how frequently they would vote the same way at the UN.)
Most of the main issues our political parties focus upon are instantly comprehensible to anyone from another CANZUK state. Our laws and constitutions share many features, making trade deals and mutual regulatory recognition a relatively straightforward matter. Our citizens enjoy a roughly similar per capita GDP (which is just not true of the other Commonwealth nations with similar constitutions) and face few hurdles in integrating into another CANZUK country’s labour market. Our societies are peaceful and orderly.
February 11, 2017
Published on Feb 8, 2017
February 10, 2017
Ted Campbell is touting the benefits of a trade pact among the “other” Anglosphere nations (Canada-Australia-New Zealand-United Kingdom):
First, I am a committed free(er) trader. My reading of history is that free(er) trade always leads to greater peace and prosperity and that, conversely, protectionism usually paves the way for recessions, depressions and wars.
Second, the time seems ripe. Given the global trade situation ~ Brexit, Trump, the demise of the TPP, etc ~ and given that Canada (and Australia and New Zealand, too, I guess) and Britain are interested in a free(er) trade deal it might be an opportune moment to hit the pause button, briefly, and engage in four way negotiation since we are, all four, likely to have very similar aims. Canada has, probably, reached tentative and tentatively acceptable agreements with Australia and New Zealand in the TPP negotiations and we have made equally tentative and acceptable agreements with Britain during the CETA negotiations. It shouldn’t be beyond the wit of men and women of good-will to broaden and deepen those agreement for the mutual benefit of all four partners. (Although Mr O’Toole’s professed support for supply management may be a problem as it is, I think, one of the things we agreed to sacrifice for the TPP and it, ending supply management of the egg and dairy sector, is a long standing Australian/NZ demand.) It might make it easier for all four of us to deal with America, the ASEAN nations, China, the European Union and India, amongst others if we are reasonably united, homogeneous trade block of four friendly nations with a population of (Dr Lilico’s figures) 128 million people, a combined GDP of $(US) 6.5 Trillion, and global trade worth more than US$3.5 Trillion (versus around US$4.8 T for the U.S., US$4.2 T for China, or US$1.7 T for Japan).
Militarily, the four might find some grounds for further and even deeper cooperation ~ ideally, in the long term, on shared defence requirements definition … deciding, in advance, to harmonize operational requirements for “big ticket” items like ships, aircraft, tanks and electronics … and then, whenever politically possible, to enter into combined, multinational procurement exercises to leverage the advantages of the greater size of the combined requirement for lower prices. This is a possibility that is fraught with political difficulty but which could deliver real, measurable financial benefits to all four countries.
Equally, the four nations, acting in concert, perhaps with Singapore added, too, might be able to exert more and better influence on e.g. United Nations peacekeeping operations.
February 8, 2017
Stephen Gordon says it’s a dangerous fantasy to think that the Canadian economy could cope with a Prime Minister who tries to “get tough” over Il Donalduce‘s trade concerns:
Pierre Trudeau once described the Canadian relationship with the United States as “like sleeping with an elephant. No matter how friendly and even-tempered the beast … one is affected by every twitch and grunt.” It is now Prime Minister Justin Trudeau’s bad luck – and ours – to be bunking down with a surly and irascible elephant.
It’s worth dwelling on just how asymmetric the economic relationship is between Canada and the United States. It’s sometimes pointed out that Canada is the largest market for U.S. exports, and that’s true as far as it goes. But U.S. dependence on the Canadian export market is an order of magnitude smaller than Canadian dependence on exports to the U.S. Exports of goods and services to the U.S. accounted for 22.8 per cent of Canadian GDP in 2015; U.S. exports to Canada were only 1.9 per cent of U.S. GDP.
There’s not much that could or should have been done to reduce this dependence on the U.S. market. All the factors that determine the volume of trade flows — physical proximity, market size, linguistic and cultural ties, similar legal systems and so forth — all point to the U.S. It’s always been a good idea to promote trade links with other countries, but the U.S. would still be our dominant export market even in a world in which the Comprehensive Economic and Trade Agreement and the Trans-Pacific Partnership were already in place.
So it really doesn’t make sense to think that a Canadian Prime Minister can “stand up” and “fight back” against U.S. sanctions, or that Canada’s bargaining position would be somehow strengthened if another person were running the government. The trade numbers would still be the same.
January 27, 2017
Well first of all, tell me: Is there some society you know that doesn’t run on greed? You think Russia doesn’t run on greed? You think China doesn’t run on greed? What is greed? Of course, none of us are greedy, it’s only the other fellow who’s greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history, are where they have had capitalism and largely free trade. If you want to know where the masses are worse off, worst off, it’s exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.
January 14, 2017
Conservative leadership candidate Maxime Bernier gets an unusually even-handed profile from the CBC:
Bernier’s life is a moveable banquet of rubber chicken, and shaking grimy, anonymous hands, and pretending great interest in everyone, trying all the while to turn the discussion to Maxime Bernier. And perhaps asking for some money while he’s at it.
Actually, that’s unfair. What Bernier mostly turns the discussion to is his ideas.
He’s libertarian, to the extent that it’s possible to be a libertarian and seek high office in a country that was built on protectionism and entitlement and government being the answer to everything.
He advocates the end of quotas and supply management for dairy, poultry and eggs. Oh, and maple syrup. Most Canadian politicians — let alone MPs representing rural Canada like Bernier — prefer to leave such topics undiscussed.
He wants to abolish interprovincial trade barriers. Stopping companies from growing into other Canadian jurisdictions, or stopping workers from travelling between provinces, he characterizes as “foolish,” “doubly foolish” and “ridiculous.”
Go ahead and argue with that.
Bernier wants an end to what he calls “corporate welfare,” his term for governments using tax money to pick winners, such as Bombardier and General Motors, and letting losers struggle with market forces.
If you’ve been reading the blog for a while, it’ll come as no surprise that Bernier is far and away my preferred choice for Tory leader.
December 11, 2016
Ted Campbell is in favour of bringing NAFTA up-to-date and reminds us that there’s another diplomatic item that could use modernization at the same time:
In my opinion, if Prime Minister Justin Trudeau, or the next Conservative leader is really interested in restoring Canada to a leading position in real, practical, long term peacekeeping then (s)he will abandon the United Nations and, instead, turn Canada into a free trade powerhouse by dropping our remaining protectionist measures, as Maxime Bernier and Colin Robertson both advocate, and making deals with all comers. And it is important to remember that “deals” involve two sides and both sides must gain something which means that both sides probably “give” something, too, and that produces short term “losers” and it is politically important to try to “soften” the transition for those who are bound to lose in the short term. But, in the mid to long term most losses are “covered” by gains in new products and services and the utilitarian goal of “the greatest good for the greatest number” is achieved … most of the time.
One of the things Colin Robertson mentioned was shipbuilding and it leads me to consider that one of the things we want to renew if or when we must renegotiate NAFTA is the Defence development sharing agreement between Canada and the United States of America. The stated objective of the existing (since 1963) agreement are:
- To assist in maintaining the Defense Production Sharing Program at a high level by making it possible for Canadian firms to perform research and development work undertaken to meet the requirements of U.S. armed forces.
- To utilize better the industrial scientific and technical resources of the United States and Canada in the interest of mutual defense.
- To make possible the standardization and interchangeability of a larger amount of the equipment necessary for the defense of United States and Canada.
The Defence Production Sharing Program is, too often, hamstrung by US (and Canadian) protectionist measures and it needs to be brought more fully into the area of bilateral free trade. I am not suggesting that the Pentagon would ever let, say, a significant shipbuilding contract to a Canadian yard but it must be possible for Canadian shipyards and factories and service providers to bid on US defence contracts on at least a “near equal” basis and vice-versa, of course. This, free(er) trade in defence materiel and services is one area where we, North Americans, can learn from the Europeans. I am not suggesting that Canada should abandon the idea of having a national defence industrial base but, rather, that we should have a base that fits, neatly, into a larger continental base that is, somehow, connected to other allied defence production systems.
So, broadly, when (if) President elect Trump says he wants to renegotiate NAFTA we should, indeed, say “bring it on!” But we should go into negotiations with our eyes wide open, prepared to surrender some “losers,” as good bridge players do, in order to finesse some winners for ourselves.
November 14, 2016
Ted Campbell rounds up much of the recent media wisdom on the state of relations between Canada and the US in the wake of Il Donalduce‘s victory in the presidential election, and summarizes what Justin Trudeau may be forced to do:
It would appear that there is an emerging consensus in the mainstream Canadian media, from left, centre and right, that the election of Donal Trump means that Justin Trudeau, and, indeed, Canada, is backed into an unhappy, uncomfortable, even dangerous corner; dangerous, that is, to our national interests.
In short, in so far as Prime Minister Trudeau’s agenda is concerned, most media commentators seem to agree that it, and by extension Canada, in so far as Canada shares the prime minister’s vision, is:
shouldmust Prime Minister Trudeau do?
First: secure the CAN~USA free trade agreement. Everything on his agenda depends upon revenue and revenue depends upon Canadians having jobs and many, many of those Canadian jobs depend upon access to the gigantic US market. If he wants to do anything except bow out, three years from now, as a miserable failure of a prime minister, then he must secure our free trade deal with the USA. And it’s a deal, which means that in order for us to get what we want and need the Americans have to get what they want and need, too.
Second, and likely consequential to the first priority: increase defence spending ~ double it if that’s what it takes, buy the F-35, strengthen the Canadian contribution to NORAD and NATO, and then make UN peacekeeping support US and Western strategic objectives.
Third: cancel the carbon tax; it will only make Canadians companies less competitive.
Fourth: force pipelines through to tidewater on both coasts. Keystone XL is OK for getting Alberta’s oil to Texas, but we really need to get it, readily, to the whole world. That means pipelines to Canadian ports … no matter what the greenies and first nations might say or do.
Fifth: negotiate free(er) trade deals with others. Start by ratifying the TPP, no matter what. Negotiate deals with the UK, with China, with India and with the Philippines, all as matters of urgency.
Finally, Prime Minister, please do not get into this position …
If Trudeau did all or most of this, he might well be able to appease Trump and retain Canada’s advantageous relationship with the US otherwise intact. The problem is that, as Campbell notes, it will offend and outrage so many parts of the Liberal coalition that it would take such a “Nixon goes to China” level of political audaciousness combined with a Jean Chrétien degree of fiscal austerity that I doubt Trudeau could even get his caucus unified enough to pass the legislation, never mind withstand the inevitable protests in Liberal ridings across the country (and in the domestic media).
October 19, 2016
Published on Sep 23, 2016
A lot of doom and gloom types say we’re living in dark times. But they’re wrong.
While there are real problems, the world has never been healthier, wealthier, and happier than it is today. Over a billion people have been lifted from dire poverty in just the past few decades.
What has contributed to this improvement of our well-being? The answer can be found in the evolution of economic and policy ideas.
But we can still do better. How will we solve today’s challenges and what breakthroughs will spark change tomorrow?
July 30, 2016
In the New York Review of Books, Jonathan Freedland looks at some of the significant factions of the Republican party who have not embraced Il Donalduce:
Yet this is not solely a revolt of “values conservatives” against the brash, thrice-married vulgarian from Queens — a battle of Iowa against New York, as Cruz likes to frame it. There are other fault-lines. Neoconservatives such as Bill Kristol (or Robert Kagan, who says he will vote for Hillary Clinton) oppose Trump too, as do foreign policy realists such as Brent Scowcroft. Some of this is personal: Scowcroft and others feel a strong loyalty to the Bush family, whose animus toward Trump is incandescent thanks to the billionaire’s trashing of Jeb. But policy substance has also played its part in Trump’s improbable achievement: he has managed to turn many disparate Republican strands — Log Cabin types and evangelicals, neocons and Bush 41 stalwarts, Wall Streeters and military brass — against him. (That these different elements have not been able to cohere around an alternative candidate or program helps, in part, to explain Trump’s success, but it does not make their opposition any less real.)
Trade is a crucial example. The GOP has long been the party of free trade; in 1993, Bill Clinton could only pass NAFTA with Republican votes. But now its nominee denounces such trade as a destroyer of American jobs, apparently seeing commerce as something the US should do to, rather than with, other countries. The result was the astonishing sight of a Republican presidential nominee, in his acceptance speech, bidding for the voters of an avowed socialist, Bernie Sanders, “because,” as Trump put it, “we will fix his biggest issue, trade deals.” The issue was hardly debated in Cleveland, but the shift is remarkable all the same. Trump has refashioned the GOP as the party of protectionism, advocating an approach Republicans previously denounced as a threat to American prosperity.
Similarly, Republicans have for decades enjoyed an advantage on national security, obliging the Democrats to match them on strength and military commitment. Trump has broken from that too. He implies a rupture not only from the neocon, democracy-spreading policies associated with Bush the son, but also with the engaged internationalism of Bush the father. Trump is seemingly uninterested in America’s traditional status as sheet-anchor of the international system, central in a series of interlocking alliances that have maintained relative order and stability since 1945. Instead, he took time out from Cleveland to tell The New York Times he did not believe in the cardinal principle underpinning NATO — that an attack on one member is an attack on all — and that, as president, he would only defend one of the Baltic states from hypothetical Russian invasion if he deemed that state to have been paying its proper dues. Put aside the huge implications of such a shift for global security. Trump is turning his back on decades of Republican Party doctrine.
That’s true on the scale of government, too, with Trump implicitly advocating gargantuan powers for an imperial presidency: “I alone can fix this problem,” he says of crime, ISIS, immigration and much else. That’s quite a change for a party that has long regarded it as an article of faith that government is the problem and never the solution.
Republicans alarmed at these developments are not quite sure what will be worse: for Trump to lose or for Trump to win. Some have persuaded themselves that a Trump victory is best for America, simply because Hillary Clinton must not be president. (One Utah delegate, anguished about Trump’s “rough edges,” told me he believed Clinton was “evil.”)
But others are terrified by the possibility of a Trump victory. If that happens, they fear, the upheaval of 2016 will become permanent: the Republican Party will be reshaped in Trump’s image. It will be protectionist, nativist, authoritarian, and the vehicle for an exclusively white rage. Richard Tafel recoils so sharply from that prospect, he is talking seriously of forming a new party of the center-right. He’s already had conversations with “some of the wealthiest” CEOs and others, worried that Trumpism does not respect the prudent, cautious, free-market conservatism they value. For millennials especially, Tafel says, Trump is making the Republican Party a “toxic brand.”
The biggest challenge to forming a new political party is that the current system is completely rigged in favour of the two big parties to the extent that even long-established third parties like the Libertarians and the Greens still have to spend vastly disproportional efforts (and funds) just trying to get their candidates onto the ballot. A new “centre-right” party would face the same problem — and neither of the two big beneficiaries of the current system will be eager to see their institutional advantages eroded.
July 21, 2016
At the heart of [Trump’s] argument is the belief that selling to countries is good and buying from them is bad, the crude mercantilist fallacy that Adam Smith’s Wealth of Nations debunked in the same year that America embraced the Declaration of Independence. Smith, the brilliant British political economist, argued that unless people start eating gold bullion, the point of wealth is to buy not sell; to consume not produce. If China starts shipping free plasma TVs to America, a few American companies may be thrown out of business, but American consumers will be better off. What’s more, they’ll be able to spend their savings on goods from other companies. The only folks that protectionist policies benefit are crony capitalists who face less competition — the very thing that Trump says he’s fighting.
Shikha Dalmia, “Donald Trump’s free-trade follies”, The Week, 2016-06-30.
June 26, 2016
In his latest column at the National Post, Colby Cosh wonders why Canadian pundits have been so strongly pro-EU when their other mode is to reject anything resembling an EU-style relationship with our own largest trading partner:
I might have voted Remain myself if my great-grandparents’ generation hadn’t lit out for the great plains, but isn’t there something obviously unusual about our view of the transatlantic frenzy? Canada is a political entity defined by its perpetual rejection of a continental political union. No one here, at all, ever expresses any doubt about the wisdom of that rejection. It costs us all hard cash, every day, to not be the 51st state. Yet we keep the Americans at bay, preserving the freedom to make arrangements on trade and defence on a basis (or pretence?) of mutual, separate sovereignty. We do this even though we share a common tongue with Americans, and they are much more similar to us culturally and ideologically than an Englishman is to an Estonian.
Look at the list of imprecations being hurled at Leave voters Friday, many of them by Canadians. They’re “small-minded,” “isolationist,” “short-sighted,” “fact-blind,” “racist” countryside boobs without vision or understanding. Couldn’t all these epithets be turned on us like a gun-barrel? Who speaks for, even contemplates, the discarded project of American Union — which was once a lively concern, actively advocated by some of the first people to call themselves Canadian in the modern sense?
If the sheer craziness of Canada’s Remain sympathies weren’t obvious enough, the intellectual leaders of the Leave camp are constantly upholding Canada as a model for immigration policy, with its self-interested, skill-privileging, but globally indiscriminate points system. They also cite us as an obvious potential partner for the kind of bilateral trade deal Britain will now be free to pursue on its own. Basically, the Leave campaigners didn’t put it this way or incorporate it into a slogan, but they want the U.K.’s relationship with Europe — a polyglot kaleidoscope of radically dissimilar nation states, some of them failing — to be the same friendly, wary relationship Canada has with the United States.
What in Hades could possibly be wrong with that, as a basic proposition?
April 14, 2016
ESR explains why the Trans-Pacific Partnership is such a huge monstrosity of regulations, crony capitalist favours to big business, anti-consumer intellectual property rules, and other mercantilist interventions in trade:
Today there’s a great deal of angst going on in the tech community about the Trans-Pacific Partnership. Its detractors charge that a “free-trade” agreement has been hijacked by big-business interests that are using it to impose draconian intellectual-property rules on the entire world, criminalize fair use, obstruct open-source software, and rent-seek at the expense of developing countries.
These charges are, of course, entirely correct. So here’s my question: What the hell else did you expect to happen? Where were you idiots when the environmentalists and the unions were corrupting the process and the entire concept of “free trade”?
The TPP is a horrible agreement. It’s toxic. It’s a dog’s breakfast. But if you stood meekly by while the precedents were being set, or – worse – actually approved of imposing rich-world regulation on poor countries, you are partly to blame.
The thing about creating political machinery to fuck with free markets is this: you never get to be the last person to control it. No matter how worthy you think your cause is, part of the cost of your behavior is what will be done with it by the next pressure group. And the one after that. And after that.
The equilibrium is that political regulatory capability is hijacked by for the use of the pressure group with the strongest incentives to exploit it. Which generally means, in Theodore Roosevelt’s timeless phrase, “malefactors of great wealth”. The abuses in the TPP were on rails, completely foreseeable, from the first time “environmental standards” got written into a trade agreement.
That’s why it will get you nowhere to object to the specifics of the TPP unless you recognize that the entire context in which it evolved is corrupt. If you want trade agreements to stop being about regulatory carve-outs, you have to stop tolerating that corruption and get back to genuinely free trade. No exemptions, no exceptions, no sweeteners for favored constituencies, no sops to putatively noble causes.
December 13, 2015
Last week, Kevin Williamson attempted to explain why the Trans Pacific Partnership isn’t all that similar to an actual “free trade” agreement (and why that’s so):
Prominent among the reasons to look askance at TPP is that its text calls for the incorporation — sight unseen — of whatever global-warming deal is negotiated at the conference currently under way in Paris. It is one thing for a trade deal to incorporate changes to environmental practices — regulatory differences are an inhibitor of truly liberal trade — but there is a world of difference between incorporating specific environmental policies and incorporating environmental policies to be named later.
It would be preferable if we could simply enact a series of bilateral “Goldberg treaties,” so called in honor of my colleague Jonah Goldberg, who argued that an ideal free-trade pact would consist of one sentence: “There shall be free trade between …” But the unhappy reality is that the snouts of the nations’ sundry regulatory apparatuses are so far up the backsides of various industries and economic sectors that sorting them out requires thousands of pages of text. Consider, for example, the problem of defense-acquisition practices. Some countries have rules mandating that defense procurement be restricted to domestic firms, and some countries don’t. Coming up with a harmonized, one-size-fits-all approach is difficult; we Americans, accustomed as we are to operating in an economy that produces the best of almost everything in the world, sometimes forget that there are countries with no domestic aerospace industry or sophisticated manufacturers of military materiel. Of course Kuwait goes abroad for military gear; if memory serves, at one point their air force uniforms were made by Armani.
All of which is to say, we should expect trade deals, especially multi-lateral trade deals, to be complex, and we should expect environmental and labor standards, along with government procurement procedures and the like, to be part of the accord. There’s no getting around it. And, again, there is nothing wrong in principle with using trade accords, which have real economic bite, as a critical instrument for enforcing environmental rules and other regulatory reforms that are incorporated into trade relationships. But using TPP to commit the United States to whatever is cooked up in Paris, without an additional vote in Congress, is a poor tradeoff. It’s not often that I will turn up my nose at a trade deal — even far-from-perfect trade pacts are generally desirable — but here we should draw the line. TPP was negotiated, Congress and the public have had a chance to review the text, and Congress should reject it. That’s the system working, not the system failing to work. It’s why we have votes.