Thursday, January 29, 2009

Will free trade or protectionism prevail?

At the World Economic Forum that opened this week in Davos, Switzerland, Professor Nouriel Roubini, eminent New York University economist and author of the book, “Bailouts or Bail-ins?," and Ian Bremmer, president of the Eurasia Group, were interviewed by the Reuters news staff. Among the subjects were free trade and protectionism. Here are brief excerpts:

Q - Is there likely to be a trend toward greater protectionism and nationalist economic policies around the world in 2009? What will be the implications for the global economy?

Roubini - Protectionist pressure will become more severe if the global economic slump is more protracted and deep. ... Protectionist tariff actions have already started to emerge in places such as Russia and India and they may spread further. Trade-distorting subsidies are more likely than tariffs (see the rescue of Big Auto in the US). ... The new U.S. administration is dominated by pro-globalization figures (such as Tim Geithner and Larry Summers), but Obama's choice for Labor Secretary and U.S. Trade Representative, and the ongoing pressures by trade unions, counter-balance these free-trade leaning forces.

Bremmer - There will be a heavy nationalist influence on economic policies globally this year because the overwhelming priority among political players will be to stimulate economies, growth and job creation. These are "national" projects. Governments will appeal to national pride to maintain domestic support. ... We will see austerity programs all over the world this year. Austerity breeds populism, but populism can easily breed protectionism in any country with significant exposure to international markets. If one country finds political advantage in throwing up a wall to protect a vulnerable industry or economic sector, other governments will have a political incentive and justification to do the same. The West has preached the virtues of free trade and free markets for years. Now, many in the developing world can cite massive state spending by Americans and Europeans to justify kick-starting their own economies, including by protectionist measures.

In another Reuters article, "Davos Policymakers sound alarm over protectionism" (1/29/09), Jonathan Lynn cites the observations of several Davos participants on the subject of free trade:

India's trade minister, Kamal Nath, warned at the World Economic Forum that the global economic crisis could fuel protectionism to safeguard national industries and jobs. He told Reuters that India saw growing signs of protectionism and would respond with its own measures if its exporters were threatened. "We do fear this because one must recognise that at the heart of globalisation lies global competitiveness, and if governments are going to protect their non-competitive production facilities it's not going to be fair trade," he said. "If there are protectionist measures India will be compelled to also take commensurate measures against those countries which will be good for no one." ...

India has raised tariffs on steel to protect local producers, a measure trade experts say was aimed at China, which India does not regard as a market economy. Chinese Premier Wen Jiabao warned in a keynote speech at the opening of the Davos meeting on Wednesday that protectionism would only deepen and prolong the crisis.

Pascal Lamy, director-general of the World Trade Organisation (WTO), said it was to be expected that the crisis would generate protectionist pressures. "We all know by experience that erecting obstacles to trade would make things worse. And the first thing you have to do when you have to cope with a crisis like this is don't shoot in your own foot," he told reporters. "It's pretty clear that there is a risk and that we have to be very vigilant." ... The WTO has started to monitor trade measures taken by its 153 members for signs of protectionism. A first report this week will be updated in time for a meeting in London in April of the G20 group of rich and emerging nations, Lamy said. "At this stage there's nothing dramatic. There are spots here and there which have appeared. Not real significant macroeconomic importance, but there is an area which deserves a lot of vigilance which is subsidies," he said. ...

On Wednesday, the U.S. House of Representatives approved a "Buy America" provision requiring public works projects funded by an $825 billion stimulus package to use only U.S.-made iron and steel. European steelmakers have challenged the move. The U.S. Chamber of Commerce, which opposed the provision, believes it will be of only limited impact. "An expansion of the current 'Buy American' rules would be a dumb idea, it would be a bad idea because the natural reaction would be for our trade partners to react in kind," Thomas J. Donohue, president and chief executive of the Chamber, which represents more than 3 million U.S. businesses, told Reuters. "The more difficult it gets the more we have to keep saying 'no isolationism, no protectionism.' We need to keep markets open, we need to keep our ability to sell stuff working and to do that we have to keep our own markets open," Donohue said.

See also: Protect first, free trade be damned
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An old, familiar story

Here is a no-longer-shocking, but still appalling story of a now common tale -- that of a powerful, single-minded lobby and how it impacts American politics. Told by Philip Weiss, on his remarkable blog Mondoweiss, it is entitled "How the Israel lobby flexed its muscle to destroy New Jersey freeholder candidacy of a Lebanese-American who had expressed sympathy for Palestinians" (1/29/09).

Weiss writes: This morning Adam Horowitz wrote a post about Congressman Bill Pascrell's journey to supporting relief for the people of Gaza in the House. The post prompted a journalist friend to send along the following story about a supporter of Pascrell who had political ambition in New Jersey. As the journalist says, "It's a textbook example of the intimidating impact that 'the lobby' has on politicians -- an explanation of why we get 390-5 votes in the House on pro-Israel resolutions. I wrote this essay about it a while back, but obviously there's no place to publish it."

Weiss asked if he could publish it on his site and proceeded to do so. Here is the link:

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Saturday, January 24, 2009

Let's all be outraged

Here is a prime example of the overbearing white person, who lives to demonstrate his protective concern for the feelings of "African Americans," even when members of said group would happily live without his protection. In "PC Whiners Aside, Downey Jr. Deserves His Oscar Nod" (Huffington Post, 1/23/09), black author John Ridley reacts to Los Angeles Times' Scott Feinberg, the white person who takes offense for blacks, even when blacks take no offense.

In his January 16 column, Feinberg expresses "shock" over a role played by Robert Downey, Jr., for which he has been nominated for the Academy Award. Feinberg is dismayed, not only because he sees Downey's role as disrespectful to blacks, but because the role has won "widespread approval" from people who, apparently, should know better. In the film, Tropic Thunder, Downey's character, an actor, undergoes an operation that alters his skin pigmentation so he can play a black soldier in a film. In effect, he performs in black face.

"Where is the outrage?" demands the presumptuous Feinberg, ignoring the context of the film's story line. Enjoying his self-appointed position as watchdog for the underdog, he then offers a history lesson about those bad, old Hollywood producers in years past, who thrived on negative portrayals of blacks. "Many in the film industry are so focused on the present," he complains, "that they forget, or worse still, never properly learned, about the past." So, Feinberg, the enlightened white man, is here to straighten out such insensitive white folks. "You can sugarcoat it all you want," he blusters,"but blackface is blackface."

In his brief, terse response to Feinberg's bombast, Ridley nominates him for "Best Performance by a White Guy Who Takes it Upon Himself to be Offended For Black People." Ridley compares Downey's acting achievement in the film to the artful New Yorker cover cartoon of Barack and Michelle Obama. It's designed to go for the gut, while making its point. "Trustees of the Liberal Plantation aside," writes Ridley, "Downey Jr.'s performance is sharp, smart satire."

Feinberg seems to imply that what he calls the "wounds of the past" should neither be forgiven nor forgotten. Yes, let's keep the wounds open and bloodied, in order to give types like Feinberg grist for their everlasting race-hyping mill. Commenters on Feinberg's article (on the Times' site) reflect Ridley's impatience with the columnist's intolerant, narrow-minded view of the Downey film:

"This is just more knee-jerk, over-the-top, over-sensitivity to a non-issue. There hasn't been huge outrage from the black community because the community understands the context."

"As an African American woman, I fail to see how celebrating Downey, Jr.'s performance would be the same as celebrating 'blackface.' ... I hope the Academy does recognize Mr. Downey's performance as it was worthy of an Oscar."

"Let's go ahead and ignore the fact that no black people seem to have been offended by the movie. Instead, let's all sit down and have this white guy from LA tell us what is offensive to black people."

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Tuesday, January 20, 2009

Bush myths and lies

"We owe him gratitude, since there were no attacks after 9/11 on American soil."
"We’ve gone seven years without another terrorist attack."
"He kept us safe."

And this is all these Bush fanatics have -- the one thing that no one can prove or disprove, sort of like God's existence. Was a second attack planned against the US by the original perpetrators, or, considering the many years of planning that went into the first one, was there never an interest in repeating the atrocity? Were those who had the resources to make another strike ever of a mind to do so? Well aware of the grievous damage done, why should the perpetrators feel the need to take any further risks, especially since the element of surprise would no longer be in their favor? How do we know we were protected from anything?

For eight years we were victims of incompetents, who willfully spat on the Constitution, while exasperating the American people to such a degree, that they decided anything would be better than a continuance of the neocon monstrosities who hijacked the government in 2000. Anything -- even electing an African to run the country.
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Thursday, January 08, 2009

Protect first, Free Trade be damned

Is Free Trade something like Communism, that is, a religion or ideology that's supposed to work when all the right conditions prevail? Remember when Communist apologists used to explain that the Soviet model did not work because true Communism, the real McCoy, was never applied? Is the reason why the US finds itself in a deficit hole today due to the fact that real Free Trade has never been tried? Is Pat Buchanan right in his claim that Free Trade is a practice in which only fools would entrap their country? Here is Buchanan on the subject.

From column, "George Bush, Protectionist":

"I've abandoned free-market principles to save the free-market system," President Bush told CNN, defending his offer of $17 billion in loans to the Big Three "to make sure the economy doesn't collapse." Thus did Bush concede that protectionism, if a critical U.S. industry is in peril, must trump free-trade ideology. For in offering the bailout to GM, Ford and Chrysler, Bush, by omission, excluded BMW, Mercedes, Honda, Toyota, Nissan and Hyundai – though all operate auto plants here in the United States and all are feeling the same sales slump.

Bush may believe he has sinned against free-market principles, but he is following the path of his great free-market predecessor. Ronald Reagan, too, was not prepared to see Japan take down the U.S. auto industry, or steel industry, or computer chip industry, or Harley-Davidson. Believing Japan was dumping to destroy U.S. companies, Reagan put patriotism before ideology and imposed quotas on Japanese imports. He, too, was castigated by the same commentariat that is berating Bush.

Averting Chapter 11 for GM, which could lead to liquidation of the greatest manufacturing company in U.S. history – cutting America out of the premier consumer market of the 21st century – makes sense not only from the standpoint of politics, but economics, as well. For other nations, as the Washington Post reports, are far ahead of Bush in sheltering their industries and protecting their markets:

Moving to shield battered domestic manufacturers from foreign imports, Indonesia is slapping restrictions on at least 500 products this month, demanding special licenses and new fees on imports. Russia is hiking tariffs on imported cars, poultry and pork. France is launching a state fund to protect French companies from foreign takeovers. Officials in Argentina and Brazil are seeking to raise tariffs on products, from imported wine and textiles to leather goods and peaches, according to the World Trade Organization.

India has levied a 20% duty on soybeans to cut imports and protect her farmers. The United States has just filed charges with the World Trade Organization against China for "unfair support of its export industry – including the award of cash grants, rebates and preferential loans to exporters."

Awfully late in the game, Bush seems to have awakened to an ancient reality. When the tough times come, nations protect their own interests first, free trade be damned.

By traditional free-trade theory, a nation should import what it does not produce from the nations that produce it most cheaply. But in 1946, Japan produced almost no steel, no TVs and no cars. Instead of buying them from America, Tokyo subsidized its own steel, TV and auto industries for decades, and protected their market. Now, as Sony did to Philco and Dumont, Toyota, Honda and Nissan are taking down Ford, GM and Chrysler. Were the Japanese foolish to subsidize their industries and protect their market? Were we wise to let our TV industry be taken down, and watch our auto and steel industries driven to death's door?

To 1970, Boeing, Lockheed and McDonnell Douglas produced almost all of the world's jetliners. But rather than rely in perpetuity on Americans for passenger planes, Britain, France, Germany and Spain subsidized a socialist cartel, Airbus, that did not make a profit for 25 years and sold its planes for less than it cost to build them. That trampled all over free-trade theory, but it did kill Lockheed and McDonnell Douglas and almost killed Boeing. Were the Europeans foolish to create an aircraft industry and subsidize the destruction of Lockheed and McDonnell Douglas? Or were they wise to sacrifice today to capture the world's aircraft market of tomorrow?

Like Prohibition in Hoover's phrase, globalism is "an experiment, noble in purpose, that has failed." As we have learned, at a cost of $10 trillion in wealth wiped out on Wall Street, the nations of the future are not the consumer nations that pile up debt as they live on imports, but the producer nations that save and sacrifice and make the things the world wants.

Back in 2004, Buchanan wrote in his column, "Suicide by Free Trade":

Like companies that continue to make products no one wants to buy anymore, parties that persist in policies that are visibly failing – like LBJ in Vietnam – end up being abandoned.

If the GOP persists in this free-trade fanaticism, it is courting suicide. For the policy is not working in the eyes of the people. And if Republicans insist the returns from global free trade – a disintegrating dollar and a merchandise trade deficit of $550 billion a year and rising – are good for America, folks are going to conclude that Republicans are too out of it to govern. If the GOP does not offer ideas to halt the de-industrialization of America and the hemorrhaging of blue- and white-collar jobs, it is going to wind up on a landfill.

The problem with the columnists and think-tank scribblers who make up the intelligentsia of the GOP is not that they believe in free markets but that they worship them. They believe that if NAFTA, GATT, the WTO, and MFN for China mean production goes overseas, the market is telling us where production ought to be. And the voice of the market is to be obeyed, because that is the voice of their god. When Reagan, a devout free trader, saw the U.S. auto industry sinking, he did not let ideology interfere with a rescue. He imposed quotas on imported Japanese cars and saved Detroit, though he was denounced for apostasy and heresy.

Free-trade Republicans are like militant Christian Scientists who prefer to let patients die rather than call in a doctor – which is fine, as long as you’re not the patient. Americans believe that the interests of U.S. workers and their families come ahead of what may be good or best for the Global Economy. For years they have seen industrial jobs disappear. Now white-collar jobs are being outsourced. They want to know what Bush and the Republicans are going to do about it.

In his book, Where the Right Went Wrong, Buchanan cites Alexander Hamilton's guidelines that he believed would insure an economically independent nation. Buchanan observes that Presidents "from Washington to Madison to Lincoln to Theodore Roosevelt" followed Hamilton's prescriptions, which were:

• America must not be thirteen separate markets but a single free market. All state tariffs that impede domestic commerce are to be abolished. Free trade among the thirteen states is embedded in the Constitution.

• To ensure free trade among the states, a new national government has been created. How is it to be financed? With tariffs on imports from abroad, imposed at customs houses at the port of entry. All exports and all income of U.S. citizens are to be exempt from taxation. This prohibition was to be written into the Constitution.

• The tariff revenue extracted from foreign merchants will be used to build a new capitol, create an army and navy to defend us from imperial predators, and construct the roads, harbors, and canals that will bind us together as a people.

Buchanan concludes:

From Hamilton's mind and pen had come the greatest free market in history. But as Hamilton was, like Washington, an American nationalist, it was a national free-trade zone he had created. All Americans participated in that free market as their birthright, but British merchants, who had held life-and-death power over the colonies, would pay a price of admission – a tariff.

That tariff would finance a small but strong central government. And by raising the price of foreign goods, tariffs would stimulate our own people into building factories here in the United States. Strategic goal: Cut the ties of dependency to Europe and create bonds of commerce among Americans. The US economy was designed to weld us into one nation and one people, dependent upon one another. What was best for America, and for our people as a whole, was the basis of Hamilton's great idea.

Washington and Hamilton wanted to wean the republic off a reliance on foreign trade so Americans would never again be drawn into the wars of the old continent. They wanted to cut the umbilical cord to Europe and set out over the mountains for the West. They were statesmen, visionaries, and patriots.

See also: Will free trade or protectionism prevail?

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