I'm Joeverkill, and these are some notes from the Right-Wing.
The World Trade Organization is advising U.S. consumers to save their money, even as the U.S. government is trying its damnedest to get them to spend it. From the AFP:
Families in the United States have to save more if the country is to reduce a deficit in payments with the rest of the world, the World Trade Organisation said on Monday.
In a review of US trade policy, the WTO said that if consumers saved more and spent less, then there would be less demand for imported goods.
That would help to reduce a deficit on the balance of payments into and out of the country, it said.
I've always been more than a bit wary of the WTO. I'm an isolationist at heart, and I've always been suspicious of the WTO's push to liberalize the flow of goods and currencies between borders. However, they're raising a good point here. We're pushing ourselves into a deep hole of debt and deficit. In my own opinion, the U.S.'s import/export ratio has been too high for years now. The federal government is telling us to spend more, but if Americans are just spending that money on imported goods (which they mostly are), it's the economic equivalent of throwing shit on a shitfire.
As per usual, though, the WTO displayed a nearly sickening level of duplicity by
warn[ing] against any pressures for protective barriers to reduce imports, saying the world's largest economy should work instead to expand its exports to balance the account.
Okay, so the WTO doesn't want to piss off all the nations that export to the U.S. -- not necessarily the high road, but it makes sense -- but then they have the balls to rule against the U.S. in its complaint against India's high tariffs on imported alcohol products.
In the conclusion of its ruling, the WTO's dispute panel said that the United States has "failed to establish that the additional duty on alcoholic liquor is inconsistent" with India's WTO commitments.
The US had filed the complaint against India in May 2007, claiming that additional duties on alcoholic beverages were as high as 550 percent of the value of the product.
I'm not saying I oppose India's high alcohol tariffs. In fact, I support the right of sovereign nations to regulate trade. But is no one going to call the WTO out on this one? They shake their fingers at the United States, admonishing us for having too high an import/export ratio, then tell us not to raise tariffs, then support a country with already astronomically high tariffs in a decision that effectively restricts the U.S.'s ability to export. Why do we put up with stuff like this?
I'm Joeverkill, and this has been Notes from the Right-Wing.
Monday, June 9, 2008
Notes from the Right-Wing: Trade Deficit
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9 responses:
the fact of the matter with liberalizing the flow of currency between borders is this is the new status quo. don't expect globalism to go away.
when i see america's interaction with this new economic paradigm, i always get a little confused. we're the country that has been defined by our open economic policies with other nations since day one. now that it's kinda biting us in the ass, we're getting mad and turning our backs on the financial system that we created.
while the wto reminds me slightly of affirmative action in that it tries to artificially prop up the developing countries against the developed, the intent is good.
as for their comments themselves, i agree completely. we need to fix our trade deficit before anything will be ok in this country again. thankfully, the invisible hand will do this naturally with a devalued currency leading to substantially less international purchasing power.
unnaturally high tariffs from countries like india will eventually serve to completely discourage exports from our coutnry to theirs. while our goods will be cheaper by the day and our economy is tanking, it simply won't be fiscally feasible to pay such tariffs. fortunately for us, we're still going to be making those great american products that people love to buy worldwide.
Analyst,
I don't see how we're turning out back on a liberal, global economic paradigm. Certain politicians and commentators in the the U.S. may be ardently opposed to it, but on the whole, our government is quite pro-globalization.
I don't expect globalism to go away, and I think the WTO was initially a good idea. However, I take issue with their tendency to expect the U.S. (and all of the G8 countries, to some extent) to kowtow to everyone else. Moreover, I take issue with the U.S.'s tendency to accept it.
it may not just be "affirmative action" but caution thrown into the wind and something to do with protecting a potentially fragile (if still booming) economy. If India didn't regulate its own imports, a main source of growth (tremendous physical goods trade surplus) could grind to a halt.
an idealised example is how jamaica used to be agriculturally entirely self-sufficient, even making good money on sugar exports.
Then globalisation stepped in, dumped subsidised foreign sugar all over the island, put farmers out of business and turned it into a giant begging bowl. Took them a long time to get it sorted-- and that's a fucking island.
joe, i think that's part of the problem - the 'conservatives' have a legitimate gripe with our interaction on the world stage that the 'liberals' don't seem to comprehend - we're treating everybody like it's still the late '40s and we're the best and only hope for free trade and liberal democracy, with 60% of the industrialized world's gdp.
not anymore. the marshall plan is over. while we're still the world's largest economy, it's time for us to stop playing benefactor and start playing competitor.
most of our gripes on both sides of the coin are inextricably tied to the fact that we haven't figured out how to play the globalism game yet to the benefit of anybody in this country except for the people on top of our multinational corporations. the trick is to rejigger our part in the system so that the worker benefits (lest we have a massive socialist uprising...nobody wants that).
Great points, Analyst.
It's important to note that the U.S. is still doing fine and dandy exporting things like entertainment media and software. It's also important to note that these fields tend to treat their workers relatively well. The tough thing is getting back into the game in arenas that required less skilled labor. The U.S. has to compete against economies that can afford to pay their workers far less -- due to both advantageous exchange rates and more liberal labor laws.
How do we do that? In my opinion, selective tariffs are the only way to bridge the gap. I'm generally in favor of a free market, but there are a number of reasons imports should be restricted:
the ethical imperative not to give patronage to nations who allow poor workplace standards, the environmental damage caused by importing goods via sea and air, the importance of protecting domestic jobs, and resistance to an increasing economic inequality gap are all concerns.
those are all extremely good reasons to institute selective tariffs. however, i believe that all of them save for the first (ethical) reason will be naturally resolved by market movements. as transportation becomes increasingly expensive, people will naturally gravitate more toward cheaper, domestically produced goods. we have definitely had similar discussions about supply chain inefficiencies before.
simply put, chinese socks will be much more expensive when the dollar drops and gas to get the socks from china gets pricier.
the first reason, which you refer to as the "ethical imperative" to punish those with substandard labor rights, seems to be the most sound. however, to make a purely semantical point, this strikes me as an embargo rather than a tariff.
Sure, it's likely that increased transport costs will bring the price gap down. However, there's no guarantee that the gap will disappear. Countries that employ sweat-shop practices can manufacture goods like socks at much lower cost, and higher transport costs might not fill the gap all the way.
Embargo is a harsh and controversial method of sanction, and it can cause some rather severe diplomatic problems. Tariffs that make it cost-effective for consumers to purchase domestically manufactured goods are a way around these issues. Additionally, tariffs are scalar and adjustable, and they generate revenue for the government.
I did a little research on the alcohol tariffs and found out two key issues that caused it. Firstly there is a burgeoning wine drinking culture that is spreading quickly in the growing cities of India where people are looking for a more sophisticated alternative to hard liquor. In response to this demand and to worldwide demands for cheap wine there is a fledgling domestic wine industry that is slowly gaining worldwide recognition. The tarriffs seem to be aimed at protecting this new industry.
Secondly - there is still a slightly puritanical attitude towards alcohol sales and consumption in India. For example I read one article that mentioned 21 dry days in the New Delhi region. It is definitely frowned upon somewhat and it makes it an area of commerce that is more susceptible to tarriffing and restricting in general. Since tarriffs can be imposed at both the state and national level alcohol tends to get hit hard by governments looking for easy revenue.
Interestingly enough, there has always been a big demand on the black market for imported alcohol and it continues to this day. I wonder if with the high tarriffs the imported booze can compete with the black market alcohol. Used to be, they sold the stuff for very high prices - the smugglers imposing their own tarriffs which they used to pay off customs guys and other government officials and cops. Whatever the price, it would be nice to have a shot of Jameson in in a Bangalore bar. The mid level Indian whiskey used to taste awful though I 'd put an indian beer against any western product.
Interesting.
Just to be 100% clear, I think India has every right to tariff as they see fit. I just think it's hypocritical of the WTO to tell the U.S. not to if they're going to defend other countries' tariff laws.
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