On Wed, 26 Oct 2005, Vitaliy wrote:

> Now, this one I can't agree with. When you have a free trade agreement, 
> *both* sides win. Sure, you have selected industries that go bankrupt, but 
> the benefit to consumers (cheaper goods) far outweigh the losses of a few 
> underperforming companies. Macroeconomics 101.

A trade agreement between an undeveloped country and a developed country 
usually results in the developed country buying raw materials and/or 
labor at a lower price and the other country not buying finished goods 
because they are still way too expensive for the majority of the 
population.

Bilateral trade agreements work well only between countries with 
comparable buying powers, else they work almost only for the more 
powerful country. The weaker country usually trades a lapse in income 
from export taxes vs. the developed country for some other advantage 
(such as big yachts and other perks for some fat cats and similar), and 
a faster depletion of its resources, as demand rises with their 
decreased price, and perhaps temporary political stability and other 
things, generated by slightly higher income and employment.

And the reason bilateral trade agreements they are necessary is the fact 
that such countries often have artificial tariff barriers against all 
outsiders. The bilateral trade agreement lowers that barrier, and 
nothing else. From the point of view of any third country contemplating 
this cozy arrangement from a distance, the two look like a cartel for 
all practical purposes.

Wasn't there a rule about 'no politics' on this list ?

Peter
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