Hi Roy,

> [Checking around first to see that this thread hasn't been hammered by 
> James yet]

I don't think James minds, as long as we keep it civil and to the point. :-)

> That is our fundamental point of disagreement - I think there are nearly 
> always externalities, whether it be environmental degradation (such as the 
> cheap beef from Brazil being produced as a result of them clearing their 
> rainforest, or New Zealand not wanting to import fruit that might 
> introduce pests we don't have, or a country that introduces a carbon tax 
> to try and do something about global warming being unable to compete with 
> a country that doesn't), labour standards (ending up with us supporting 
> some appalling behaviour such as sweatshops and not having the political 
> will to do anything about it because we get so much cheap stuff) or other 
> standards (such as a significant part of a population really wanting to 
> have a choice about whether it eats genetically engineered food).

Although I can substantiate it, my intuition tells me that negative 
externalities are limited to a small range of products. For most goods, 
externalities are either positive, or for all intents and purposes, 
non-existent.

Trade restrictions won't solve the problems you've listed.

Since the whole world benefits from the rainforest, why don't we all pay 
Brazil to not cut it down? How is it fair to make the Brazilians bear the 
burden alone, by imposing trade restrictions?

Restrictions on fruit imports exist within a single country as well, for 
example it's illegal to bring homegrown fruit to California. However, it is 
not illegal to bring in oranges from Florida, or apples from Washington, as 
long as they're certified. Similar laws in New Zealand are designed to 
protect domestic growers from competition, not to keep the pests out (are 
you saying that our apples have more worms?! :-).

Labor standards will not be improved by imposing high tariffs. Remember that 
labor is a scarce resource, so when a country opens up its borders, the 
standard of living actually increases. Isolationist policies is what causes 
the living standard to deteriorate (cf US in the late 1800s). The only way 
to improve labor standards around the world is to allow free trade (both for 
imports and exports) of both goods and ideas, and to apply international 
pressure on countries with non-democratic regimes.

As far as pollution goes, an international agreement is of course necessary. 
However, instead of rigid regulations, which are unfair to industrialized 
nations and offer zero incentive to cut down pollution by countries that are 
not polluting as much as, say, the United States, we need to have in place a 
system of pollution permits. Under this system, each country would get 
vouchers, each allowing it to release X tons of CO2 into the atmosphere, and 
would be allowed to trade them in the open market. This idea sounds 
ludicrous to people because it "puts a price on the environment." But it is 
the most efficient way to achieve the end result (reducing pollution).

> I used to like the idea of free trade as a concept, and would have 
> supported it if the externalities could be somehow accounted for, but 
> there is an even more fundamental flaw that was pointed out by John 
> Ralston Saul in 'A Doubter's Companion". I'm paraphrasing here because I 
> don't have the book handy, but he points out that yes, some places do 
> things more efficiently than other places, so place A might mine coal 
> cheaper than anywhere else, and another place B might be cheapest at 
> manufacturing clothes for instance. The problem is that if you follow free 
> trade to its conclusion, you end up with a situation where it is not 
> economically viable to be anything except a coal miner at A, because 
> whatever else you want to do can be done cheaper somewhere else. This 
> might sound wonderful to the free trade advocates if you just want to look 
> at people as production units, but what you have lost is the idea of 
> heterogeneous society and replaced it with something that is going to be 
> culturally much poorer.

This argument is weak, because it can be used in favor of free trade. :-) 
Say that you already have places in the world, whose main product is coal, 
or steel, or textiles - and you are stripping them of the opportunity to 
enjoy other things. Think of the American Northeast. The steel industry 
there is dying a slow and painful death, and we are prolonging the agony 
with high tariffs on steel.  What for - so that people can work in hot, 
dirty steel mills? Now look at Singapore, which moved from labor-intensive 
textiles, to oil refining, to computers and biotechnology. They would still 
be in the clothing business if the textile industry was "protected."

Anoter argument for free trade is freedom of choice. If people want to 
support their local producers - let them vote with their dollar. Let them 
use persuasion ("Buy American!") if they want to keep the old ways, but 
don't force the choice on those who don't want it.

> In another post, you gave as an example the idea of a free trade agreement 
> between New Zealand and the USA. Would I oppose this? The answer is a most 
> definite yes, for two reasons. The first is that it would not be a real 
> free trade agreement, as the US would put in lots of terms that maded it 
> favorable to them, such as there would be something in there to protect US 
> sheep farmers (we should technically be trying to do the same sort of 
> thing, but the free-trade idealogues in this country have historically 
> been been poor at doing this, which is how we got screwed in the late 
> 1980s). Secondly, even if their was a genuine lowering of all 
> restrictions, it would be a disaster for New Zealand. We might get some 
> stuff cheaper, and be able to sell our sheep, but our economy would become 
> so completely at the mercy of the US one (OK, there's some arguement that 
> it is already) that in some ways we might as well become a 51st state. 
> We'd be seeing whole sectors of New Zealand industry wiped out, we would 
> see 'dumping' (where something is sold below cost for a while in order to 
> destroy competitors) - a side note is that dumping is illegal within the 
> USA, but it is not illegal for USA companies to dump elsewhere, and New 
> Zealand laws on such things are weak. We would see that taxes in New 
> Zealand would have to fall to USA levels for people to compete - goodbye 
> public health system and a decent social welfare safety net, all in the 
> name of being able to sell some sheep and buy a few things cheaper.

First of all, what you are talking about is not free trade per se (you're 
talking about trade barriers).

Second, even when a country unilaterally decides to drop its tariffs, it 
benefits from the trade - consumers can buy the same goods, only cheaper. 
Which means that they get "more bang for their buck", and have money left to 
spend on other things.

The fundamental mistake that people make is that they only consider the 
losses, but do not consider the benefits (which are *always* much greater). 
It's easy to quantify losses for a particular industry - in terms of jobs 
lost, profits, tax revenue, etc. However, since the benefits are usually 
spread over a multitude of products, they are not nearly as noticeable. For 
example, you talk about being "screwed" by the United States, but economic 
data shows that New Zealanders have more things and live better than they 
did before the free trade agreement.

I think the argument for protecting young industries is valid - 
industrialization is "where the money is", whenever you mechanize labor you 
increase productivity and incomes. It is difficult to turn your country into 
a new South Korea when you're facing such giants as GM, Ford, and Toyota. 
However, why don't you subsidize your young industries, instead of using 
tariffs to protect them?

Because of the "tax the foreigner" mentality (and xenofobia, take for 
example your "New Zealand as the 51st state"). The fallacy lies in the fact 
that when you have tariffs, you are not taxing the foreign companies. It is 
the CONSUMERS who pick up the tab.

So why do we have tariffs and not subsidies? Again, because subsidies are 
much easier to calculate ("we've spent *how* many billions on subsidies?!") 
than the losses from tariffs (which are paid for by individual consumers in 
the form of higher prices).

> I'm not against all trade - just it should be the icing on the cake, not 
> the whole cake.

Doesn't make any sense to me.

> Pure free trade is like pure communism - a myth, and the distortions it 
> would put on society make it about as desirable.

And yet history is on the side of free trade. There are many examples when 
the quality of life of ordinary citizens impoved after a nation removed (or 
laxed) its trade barriers.

On the other hand, you have nations which isolated themselves from the 
world, and paid dearly for it.

And in conclusion, let me ask you three questions:

- How is trade between industrialized nations different from trade between 
states or provinces within a nation?
- If it's not much different, why don't we go back a few hundred years, and 
start taxing goods that cross the state, or even county lines? Think of 
pre-Bismarck Germany, with its 30+ (if my memory doesn't fail me) different 
tariff codes.
- Can you give me the name of one country which isolated itself 
economically, and prospered because of it?

Best regards,

Vitaliy 

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