PRESIDENT'S ESSAY
Limits of Free Trade
POSTED
September 3, 2011

In his 2005 Incoherent Empire , UCLA sociology Michael Mann notes that US tariffs are on average only 4%, “low by historic standards.” But a closer look shows that this openness to foreign goods is selective, and allied to a form of protectionism-by-subsidy.

Mann observes that “the most protected US sectors are those in which poorer countries specialize.” In particular, “Agriculture is the most protected. US farmers get direct subsidies and cheap insurance if they export.” Food aid also assists US farmers in their competition with farmers in developing countries. Instead of sending cash aid, the US sends its surplus food “at the expense of local farmers whose produce cannot compete with the subsidized US exports.” Provocatively, Mann says that “This is not ‘aid,’ but ruthless price gouging.”

The US gives particular assistance to agriculture and “lower-end industrial technologies like textiles, clothing, shoes, and increasingly (as poorer countries move into these areas) steel and autos.” As a result, “Bangladesh pays more import tariffs in the US than France does!” While the US sends $84 in aid to Bangladesh, the country returns $331 million in tariffs on its American imports. The US is not alone in this tilt against competition from poor countries: Most of the developed world has “development programs . . . full of cant.”

He illustrates the limits of US free trade with the example of Argentine honey.

Argentina is the world’s largest producer of honey, and the world’s leading exporter of honey as well, nearly half of it going to sweet-toothed Americans. When American honey producers complained that Argentine honey was being “dumped” on the US market, the “US Department of Commerce investigated and gave the Argentine beekeepers 30 days to answer a 150-page questionnaire in English. Few beekeepers responded . . . . The result? The US slapped tariffs of up to 66 percent, causing $50 million in annual sales losses for Argentina.”

Argentine honey was competitively priced on the US market, but not because of any unfair trade practices: “Their low prices came from cheap labor costs and efficient processing plants run by a nonprofit coop.” Argentina’s Minister of Production said that the real issue is that the US wants to protect its own producers, even at higher cost to American consumers, not to mention abuse of Argentine producers: “Whatever Argentine is capable of exporting, we know that the United States will administer its own trade in such a way as to be able to protect its own producers at our expense.”

Despite the neo-liberal rhetoric, US trade policy is not really free trade: “It privileges American interests.”

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