13 February 2004

Agricultural subsidies vs. free trade

To a North Dakota radio station, U.S. trade representative Robert Zoellick vowed that he would stand like Horatius at the bridge to block Australian sugar. The quotas can be considered among the bearable transaction costs of democracy, keeping North Dakota's, Minnesota's and other states' growers of sugar beets and Florida's, Louisiana's and other states' growers of sugar cane from starving. Or seceding. Or being forced to grow something else. But protectionism is unconservative, unseemly and unhealthy -- lethal.

Unconservative? Protectionism is a variant of what conservatives disparage as ''industrial policy'' when nonconservatives do it. It is government supplanting the market as the picker of economic winners. Another name for industrial policy is lemon socialism -- survival of the unfit.

Unseemly? America has no better friend than Australia. Yet such is the power of American sugar interests, the Bush administration has forced Australia to continue quotas on its sugar exports to America. That was a price for achieving the not-exactly ''free trade'' agreement signed last weekend. But look on the bright side: Restrictions on beef imports will be phased out over 18 years.

Is protectionism lethal? Promoted by Democrats hawking their compassion, protectionism could flatten somewhat the trajectory of America's rising prosperity. But protectionism could kill millions in developing nations by slowing world growth, thereby impeding those nations from achieving prosperity. Developed nations spend $1 billion a day on agriculture subsidies that prevent poor nations' farmers from competing in the world market.

Sugar quotas, although a bipartisan addiction, are worst when defended by Republicans who actually know better, and who lose their ability to make a principled argument against the Democrats' protectionist temptation. Fortunately, splendid trouble may be on the horizon.

Last September's collapse of the World Trade Organization's ministerial meeting in Canc�n meant that the pernicious ''peace clause'' was not renewed. For nine years it has prevented the WTO from treating agricultural subsidies as what they obviously are -- market distortions incompatible with free trade. For Americans, a fight over that is worth having, and losing.

The Man of Steel, ably assisted by the Foreign Minister of Kleenex, is developing an argument that Labor, the Democrats, the Greens are mired in anti-Americanism because they criticising the USFTA.

Today's Age carried a good specimen of the beast:

But Labor should look before leaping. For one thing, the politics are fraught. There is no doubt where John Howard thinks the mainstream is on this.

More than that, however, it comes down to a fundamental policy choice: for Labor, is this really the issue, the agenda, on which to say no to America?

All that argument, like Howard's, is really saying is that US policy must never be questioned. When the US media are questioning the FTA for the same reasons as Labor that looks an exceedingly shallow argument.

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