The one market that does seem to fit the competitive story reasonably well is agriculture. Farmers see a price in the market for corn, wheat, soybeans, etc. and they can sell as much as they choose at this price. Unfortunately, the Post apparently does not believe that agriculture is a competitive market. It reports today that the United States is trying to open up markets in developing countries in order to give U.S. farmers something to offset the loss of subsidies in a new W.T.O. agreement. Sorry, this doesn’t make any sense. Farmers can already sell all they want in the market today at the prevailing price. It is unlikely that farmers will feel any better if the wheat they sell at $2.50 a bushel is going to Zambia than if it’s going to Pennsylvania. Perhaps the article meant that by opening up markets in Zambia, and other developing countries, the price of wheat would rise. It doesn’t seem very likely that the new markets would produce any substantial rise in price (the new entrants would be relatively small compared to the existing world market), but this would be a qualitatively different effect than simply an increase in the quantity of wheat sold. It would mean that all of us would be paying more for wheat. This could lead a more efficient world market, but it would also mean higher prices for consumers in the U.S.
Dean was referring to this passage:
The United States is especially adamant that tariffs on agricultural goods must come down sharply; on that issue, its strongest adversaries include rich nations such as the European Union and Japan. The Bush administration wants to give American farmers new opportunities for shipping their products abroad – a political necessity, in the administration’s view, to offset the losses some farmers would suffer from cuts in government subsidy payments that would be part of a final Doha-round deal. The subsidy programs of rich countries are widely blamed for leading to overproduction of crops that depresses prices on world markets, hurting farmers in the developing world.
In other words, the competitive market for agricultural products is plagued with subsidies from the US as well as tariffs from the EU as well as many other places. In my view, we should be drastically reducing tariffs on agricultural products as the Bush Administration is calling for – just as we should be eliminating US subsidies.
Blustein also notes:
Undercutting the U.S. free-trade position, however, is the accusation of hypocrisy. The administration’s critics note that its negotiators are seeking to shelter U.S. textile and apparel companies from the impact of a proposal that would eliminate all duties and quota limitations on products made in several dozen very poor nations, most of which are in sub-Saharan Africa. Although by some estimates the “duty-free, quota-free” proposal could give a major boost to the anti-poverty impact of the Doha round, U.S. textile makers fear that they would be hurt by a flood of imports from some of the poor countries, especially Bangladesh and Cambodia. So the administration is insisting on the right to exempt a small number of products from the plan – exactly the sort of protection for powerful interests that U.S. officials decry in other countries’ policies.
Maybe we can put this deal on the table – an elimination of the tariffs on apparel and textile products in exchange for an elimination of Asian Central Bank mercantilism.