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(someday)

Pfizer Forum free-trade advertisements

A few days ago I found a link (I forget where) to this remarkable advertisement in the National Review. It's a collection of five articles about international trade and the upcoming WTO summit in Cancun starting Sept. 10th. The advertisement is sponsored by the Pfizer Forum, an organization I had not heard of before.

I do have one serious reservation about these articles. In a few places they support the misconception that product "dumping" is bad for the recipient nation. For example, from page 4:

According to the E.U.'s official Court of Auditors, Europe pays farmers 225 percent more for sugar than the prevailing world market price. Much of this sugar is then dumped on poor-country markets, undermining what would otherwise be successful sugar industries. The same is true for many of the products subsidized under CAP, with surpluses driving down prices and destroying local markets for farmers in poor countries.

This argument is true so far as it goes — subsidized imports will damage local production of that good — but it ignores the wider effects. One of the bedrock principles of economics is that labor is fundamentally scarce: There is no limit to human desires, but the labor available to satisfy them is limited.

If a poor country cannot support a sugar industry because of subsidized imports from elsewhere, this fact should be celebrated by the locals, for it means that so much labor that would have been devoted to sugar production can now be devoted to other activities. A lower price of sugar reflects the fact that less labor is required to obtain it, which means that more labor is available for everything else.

For Europe to pay its farmers 225% more than market price and then to export the sugar at below market price (presumably it is "dumping") is equivalent to it gathering up two piles of wealth, giving one of them to domestic farmers, and putting the other on a boat and giving it to the poorer nation. Both domestic farmers and foreign consumers benefit at the expense of European taxpayers.

For the record, I am totally opposed to all agricultural subsidies. Not because I hate farmers or because I hate hungry people, but because subsidies are a twin evil: They distort the free market, which makes me poorer in the long run, and they're funded by taxation, which makes me poorer in the short run.