Covering Up Protectionism
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Thursday, 13 October 2011 04:21 |
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The NYT went overboard in covering up the protectionism in the trade pacts approved by Congress yesterday. All three deals substantially increase protectionism in the form of patent and copyright protection. The former will likely increase the price of drugs in the countries partnering with the United States. The distortions created by these protections will reduce real wages and lower output.
For this reason, it is wrong to call these pacts "free trade" agreements, as the NYT did four times in a short piece. It is also inaccurate to say as the NYT does:
"Economists generally predict that free trade agreements, which eliminate tariffs and other policies aimed at protecting domestic manufacturers, benefit all participating nations by creating a larger common market, increasing sales and reducing prices."
This does not follow when protectionist barriers raise the price of a substantial group of products.
[The Post committed the same sin.]
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Any economist knows since supply curves slope upwards higher prices result in more output which increases efficiency for the producing nation through scale economies that benefit the consumer nation as well.
For example USA health care is sold domestically in markets with fierce competition while tourism health care is sold at higher prices under protectionism to achieve the higher output levels and efficiences passed on to domestic consumers.
Therefore it's a win-win free trade outcome for all producers and consumers.
Stupid liberals.