No Tricks on Trade

From Investors Business Daily:

Posted 12/19/2005
Free Trade:
International negotiators appear to have felled a towering redwood among trade barriers. The big beneficiaries will be farmers in poor nations — and consumers in rich ones.

After a lot of cynically and politically generated concern that the talks would end without a deal, World Trade Organization ministers reportedly hit on a last-minute breakthrough Sunday in Hong Kong that will end farm export subsidies by 2013.

This is significant. If actually adopted by the WTO next year as expected, it will open agriculture markets in wealthy nations to farmers from poor countries who have been unable to compete because of government subsidies, especially in the European Union.

The subsidies have let farmers in rich countries sell their goods for less than farmers in developing nations. It's clear that ending this trade-distorting aid will help farmers in poor countries, since they'll have access to markets from which they've been shut out.

Consumers in the subsidizing nations will benefit, as well. Consumers also are the taxpayers who pay bigger tax bills to fund the subsidies governments pay out to farmers. The Organization for Economic Cooperation and Development reckons that protectionist farm supports cost its members $300 billion last year.

Consumers also win because food prices are artificially driven higher in countries that subsidize. Prices will fall under a liberalized trade regime due to competition from developing nations.

Policy Exchange, a British think tank, looked two years ago at the problems created by subsidies and found that EU consumers "pay 42% more for agricultural products than they would if the system were dismantled. Americans pay 10% extra, Japanese more than twice as much. For less well-off families, for whom food takes up a large proportion of household income, freer trade would mean a noticeably higher standard of living."
Farm interests in rich countries will whine about losing their subsidies and put up a bitter fight to keep them. But they're standing on shaky ground. The bulk of subsidies go to the richest farmers — not to struggling family farmers.

The richest 20% of farmers in France get roughly 80% of the subsidies, for instance. In the U.S., 45% of farm subsidies went to the largest 7% of farms in 1999. It's a typical case of flawed policy that benefits some at the expense of others.

Everyone would benefit if all trade barriers were ended. Nothing can boost economies and living standards like free trade across the globe — something even economists on the left agree with.

Look no further than Mexico for proof. Since trade was opened by the 1994 North American Free Trade Agreement, that country's economy has nearly doubled as its exports to the U.S. tripled.

Imagine what a real global free-trade agreement would do.