Deconstructing Trade


By Global Tax Weekly

In a masterpiece of diplomacy, China’s premier said last week that it was “open-minded” about the TPP (Trans-Pacific Partnership), which when you deconstruct it probably means that he is happy for Japan to wreck the chances of a successful TPP by refusing to negotiate on its rice tariffs (778 percent, as I recall). There is a double irony in this, given that Shinzo Abe is in reality quite willing to reduce the tariffs, but doesn’t need to play such a valuable card given that the US Congress has already ensured that there can be no further US trade treaties by refusing to allow the Trade Promotion Authority to be reconstituted, and that China on the other hand has been a willing player in the World Trade Organization. What actually puzzles me most is the question of why Japan was ever allowed into the WTO in the first place with such outrageous agricultural tariffs. I know the answer that the high-ups in the WTO will give: the Uruguay Round was never intended to cover agriculture, and it was better to secure free trade in manufactured goods as a starting point, before moving on to agriculture. Well, we haven’t moved on, twenty years later, have we? Doing a bit more deconstructing, the real reason that agriculture was excluded is the EU’s Common Agricultural Policy. Another irony there is that the CAP was designed in 1955 when agricultural employment in France amounted to 27 percent of the workforce; the figure in 2013 had dropped to 2.8 percent, a reduction of 90 percent. Figures in other EU countries are comparable: yet the beast staggers on. Why? No longer, presumably, because it represents an electoral 3rd rail for French politicians; no, nowadays it is because it amounts to an immense subsidy paid by Brussels to rich landowners, and it is not in the interest of the rulers of France, Communist or Capitalist, to annoy them. In Japan, I suppose, there is still an electoral calculation, while in Washington there is pork, nowadays lightly disguised as party political advantage. More irony: US agricultural employment is below 2 percent of the population (it was 80 percent in 1870 – today’s useless but charming piece of information). So now you understand why neither side of the aisle wants trade treaties: the left because protection of (now disappeared) agricultural workers is an article of faith, worth millions of votes in any election (of course they won’t be protecting the immigrant Mexicans who actually do need protection); and the right, because the owners of agriculture fear competition from poorer countries and their campaign contributions would wither away in the face of a TPA. The final irony after so many others: halfway through his second term, the President, like most of his predecessors, has come to understand that free trade is a Good Thing; but after spending six years making sure that it can’t happen, he is now tied down by his own policies.





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