Tuesday, December 11, 2012

Trade Policy - How should it be?

Cato had this scathing post on how trade policy should be. While it referred to the U.S. in the present case,  it could well apply to any other trading country.Opining on the purpose of trade policy it says:
"No. Policy should be neutral with respect to the goals of particular companies and industries, and designed to attract investment and human capital, and to maximize opportunities for Americans to partake of the global economy. Trade policy should be about ensuring certainty and eliminating policy-induced frictions in supply chains. As I wrote in this article (21st Century Economy Deserves Better Than 16th Century Trade Policies), which expounds upon the thoughts in this post: 
This 21st century economic reality demands better than trade policies rooted in 16th century mercantilist dogma. It demands policies that are welcoming of imports and foreign investment, and that minimise regulations or administrative frictions that are based on misconceptions about some vague or ill-defined “national interest”."
I am not an expert on trade policy nor am I a practitioner of it. The prescriptions in the post did make sense in terms of not benefitting "special interests" rather than the large number of consumers. It brings us back to the question I have often raised in this blog in other posts - what constitutes "national interest"? While the concept does differ in differing situations, at times, interests of the consumer conflict with the interests of the local producer. What stand does a trade policy analyst take then? Is the prescription in the post referred to too idealistic for implementation?

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