Tuesday, March 21, 2006

The EU would do better to eliminate all its protectionism, not just that within itself

Background reading:
Do government subsidies really help the economy?
The error of protectionist economics

I'm a bit late in noting this news from last Wednesday, which I haven't seen on the major blogs that I try to keep up with. The President of the European Commission "said the EU executive would take action against countries that pursued protectionist policies." That sounds great, except when we find that Barroso is calling for the elimination of protectionism only between EU members. So protectionism is fine between the EU and the rest of the world?

It is beneficial for the several States of the United States to do nothing to inhibit free commerce between their residents. So if free trade is good between South Dakotans and Georgians, or Californians and Pennsylvanians, then why not between any U.S. residents and Japan, or China? Then why does Barroso push for free trade between, say, Spain and Finland, as a good thing, but he won't emphasize the importance of free trade between any EU member and the rest of the world?

The EU must do more than just striking down trade barriers between its members, but the special interest groups, particularly those in agriculture (where the Third World is most competitive), always step in. Oxfam for years has tried to get the EU to cease its farmer subsidies and protective tariffs, particularly on sugar. Oxfam is correct to say that this impoverishes poor nations that need exports to earn income, but it is incorrect to think that Europeans benefit themselves by protectionism.

Protectionism, as I explained in the two posts listed at the top, only benefits special interests. How do Europeans benefit from sugar tariffs when they are paying three times the global market price? Even if sugar were subsidized to below the world market price, that's still not a bargain, because they must pay taxes to pay the farmers so they can sell sugar at low prices. That's the current situation with ethanol in the U.S., which is heavily subsidized -- just don't expect certain pseudo-free-market advocates to admit it.

And when European special interests don't get their way, they get violent. At least that's what they do in France. Never mind the current student riots, or last fall's Muslim riots. Have we forgotten the French winemaker terrorists from only a year ago, who bombed government offices? All because they're overproducing wine, and the government isn't paying them what they say is enough to turn it into industrial alcohol.

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