Friday, December 3, 2010

Free Trade? Forgettaboudit

News Alert
from The Wall Street Journal

 "South Korea agreed to give the U.S. five years to phase out a 2.5% tariff it levies on Korean-built cars, rather than cutting the tariff immediately, clearing a key obstacle to a deal on the long-stalled U.S.-South Korea trade pact, say people familiar with the negotiations.

Details of the revised pact, which must still be ratified by both nations’ legislatures, are expected to be released later Friday, barring a last-minute snag. The proposed trade pact, if ratified, would be the largest bilateral trade deal the U.S. has completed since the 1994 North American Free Trade Agreement."

Would someone please explain just why it is that America has a 2.5% tariff against Korean-built cars in the first place?  Why can't American citizens buy a Korean-built car at whatever price Korean companies and American citizens would like to voluntarily negotiate?  Why is the government involved at all?

Oh, excuse me.  I must have forgotten for a minute that BHO and crew have to give benefits to labor unions to reimburse them for their votes.  The 2.5% tariff makes Korean-built cars more expensive to American consumers than American-built cars of similar quality.  In the end, the tariff helps unionized American auto workers insist on higher wages.  

Higher wages is certainly good for auto workers, but are they also good for all the rest of us Americans?  Not so much.  All the rest of us pay more for whatever car we decide to purchase.  We do so because BHO and crew think it is just fine to extort money from the many to reward  the few for their erstwhile support at the polls.

"But wait," you say.  Shouldn't we all be willing to pay more for our cars to protect the jobs of American auto workers?  This is a "people" issue, after all.  But that line of reasoning is ignoring the jobs of other American workers that will be lost instead as American consumers don't buy as many Korean-built cars.  

Jobs saved in the American auto industry due to the 2.5% tariff will come at the expense of other jobs lost in industries that export goods and services to Korean citizens. Remember, trade is always a two-way street. In the end, for every dollar American consumers don't spend on Korean-built cars, some Korean consumers will not spend that dollar on American-produced goods and services.

Don't you think it's time we the people insist that our politicians keep their hands out of voluntary exchange?  If they did, we would enjoy two immediate benefits.  First, American consumers could buy less expensive cars. Second, the right of American consumers to exchange voluntarily with whomever they want, on whatever terms they want would be restored.

While I would like both benefits, for me the second benefit is the more important of the two.  Can someone explain just why American auto workers should have the right to coerce higher prices from all other Americans using the force of the federal government?

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