Wednesday, September 26, 2007

Fair Trade Policies Should Help Not Punish

Matthew Slaughter of Tuck Business School wrote an op-ed today in the Wall Street Journal titled, "Let's Have a Real Debate on Globalization." His central point is that globalization has in balance helped the U.S. economy. And that instead of trying to punish countries that appear to be cheating, the U.S. should focus on making sure Americans are equipped to compete in and cope with a globalized economy.

Here is the key quote:

"The preferred course is to complement open borders with a mix of domestic policies to help those that are hurt. But is this what we hear being discussed on the campaign trail? No. It is about fair trade, not free trade. It is about pulling back on previous trade agreements. It is about new laws to hit 'currency manipulators' with new trade barriers."

I totally agree.

In an article I wrote a few months ago titled "The United States Must Redefine Fair Trade" I tried to make the same point. My point is that fair trade policies should start with the freedom to trade and add ethical principles, based on the fair trade movement.

It is fair to give the world the opportunity to benefit from the international trading system. It is also fair to try to protect labor and environmental standards--and it is fair to build human capacity and potential to innovate and prosper. Punishing regimes that we don't like or manipulate their currencies have very little efficacy.

This is how I put it:

"Notice that tariffs and competitive devaluations are not on the list [of desirable policy tools]. Although both of these approaches are advocated under the guise of protecting fairness and even human rights, history and economics tend to dispute those claims. Instead, openness—with the proper safety net—can help advance human rights."

Policy Innovations interviewed Matthew Slaughter recently. Read our interview, titled "Pushing against the Protectionist Drift."

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