For Unilateral Free Trade
Published by sauvik January 13th, 2006 in Economics, LibertarianI have an article at TechCentralStation arguing that India should abandon the WTO and opt for unilateral free trade. There is a lot to gain from this approach, as imports of cheap food, cheap cars (second-hand) and cheap everything else will mean that the possessions of every Indian will increase in a quantum jump. The ‘wealth of the nation’ will rise in ‘real’ terms as every Indian will be possessed of ‘real’ assets.
A country of consumers alone can never develop beyond a certain threshold. Cheap goods will flood the market and the local manufacturers will be at the losing end. Think about it, Indian goods can never match subsidized Chinese goods. And the trade deficit created by this can quickly decimate any economy. I support opening up the markets but at a regulated pace.
IndianPad: And I support sterilizing backdoor anti-free-marketeers. But we can’t all have what we want can we?
As a thought experiment say a benevolent God gives all the goods we want for FREE. This God is an even worse offender than the Chinese for even the subsidized Chinese goods cannot compete with free goods. Should we tell the God — hey we don’t want your free goods and/or we’ll put tarriffs on your free goods for Indian goods cannot compete with your free goods.
If that sounds silly, so does your argument.
I think our government has taken a wise stance against first-world agricultural subsidies.
Firstly, our excess produce, presently rotting in FCI godowns, can be exported - earning us easy money. Why give this up?
Secondly, if we remove our anti-dumping tariffs, it is true, prices would drop in the short-run, and increase our standard of living. But subsidies being subsidies can be lifted anytime- raising prices arbitrarily and creating political instability back home. No government would want to live through that.
Thirdly, the Opposition would give the goverment tremendous flak if it slipped up here. Politically, backing out now would be suicide.
And why back out of a battle you’re winning? We’re doing pretty good at the WTO; the West agrees with us on principle. It is just a matter of time. The subsidies will go.
7 x 6: It’s more like the Devil that’s offering you stuff for free. You have to think twice about what’s at stake.
i support seven-times-six’s good point, and would like to extend it. Suppose we discover a planet nearby made up entirely of wheat and magic brooms. If we bring these free to earth, no farmer would ever have to work again to produce wheat. Similarly, the magic brooms would make the oil, automobile and maybe even civil aviation industries redundant. Should we shoot any entrepreneur who attempted to sell these ‘free’ products on Planet Earth? What would people in the affected industries do if these free products killed their businesses?
Well, as Bastiat put it: “Something Else”! We cannot say exactly what, but they would do something else in the expanding economy, where savings on transport and food would translate to increased spending on other goods.
I sometimes think of the thousands and thousands of Morse Code-wallahs emplyed in telegraphy, made redundant by SMS. What will they do now? Well, “something else”. As simple as that.
Richard Flynn: none of your arguments provide any logical counter. Why did you use that many words to say nothing?
My counter was against your ideological stance, 42. And against your implicit suggestion that we should back out of WTO talks.
I’m against levying tariffs for subsidies like Japanese subsidies of Airplane parts, etc. But adjusting to (EU & US) agricultural subsidies would be painful for thousands of Indian families. And the benefits would be marginal anyways.
Richard Flynn, at face value your argument has merit: Import of cheaper goods leads to Workforce sustitution and so on; but when 60-70% percent of the workforce is engaged in said activity, workforce substitution might lead to a lot of pain.
But this is only at face value: if you look further, you see that a society with 60-70% of its workforce engaged in agriculture is doomed to low productivity and per capita income. They HAVE to be weaned away from agriculture. This and pressures on price would force efficiencies and aggregation (scale).
Do you also want to say that such an increase in the productivity and per capita income of large sections of Indian Society — a transformation out of a third world country basically — is also a bad thing?
Na-uh. I agree with you on the productivity argument. But you want to ‘wean’ them away from agriculture, by throwing them into unemployment? Not exactly weaning.
Wouldn’t it be better if they are given access to education, so they find themselves eligible for better paying jobs in the cities? Wouldn’t they migrate voluntarily? And this IS happening, gradually, even as we speak.
Unfortunately there is some cyclical unemployment within the urban poor even today. I happen to know kids who can name the 9 planets from Mercury to Pluto, who have to work construction-jobs at a day-laborers wage. Adding the whole mass of rural poor to this mix - would unnecessarily lower their living standards.
silly unrelated comment, so you can take it off if you want to.
I recently read Rohinton Mistry’s ‘Family Matters’ and everytime he said “Yezad” I was thinking “YazadJal”!
Oh maybe I’m being too influenced by the Internet :-$
Good knowledge can be gained from your site
So many blogs. how will you write all these?