Tuesday, April 3, 2007

South Korean/US FTA

The Bush administration, under the "fast track" authority to negotiate free trade agreements, completed a free trade agreement with South Korea on April 1st (NYT reports here). I was worried that the deal would not be completed fast enough to give congress the 90 days it needs to review the agreements and then vote without amendments on them. I get the impression that the agreement was rushed, and that it is not a terrific deal. I am somewhat worried about the relaxation of taxes on engine size which S. Korea has had to make, which seem environmental. Barriers to American agricultural products are also to be removed, which, because of American agriculture subsidies, will end up being bad for American taxpayers. The NYT article claims that 90% of all tariffs will be removed so I think this will still be a huge boon to both countries, even if there are substantial growing pains and some negative effects, I am still hopeful that congress will pass the agreement.

The Economist gives a little bit of background on the politics of the fast track authority here. The Wikipedia entry is also interesting.

I am continually annoyed at the power special interest groups have to establish protectionist policies and subsidies and to otherwise extract rent, but it seems almost inevitable that such power and influence will exist. I don't see any institutional fixes. Any ideas?

4 comments:

Chris said...

We were just talking about such government failures (as opposed to market failures) today in econ 435. Policies that create concentrated benefits and dispersed costs are political winners.

Perhaps we could try to use more direct democracy. What if Americans had to approve every spending bill directly? Perhaps also stipulate that each bill could only be about one thing (keep Iraq and ag subsidies separate). So you'd get a ballot and check off which spending proposals you wanted to support from a big list. And require each proposal to clearly state its cost to taxpayers. Maybe then people would see more clearly the connection between the sugar program, say, and their money.

Another option might be a much more restrictive constitution. One that explicitly bans public assistance to or penalty for any private party, unless the policy is meant to correct for an externality. This option seems even more unlikely than the first one, though. Aren't there some uninhabited islands we could use or something to start a new country?

Chris said...

Line from the Economist article regarding the probable end of Bush's Trade Promotion Authority:

"The biggest cost to America of all this is probably the lost opportunity to spread goodwill."

Wow. Go Democrats.

loogel said...

Really? Do you think having every American approve spending would improve things? I think that would lead to really populist politics. I think the later is much more workable. Setting up clear rules about what government is for, and what it can do to correct for externalities.

Chris said...

Well, John, I don't it would be great, but it would be better. I think we have a problem with legislators in that they can vote on lots of funding and then selectively promote their voting record depending on their audience. So, they go to a fundraiser dinner of the farmers association or whatnot and talk about farm spending, then talk to some senior citizens about healthcare spending, etc. My thought was that with direct voter approval of each item of spending, perhaps more information would reach the people who are hurt by policy, not just the ones who benefit.