Entries Tagged as 'free trade'

What Congress Really Thinks of Canada

May 12th, 2011 at 8:40 am 12 Comments

What do American members of Congress really think of Canada? Well, it depends on the issue. Indeed, a Fraser Institute study examining 1,830 mentions of Canada in Congressional debate between 2001 and 2010 shows mixed results.

When it came to Congress’ perspective on the Canadian health care system, border security, and cross-border trade (excepting pharmaceuticals), American members of Congress were generally critical and negative.

On the other hand, American politicians were generally positive about Canada in terms of defense and foreign policy – recognizing their neighbors as a strong ally – as well as being rather supportive about Canadian energy policy, especially additional exploration and development of the oil sands.

The authors of the study, Alexander Moens and Nachum Gabler, found that there was a good deal of misinformation about Canada. Canadian border security, for example, was often mentioned in the context of Mexican border security, as if there were no difference – and of course that meant that the perception of Canada on border security was generally negative.

An even more egregiously erroneous point that members of Congress referred to was the false assertion that the 9/11 hijackers infiltrated the United States through Canada. There were “7 comments made in the U.S. Congress [between 2001 and 2010] saying that one or more of the 9/11 attackers came from Canada. And factually, we know that none did,” said Moens.

At least a sense of friendliness in foreign affairs remained, however. Although there was some concern on the part of the authors that Canada had alienated the United States over the last decade by declining to partner with it in joint missile defense and over the war in Iraq, Congress’ view of Canada as a reliable ally remained strong. “Overall the sentiment was enormously positive, in both chambers and for both parties, in terms of defense and foreign affairs,” said Moens. “This remains an important resource for Canadians… to draw on this positive sentiment.”

Although there were some small differences between the Republican and Democratic parties, views of Canada were often bipartisan. “The Democrats were somewhat more negative than Republicans [on NAFTA and trade relations with Canada], but they were both generally negative… [and] on the border and the question of whether there was a terrorist threat emanating from Canada, both parties were quite negative,” Moens told FrumForum.

Moens also pointed out that he and his co-author were also surprised about how frequently Canada was talked about in Congressional debates, and that Congress mentioned issues of bilateral importance, but also considered whether policies Canada had already adopted would be good for the United States.

So: Canada, a model for the United States? Might be a stretch. But there’s still hope.

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The Fair Trade Racket

March 9th, 2011 at 12:57 pm 23 Comments

“Fair Trade” coffee is promoted everywhere, from companies such as Starbucks to my university’s campus. Its advocates argue that the premium paid helps support the livelihoods of farmers and the quality of life in their communities. In reality “fair trade” hurts farmers by distorting the prices of the markets they work in and locking poor farmers out.

Imagine you are a farmer in Vietnam or Kenya deciding what market to get into. There is a vast excess of coffee suppliers so the price of coffee should be low and discouraging further entrants into the market. However, “fair trade” coffee is subsidized, and is sold at an artificially high price, and this entices more farmers to get into coffee production. This further feeds the already injurious surfeit of providers.

We’ve seen what happens when markets get distorted like this. The Coffee Crisis of the 1990s was characterized by plummeting and unstable prices. Coffee-producing nations rigged prices and subsidized local industry until the bubble eventually burst to the detriment of farmers worldwide.

The negative impacts of “fair trade” would not be mitigated by its universal adoption. Rather, this would compound the problems. Not only would supply increase but fewer farmers would be able to partake in the program. High entry fees (roughly $1600) and first world intermediaries taking almost 90 percent of premiums keep out the poorest farmers. Typically fair trade contracts are sent to areas that are already developed. A 2008 report by the Adam Smith institute sums it up well: “In practice, then, Fair trade pays to support relatively wealthy Mexican coffee farmers at the expense of poorer nations.”

Overall, by its nature, “fair trade” coffee creates a harmful set of incentives, luring the world’s poor into an already bloated market – the recurring trap of good intentions.