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Brooks Wilson's Economics Blog: Sessions Wrong on Trade

Sunday, February 6, 2011

Sessions Wrong on Trade

Since Adam Smith wrote the An Inquiry into the Nature and Causes of the Wealth of Nations economists have supported removing restrictions on trade.  Alston, Kearl and Vaughn reported the results of a survey of economists in “Is There Consensus among Economists in the 1990’s?” which was published in the American Economic Review.  Of those responding to the survey, 93% agreed with the statement that “tariffs and import quotas usually reduce general economic welfare.”

I am assuming that Jeff Sessions is a smart man and understands the economics of trade as well as the calculus of governing. In an ugly example of relationship capitalism, he has apparently concluded that it is more important to make constituents happy than it is to do what is best for the American economy.  The Wall Street Journal reports in “Fair Trade for One” that in December, Sessions “put a hold on the renewal of GSP [Generalized System of Preferences] on behalf of Exxel Outdoors, which makes sleeping bags in his state.”   The General System of Preferences was a program that has been in place since the 1970s that aided poor countries by lowering our tariffs on their products.  This was not only beneficial to poor countries but to consumers and the economy as a whole.  The program had a review process conducted by a subcommittee in the House and Exxel Outdoors had appealed to the subcommittee and lost.  They made a second appeal but Sessions intervened before the second decision.

Bangladesh is the economic powerhouse that Sessions claims is pushing its way into U.S. markets by unfairly subsidizing its products.  Their sleeping bag sales rose to 8.4% of U.S. imports due to manufactures moving production from China to escape “high cost” labor.  Bangladesh has a per capita GDP of $1,500, about the same as Haiti.  Perhaps Bangladesh has a comparative advantage in the production of products manufactured with low skilled labor.

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