Thursday, September 10, 2015

Cheaper sugar

A nice trade epigram from David Henderson
I don't think Trump understands that when we open trade to other countries, we gain not just as exporters but as consumers. But then, what U.S. politician running for president does? Marco Rubio? Rubio argued a few years ago that he would favour getting rid of quotas on sugar imports if we got something in return. But we do get something in return: it's called cheaper sugar. And getting cheaper sugar, by the way, might have caused LifeSavers not to move from Michigan to Quebec.
David might have added, we also get more exports automatically without political deals. When other countries sell us sugar, they get dollars, of every single one ends up buying US exports or invested in the US.

Nothing new. It's in Adam Smith. But nicely expressed. Economics needs good stories.

13 comments:

  1. Amen! I wrote my master's thesis on this exact subject! http://scholarworks.montana.edu/xmlui/bitstream/handle/1/2554/WiltgenT1207.pdf

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  2. Yes,what could possibly be better than Americans having access to cheap sugar?

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    1. I was wondering how long it would take someone to lob that cheap shot. Do you really think that sugar quotas are justified as a Federal diet control measure? Ever heard of corn syrup (substitutes)?

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    2. Ever heard of something called individual freedom? This includes choosing to be sedentary, eating sugar, and even smoking (far from everyone else).

      PS: It is not that difficult to understand the big picture, and that this is not about sugar, or is it?

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    3. Individual freedom? That's what an odd description of system in which the government will put you and me in jail if we don't pay extra taxes to treat the diabetes epidemic caused by cheap sugar.

      The externalities of American glucose consumption are not reflected in in its current price, so even if trade quotas were not meant as a Pigovian tax, that's what they've become.

      Are they set at the right level to balance the health care costs? Maybe not, but raising the price of a product that is one of the leading causes of disease and death in this country does have an important upside, no?

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  3. From the governments point of view the consumers gain is essentially meaningless unless it has the ability to affect elections.

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    1. Exactly. Saving some jobs in the U.S. sugar industry is story that's easy to tell and makes for a nice political talking point. Selling a policy to voters by explaining that it will lower the trend in sugar prices relative to what it otherwise would have been and will also indirectly create other jobs is a bit tougher.

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  4. Actually, if we are lucky the dollars spent on the sugar will never be invested or used to buy something in the US but will instead be kept in the vault of a bank somewhere or used for international trade outside the US. The funny thing is that when I tell this to someone they look at me as if am crazy, until I ask them if they would turn down a deal in which I work for them for free or in exchange for little pieces of paper that they have unlimited supply of.

    We have a lot of work to do to educate the public!

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    1. Yes. You can see the trouble. I posted a very short sweet epigram. Then I couldn't help myself and had to add, by the way, we do get exports automatically. You point out, correctly, that we can print paper a lot faster than they can make sugar. (When Germany sent Greece Porsches in return for worthless paper, everyone thinks Germany got the good deal and was somehow exploiting the Greeks!). Next thing you know we will have rewritten the intro trade textbook.

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    2. I've been telling people that for years about trade with China. They send us shower flipflops and iPhones and we send them IOUs and pollution.

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  5. Trade is interesting... yet the Far East has boomed on an export model. Would have the tiger nations been better off simply printing money and making their own economies boom rather than working and exporting goods and services in exchange for money?

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    1. BC,

      Reality as in "yet the Far East has boomed on an export model" can not be allowed to intrude into economic theory. Of course, we could also observe that Greece (yes, Greece) followed the Cochrane model (free trade, imports) right over the cliff. Germany ran (still runs) trade surpluses. Therefore Greece is booming and Germany is foundering.

      Wait... Thats' not even remotely true.

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  6. It's always puzzled me (a retired Navy Supply Officer) why it's sound wartime policy to blockade opponents' ports to keep them from from trading, but it's sound economic policy in peacetime to blockade U.S. ports to prevent trade -- to "protect Americans."

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