June 15, 2006

Mirko Wants Bananas

Posted in free trade, globalisation, politics at 1:18 am by thelawthoughts

I'm fair, I'll give credit where it is due. Mirko Bagaric's piece this week discusses the inequity of global trade through the prism of his lack of bananas.

He is right, there is plenty of everything in the world, we just won't let people sell it. I remember hearing John Ralston Saul speak last year, and he said that global welfare is lacking because of dysfunctional distribution, not the lack of ability to actually produce.

He used the example of socks. The world has so many socks we can buy 200 pairs on eBay for $100. Trust me, I almost did. However, we daily see people in Africa with no socks. The problem is not producing this stuff, it is getting it where it is needed.

Governments provide as many barriers as they can to this distribution process, exactly as Bagaric describes. Why would our government let foreign banana producers gain a toehold in our market, when there are no votes coming in from Ecuador? See, the myth of free trade is that the banana producers sending us stuff for a lower price makes our domestic producers sit up and think – 'gee, I can't compete on bananas anymore, I better make a higher value product than simply pulling something off a tree'.

If we let that happen more, we would probably be much better off. However, most of the time that is not what happens. We protect our domestic producers. Third world countries have a busted economy.

Points to anybody who can jog my memory. Who gives more subsidies to domestic producers than foreign aid? I think I read it was the EU, but it is probably almost every rich nation. Why not scrap the subsidies, get cheap product from overseas, and use the money to train people into better situations? Isn't that how things are meant to work?

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2 Comments »

  1. Dash Brannigan said,

    The US are good at this. Favourite story about Kenneth Arrow, one of the greatest economists to walk the earth. One day he’s doing some back of the napkin calculations about the US sugar industry. He finds out that for the subsidies they they are paying them the US Government could buy the whole industry.

    He goes to a senator who is one the committee and is promptly kicked out of his office after telling him his revalation. Some years late Arrow is watching the news to see that same senator being arrested (i think, or at least in deep poo) over taking bribes from the sugar industry. Funny stuff.

    That aside I won’t even get started on the French and what they do…

    Still I think there are seperate issues here. I don’t beleive that aid will help 3rd world nations. In the long run it’s actually pretty damaging. Free trade alone won’t help them either.

    This is a very very complex problem, there are no silver bullets. It’s a problem that requires hard work sustained public attention, a few rock concerts won’t solve this at all.

  2. I was thinking primarily of EU farming subsidies as well. It is interesting that our own free trade agreements allows more expensive oranges (which are DYED orange by the way) in, but won’t let our cheaper, and probably better quality sugar out.

    Crazy behaviour.

    But you are right, it is not easy. Still, what gives me the irrites is that the required laws (WTO) are in place to deal with this stuff. People just don’t bother observing them.


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