July 11, 2017
Regular readers of the NYT and other leading outlets might well get that impression. The one-sided nature of the discussion of these deals (invariably dubbed “free” trade agreements, because no one can be opposed to freedom) is hard for careful readers to miss.
We got yet another example with a column warning that Donald Trump may kill the bourbon boom with his trade policy. The piece uses the example of bourbon to tell us all the ways in which Trump’s decision to pull back from the Trans-Pacific Partnership and other trade deals can harm people in the United States and be bad for the world generally.
Starting at the basics, it tells us:
“Take Vietnam, a TPP member that increased American spirits imports by 173.9 percent between 2015 and 2016, to $45.9 million, making it the category’s fastest-growing importer. Under the trade deal, the country is expected to drastically increase its American whiskey consumption.
“Without American membership in the TPP, a 12-nation pact that created zero tariffs for American products, Vietnam’s 45 percent duty on bourbon and other distilled spirits will no longer be phased out, putting those expectations on ice.”
There are several points worth noting here. First, apparently, our whiskey exports to Vietnam appear to be doing just fine even with the 45 percent tariff. Perhaps U.S. whiskey is considered a luxury in Vietnam and the people who buy it are not that concerned about the price. I have no idea whether that is the case, but is possible that the reduction or elimination of the tariff may not affect sales very much.
The second point is that the implicit assumption in this story is that the people in Vietnam have no interest in getting cheaper whiskey. The piece assumes that they will continue to impose a 45 percent tax on the whiskey they buy from the United States for the indefinite future. This is, of course, possible, but it’s also possible that Vietnamese with access to textbooks on public finance, or who like U.S. whiskey, will push their government to reduce the 45 percent tax with or without a trade deal.
Finally, we should be asking how people in the United States feel about paying more for their whiskey. After all, there is a limited amount of whiskey that U.S. distilleries can produce, at least in the short-term. If Vietnam and other countries will buy more, then there is less left for us whiskey drinkers back in the United States.
The impact on the domestic price of whiskey from increased export demand may not prove to be too much, but there certainly are examples of cases where it has been large. The Soviet wheat deals signed by Nixon had a very visible effect on the price of wheat and a wide range of food products in the United States. In any case, there can be little doubt that the direction of domestic whiskey prices as a result of increased exports is upward. Is the NYT prohibited from pointing out that the TPP would mean higher prices for U.S. whiskey drinkers?
But there’s more:
“But absent trade agreements, other countries are free to sell their own versions of American products. Like Champagne and cognac, bourbon’s name protection relies largely on trade deals that set standards and definitions; without them, foreign distillers are surely tempted to slap ‘bourbon’ on anything they want.”
Okay, this one also cuts both ways. Back in the old days, we used to have California “Champagne.” Trade deals killed this product, so we can only buy sparkling wine from California, not Champagne. There are also issues about “Provolone” and “Gouda” cheese from Wisconsin and many other products produced in the United States that carry the name of the regions in other countries.
Sales of these products are jeopardized by rules in trade deals that could specify that only products from these regions can carry the name. Such restrictions would also raise the price for consumers. We can debate whether this is the right path, but there is no doubt there are losers from such prohibitions. Is the NYT and other news outlets prohibited from making this obvious point?
Then we get:
“Trade deals also create structures to combat counterfeiting, another big problem for exporters. Asian countries already pose a great counterfeit risk for iconic brands like Jack Daniel’s Tennessee Whiskey and Maker’s Mark. While the TPP would not entirely have curbed this problem, it would have given American companies distilling the real thing stronger legal protection.”
This paragraph commits the common crime of confusing “counterfeits” with unauthorized copies. With a counterfeit product, the buyer is deceived. They think they are purchasing Jack Daniels Tennessee Whiskey, when in fact they are buying something that may be far inferior. As a result, the consumer is getting ripped off. They are paying a premium price for something they are not getting. In this case, cracking down on the trade is a gain for both the maker of Jack Daniels and the consumer.
On the other hand, an unauthorized copy plays on the identity of the product, but the consumer knows she is not actually buying Jack Daniels. In this case, there is no ripoff. The consumer is getting a product that they know is not Jack Daniels for a price that is considerably less than they would have to pay for Jack Daniels.
The result of the trade deal, in this case, is to close off this discount market. That is good news for Jack Daniels, which will benefit from reduced competition, but it is bad news for consumers in our trading partners. How are we supposed to feel about making people in Vietnam and other poor countries pay more for their whiskey and a wide variety of other products? Also, if they give more money to Jack Daniels, they will have less money to buy our wheat and computers and whatever else we might sell to them. Is there some reason the NYT can’t mention this aspect of the story?
And, there are the pure protectionist components of these trade deals in the form of longer and stronger patent and copyright protections. This means making these people pay more for prescription drugs, medical equipment, software and a wide variety of other products. The impact of these types of protectionism can be equivalent to tariffs of several thousand percent. They can jeopardize public health and also mean much less money for other imports.
Again, this basic fact is never mentioned in the NYT or other news outlets. Is this also prohibited?
Anyhow, it is unfortunate that news outlets like the NYT feel an obligation to do fluff pieces promoting trade deals rather than honestly discussing their plusses and minuses. I guess they don’t think they have a very good case.
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