Arnold Kling responds”>http://www.inquit.com/cgi-bin/blosxom/blosxom.cgi/pwg/wto/whatUse.writeback”>responds to my claim:
“I don’t see the public good argument. If the U.S. cuts its tariffs and subsidies, then the biggest beneficiary is the U.S. The problem is not that we failed to incorporate world welfare into our utility function–it’s that out government caves into special interests. ”
This may be a distinction without a difference. Saying that the government ‘caves-in to special interests’ is just another way of saying that it gives too little weight to the externalities (foreign or domestic). I don’t believe that this undermines my ‘public good’ contention. I agree that the costs to the USA of its own protection in a globalized world are mostly the loss of the gains from specialization etc. in its own economy. But the costs also include * the United States’ share of loss of global welfare from the global-market-shrinking consequences its own actions
* losses due to the ‘demonstration effect’ that the actions of the world’s most powerful economy have on the policies of others.
Allow me to anticipate a further concern here: what sort of force is needed to make negative externalities count in the political debate over trade or related policy decisions? AK may be referring to this concern when noting his dislike of the idea that we should trump big government with ‘bigger government’ (the WTO). The WTO is not ‘bigger government’ and doesn’t need to be. It’s only a contract among its member economies; it has no forensic or cooercive powers. The weight that it has in domestic debates is mostly borrowed from the domestic opposition to the plans of narrow sectional interests. As policy makers everwhere know, the most difficult resource allocation decisions are surprisingly finely balanced. The problem is that the side of the argument that represents the interests of the majority is frequently under-represented in the policy debates. Protection imposes huge costs on consumers as a group but only small costs on individuals, who have little individual incentive to object. The WTO has no power to force governments to act appropriately; certainly not by appealing to their ‘global citizenship’. But its principles give some voice in domestic debates to the broader interests in open markets and policy transparency that decision-makers often know to be close to the under-represented interests of consumers and e.g. importers. As Roosevelt’s Secretary of State Cordell Hull—one the treaty’s principal authors—knew, there’s nothing quite as helpful to a politician under assault from special interests as being able to say: “Well, friends, I’d love to help you… but we have these overriding treaty obligations.”