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TRADE WARS
Outside View: Protectionism on the Right
by Shanker Singham
Washington (UPI) Mar 23, 2012

disclaimer: image is for illustration purposes only

A disturbing trend has manifested itself in the Republican primary race -- the rising specter of populism and protectionism.

One of the two leading candidates, Rick Santorum, has championed a manufacturing tax plan that could have come from the most planning-oriented official in China -- a plan that would deliberately use the coercive government power to force firms to relocate manufacturing facilities in the United States by skewing the overall tax structure of the country.

This is not dissimilar to the Chinese government's use of a zero tax for foreign-invested enterprises and is the functional equivalent of highly distortive "buy local" policies applied in many countries around the world, especially the Buy American provisions of the 2009 fiscal stimulus package.

Santorum's tax proposal and the Obama administration's proposal for a global minimum corporate tax (which would disincentivize U.S. firms' foreign success) are, in fact, drawn from the same side of the economic ledger. They will have the same effect, which is to shrink the market and suck money out of the economy.

When this is allied to Santorum's opposition to the North American Free Trade Agreement, his support of protectionist steel measures, his support of an import tax on honey and milk subsidies, an emerging picture of right-wing populism and protectionism emerges.

Newt Gingrich's attacks on Mitt Romney continue to draw from the Occupy movement's rhetoric, criticizing the man's private sector experience, wealth and organization as the Occupy movement attacks the risk-side of the free market economy.

His continuing support of the government-sponsored enterprises, Fannie Mae and Freddie Mac, and his work supporting government distortions in Freddie Mac that contributed to the financial crisis suggest that he too favors government solutions to economic problems.

His equating of the free enterprise system with simply making money (however it is made) suggests a fatal flaw in his understanding of markets.

Both candidates suffer from the same problem. While the rhetoric of free markets and free trade is good, the actual detail of their previous policies and -- in the case of Santorum -- current policy proposals is drawn from a completely different world view.

In this world view, manufacturing can only be promoted by distorting the market and making money off government distortions is exactly the same as making money through the creative destruction of real free market capitalism.

The problem with this zero sum world view is that it does not understand that the world of human interaction is actually non-zero sum in nature. Money is very hard to create, and very easy to destroy. Bad economic policy choices such as those set out above will, in fact, suck money out of the economy, the equivalent of burning sheaves of $100 bills.

This is not good for anyone, whether it is the poor or the rich. In a contracting market, the entire population is sucked deeper into the rising tide of poverty. In an expanding market, the populace moves up and out of poverty, most especially the poor.

There is a reason why Santorum's policy of picking winners and losers is bad and it is not only the Solyndra problem. Government interventions that distort the business decision-making process of firms destroys wealth, hurting the people at the bottom of the economic ladder most of all, but pulling all except a privileged elite down.

Only the platform of Mitt Romney seems to comprehend this and attempt to put it into practice. He has advocated for a territorial tax policy that could loosen the shackles on the private sector and make the economic pie grow bigger for everyone. His trade policy with respect to state-led economic models in China and elsewhere seems to recognize that our goal should be to have free markets at home and abroad and takes a realistic view of how to get there.

Countries that are right now embracing protectionism of one sort of another -- whether it is Brazil increasing its tariffs or China's attacks on U.S. intellectual property -- must be confronted and will not simply embrace free markets because we tell them to.

Populism at home, whether it comes from the right or the left must be confronted.

There is a real conservative choice at least in the economic sphere but it is not the one that the media has been suggesting. It is highly ironic that groups that claim to support economic conservative ideas are supporting candidates whose policies and proposals do not.

This election will call for a full-throated, robust defense of free markets and free enterprise. On the Republican side, only Mitt Romney seems qualified to make it.

(Shanker Singham is chairman of the International Roundtable on Trade and Competition Policy and partner in the Washington office of global law firm, Squire Sanders. He is the author of "A General Theory of Trade and Competition.")

(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)

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Apple chief meets officials in China
Beijing (AFP) March 27, 2012 - Apple's new chief executive Tim Cook has held talks with officials in China, the US tech giant said Tuesday, the workshop of its products but where its operations have faced difficulties.

Cook's visit to China, his first since taking over at Apple after the death of co-founder Steve Jobs in October, reflects the importance attached to the massive Chinese market by the firm, a company spokeswoman said.

But it also comes after Apple's operations in China have faced difficulties, such as recent copyright battles and worker suicides at a major supplier.

Apple spokeswoman Carolyn Wu, speaking from Beijing, confirmed Cook, who is currently in China, had discussions with government officials.

"China is very important to us and we look forward to even greater investments," she said.

She declined to give further details on the nature of the talks or Cook's trip, which comes after recent difficulties for the firm.

Earlier this month, a group of Chinese writers, who accuse Apple's online store of selling pirated copies of their books, said they were seeking $8 million in compensation from the US firm, according to the official Xinhua news agency.

A local computer firm called Proview Technology (Shenzhen) has also filed lawsuits against Apple claiming it owns the Chinese rights for the "iPad" trademark.

Lawyers for the Chinese company said they were seeking to prevent Apple from shipping the iconic tablet computers into and out of China, and are threatening to sue the US firm in the United States for $2 billion.

Apple has also had to fend off allegations by labour watchdog groups that Chinese workers employed by key supplier Foxconn of Taiwan were operating in harsh factory conditions at the company's plants in China.

A string of workers have died in apparent suicides at Foxconn plants, with activists blaming the tough conditions.

However, the gadget maker, based in Cupertino, California, remains wildly popular in China and its iconic products such as the iPhone and iPad are coveted by wealthy Chinese consumers.



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