Comments on Happy 10th Anniversary, EU Central Bank

golob, don't try and take away the rent seeking behavior of the United States.

It seems that any trade agreement involving the United States is crafted to maintain our economic standing. They are all a quest for cheaper labor and resources, to the benefit of American companies.

The EU is unique because, after slaughtering each other for centuries, the member countries finally figured out that the only way to compete with the US in the global market is to pool resources and work together.

True free trade in the Americas isn't really possible due to the huge economic imbalance between the US and every other country. Or, at least, it isn't possible unless we drastically change our priorities.

Yes. And the only reason the EU works is because all member countries have roughly the same standard of living. Wages equalize and its no big deal.

It is a big deal if you want my standard of living to go down in order to meet some dirt poor mexicans (its not racist, they do exist) standard of living in the middle.

Jonathan, you are talking out your ass in a multitude of ways:

1. Grab any responsible economist, and he'll admit to you that nations need not implement all your five points to gain some benefit from less restricted trade. As a general rule of thumb, any increase in the set of allowed trades is welfare-improving. (Heard what happned to New Zealand when it decided to unilaterally lower trade barriers?)

2. The US does not manipulate its currency or restrict capitol flows any more than Euroland, and does so significantly less than some non-Euroland EU countries.

3. You seem to conflate the EU and Euroland. There are more than a dozen EU countries that are not in Euroland. (Ever heard of Poland?) So apparently sharind a currency isn't that important.

4. Individual nations within the EU have plenty of selective subsidies, tax regimes, and other politices that favor national firms. (For recent interventions by Germany, France, and Italy on behalf of national champions, read any issue of The Economist.)

5. Individual nations within the EU certainly compete on tax policy. (Heard what happened since Ireland slashed it corporate tax?) There are plenty of differences in labor, environmental, safety, and business standards among EU countries.

6. There are still very strict restrictions on the freedom of citizens of eastern EU countries to move to and work in western EU countries.

So basically, you are wrong about Europe and wrong about economics. Next time, before engaging the "isn't Europe's economic system wonderful?" game so beloved of starry-eyed-progressives, go learn some facts about Europe and about economics.

Karst @3 says: "And the only reason the EU works is because all member countries have roughly the same standard of living."

Yet more people talking out there asses! Ratio of GDP/captia of the U.S. to Mexico: 5.6. Ratio of GDP/capita of Norway to Romania: 15.3. (Time that it took me to look up these figures: less than 60 seconds.)

David Wright beat me to it on 5. But still I love this post even though it's not so simple as you make it out to be.

One thing that's interesting about Europe's experiment is how it has been so spectacularly successful in raising the incomes of its poorest members. Today it's Romania, but twenty years ago it was Portugal, and Greece, and even Ireland and Spain that were as relatively poor as Mexico is. Today Spain has already passed Italy on GDP per head, and Greece is about to; Portugal is booming, and Ireland is the best-performing economy in the world over that time span, the Celtic Tiger making the Asian ones look sick.

It's not all down the EU -- getting rid of thugs and losers like Franco, Salazar, Papadopoulos, and de Valera helped -- but it largely is, and it's been remarkable, even in the face of (for instance) French intransigence on ag subsidies.

@5: Small quibble, but I thought Norway opted out of being part of the Eurozone? And Romania isn't expected to join until 2014?

@5 - There's a pretty big gap in GDP/capita between the original EU countries (1995 or before) and countries added during the expansions in 2004 and 2007. For example, the ratio between Norway and Portugal (I think the poorest of the original countries) is only around 4.

I think it's safe to say that the dynamic is different with poorer countries joining the already established EU, as opposed to, say, Norway and Romania entering a bilateral free trade agreement. You also pointed out immigration restrictions between the new members and the already established countries.

Regarding Mexico's GDP, there is enormous economic disparity and corruption. Around 20% of Mexicans live in abject poverty, and much of the wealth is distributed along ethnic and geographic lines. In other words, the GDP/capita number is misleading, and I don't think you'll find anything like that in EU countries.

For the most part, I think Jonathan's post is on point. Of course, there is some wrangling by the member countries to try to gain an advantage, but ultimately the EU is a legitimate model for free trade.

I should also comment on the implicit suggestion made, by linking to that graph showing the USD/EUR exchange rate declining by 25% over the last 5 years, that exchange rate changes represent changes in the relative well-being of those populations. That is not true.

Go to the IMF web site and look up GDP/capita at PPP, an actual measure of well-being, for the US and the EU-15 from 2003 to 2008. You will find that, during that period, GDP/capita increased by 28% in the US and 26% in the EU-15.

Please don't misunderstand me: I am a fan of the strongly anti-inflationary stance of the ECB. I am a fan of the lower trade barriers that the EU, Euro, and Shengen have achieved. I am also a fan of the lower trade barriers that NAFTA, CAFTA, and WTO have achieved. I'll take my free trade opportunities where I can get them. And I'll thank Jonothan Golob not to tell me that I can only have them if I do it in the same way that he wrongly thinks Europe has.

Two thoughts:

1. Golob, was that your senior thesis coverage?

2. Wonks = Me w/ a chubby (thanks guys!)

* cover page.

Shite...

Sherman @5: Norway and Romania are both EU countries, but not Euroland countries. Since Jonathan conflates them, it's not clear whether he thinks the EU or Euroland is the relevant comparison entity. Certainly under any normal understanding of a free trade area, the EU is one: goods can be shipped between Norway and Romania without tarrifs. It would be particularly odd to pick Euroland for a comparison to NAFTA, since NAFTA is now nor is it even intended to grow into a currency union.

David Wright - good points all around.

Jonathan - thank you for bringing up the subject

David--

Fair enough on your critiques. I wrote this quickly, and for slog. Fair. Just. Stupid.

Since you took the time, my response to your points:

1. I agree. Not all five need to be implemented to get benefit. NAFTA just shouldn't be called a free trade agreement. It's a trade agreement.

And I think you missed the main point I was trying to make. I think the imbalance is the problem. For example, NAFTA does a far better job dropping tariffs than equalizing environmental and labor regulations. It would've been a better agreement for all involved if there was some parity.

2. I completely agree; the US doesn't tend to manipulate our currency, beyond a vague "strong dollar policy."

I think many of our trade partners do. Both Japan and China have repeatedly done so. I'm too lazy to drag up an early slog I wrote on the topic, but China has a quite involved system to restrict the flow of capitol, directly contributing to the massive ongoing trade imbalances.

I could go on to say I don't think the deals are designed to flow money just to the US. To the contrary. I think many of the deals are structured in a way that the privileged both here and abroad disproportionately benefit. Think of where the bulk of wealth growth has occurred, worldwide, in the last twenty years.

3. Yes, particularly the developing economies of the EU aren't all using the Euro. They all still, arguably, benefit just by being the the better integrated regional economy.

4 and 5. Again, you are right. But my point also stands. There are fewer of these protectionist policies, and more of them are directed against non-EU countries rather than between EU-states. The result is more internal efficiency.

6. Again, the newer member states are, indeed, a different story. The ability to switch jobs between developed EU countries is still quite easy--far more analogous to traveling between US states than compared to, say, traveling from Mexico to the US for work.

I don't think the EU is perfect by any means. I still maintain it's a damn good example of how well embracing actual free trade agreements--all five points in parity--works. It makes our "free trade" agreements somewhat pathetic in comparison.

Baloney.

Like most anti trade "thought" this confuses a trade agreement like Nafta, removing tariffs and such, with trade itself. The trade is going to be there anyway with or without Nafta. If you want to ban trade or have higher taxes on trade goods, just say so.

Tell us again why you want taxes on imports, so you can pay more for your imported Honda, for your shirt made in vietnam, your computer made in china and printers made in singapore ?

You want that laptop made in china to cost 2000 instead of 899 so you can write anti trade rants with more expense?

Hello?
Europe is a shining example of trade liberalization benefits that exactly disproves the thesis offered here.
They STARTED with just liberalizing trade and added unification of currency and regulations and free movement of labor LATER.

Here's a quiz:
What provision of Nafta exactly is it that you don't like?

Please show us the document and quote the article and paragraph number.

Tell us why it's bad.

OK?

If not stop ranting against it.

@9

Seriously, you are going to bring up gdp as a measure of living? The same GDP that includes all the equity that was stripped out of the housing market? The same gdp that includes the 30 or so billion a quarter for the 5 companies that control oil? Because I think a lot of people may tend to think that gdp number that gets thrown about might be misleading, you know, with the way true scholars are being replaced by political appointments. The trickle down hasn't trickled down for 28 years.

And guess what kids we get to bail out the banks next!
Hooray speculation on credit!
Hooray profit!
Hooray protectionism and an unwillingness for a free market!

Its the wall street way! There will be no recession! GAs is not $4 a gallon! everything is not more expensive!

Argue all you want on every point, the simple fact is, we could learn a lot from European countries.

You also forgot about the US insane rules (aka "laws") about Intellectual Property, Copyrights, and Patents that are used to keep the ultra-rich even richer for far longer than any other country.

Just look at how much of a ripoff our drug costs are.

Does PC ever make sense? I secretly dream he will one of these days, he's just so darn passionate, he deserves it.

... oop, guess it's not a secret anymore.

@18
ad hominem = you don't got the goods.

What provision in Nafta is wrong ?

Happy to discuss it, it'd be pretty weird if you couldn't find even one paragraph that is wrong and bad policy. But instead of dealing with reality you just spread all these myths.

"Differences in regulation" were allowed before trade agreements. If A/k/a "national soveriegnty." I'd prefer socialized medicine here but we don't have it. If nation X which does have it views that as an unfair trade advantage we have, making our cars cheaper, they are free to impose a huge tax on our car exports if they like. If they are in a trade agreement with us that bans that they can....dorp out of that agreement.

If your nation does not want to trade with say, with China, because you think they should have higher environmental standards, your nation is free to not trade with China. You can ban all imports, or tax them or whatnot.

Is that what you want?

What taxes do you want to put on imports from China exactly?

You want a tax on Chinese imports to equalize the lower costs of no eviro regulation there and a lower minimum wage (ha ha don't think or know if they got one) fine.

WHat's that tax going to be, 500%??????

So that laptop you write on to post on Slog made in China would cost $5,000 and not $1,000?

Oh yes if we tax them of ourse will retaliate and ban our software, tax our food exports, etc. etc. etc.

I'm not defending all aspects of any trade agreement. I'm saying if you are against trade, say so; it's not the trade agreement that causes the trade; and say what barriers to trade you want.

but meanwhile stop wearing those cheap shirts made in Vietnam and Malaysia and using that inkjet printer made in Singapore, OK?

Seriously. Tell us one paragraph in Nafta that you don't like, then we'll talk.
Or tell me how high you want the tax to be on Chinese goods. Or tell me you want world government so that we can intervene in China and raise their standards.

What would you want if the world was as you like it?

If you can't say what it is u r not making sense.

PS- thanks for noting the passion. But it's no big deal. What gets me riled is good hearted people who just spout nonsense and myths and can't even argue their own point of view. As opposed, say to calling names. Yawn. Back to writing on my cheap laptop. Oh where are my Ken Cole shoes made? china, check. My scenario calulator for $5 on this desk? China, check. My mouse? china check. Gee how terrible I am buying shit from China and helping all those poor slobs over their have horrible factory jobs to choose from in that provine outside Hong Kong that's producing capitalists. In addition to slaving away in poverty on their rice patches out in the countryside. Sure wish we banned imports from China, that would help them a lot.

Or, too bad they don't go back to Maoism and forbid capitalism and trade, things were so much better then with no trade, no contacts, no richy rich mainland Chinese sending their kids over here to learn English and take the economy away from the USA. Let's ban trade, that will help keep them from being an economic power!!

What's so just about giving less developed (ie poorer) countries provisional membership in your "free trade" agreement so that you knock down all resistance to Western European capital, demolish small businesses deemed "inefficient", scoop up huge amounts of the post-communist East while at the same time not give East European workers dispossessed by these changes immediate full citizenship status?

This is genius neo-colonialism. With the addition of each new country to the EU comes a new, subject, sub-citizen workforce pushed to leave their country to find work, ready to be exploited to the benefit of western Europeans without their having to radically open up immigration laws/ new paths to citizenship or go bother with conquering another country.

Turkey will be their gem acquisition, their entre into the Middle East, which will supply them with this kind of sink for excess capital and source of cheap labor for decades.

Free trade, indeed.

If I were the rest of the world, or at least Europe, I would hold a nice ceremony for the US, shake its hand, give it a certificate of merit, thank it for all its pioneering work in democracy and economic liberalism, make it Nation State Emeritus....

...and then let it fester and rot away while I move into the future without it.

Oh wait, that's pretty much what is happening.

PC - which strawman in this thread said they want to tax Chinese goods? Is anyone here arguing for more trade barriers?

Jonathan @ 14: I tip my hat to you for your gracious and measured response. I was correct, but you showed coolness under fire, and I admire that.

@19 Hey, just to clarify, I didn't spread any myths.

I was just making fun of you. :D