Thursday, May 10, 2007

A Gutierrez Gaffe

Carlos Gutierrez was on Kudlow tonight discussing various trade-restricting bills floating around Congress. While he defended the importance of free trade, he also made the mistake in claiming the US has free trade. Not even close.

The point that stuck out the most was when he mentioned the value of anti-dumping laws. According to Gutierrez, this is consistent with free trade. Indeed, the WTO approves anti-dumping law to counter "unfair" prices (whatever that means) and government subsidies. But this is not free trade, no matter what the law says.

Free trade is the absence of government regulation concerning international exchange. Anti-dumping laws don't "cancel" subsidies and it certainly doesn't add to free trade. Their only saving grace is a threat: stop creating barriers or we'll create more. But this might not work and one legal distortion is better for both sides than two.

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