Shit, looks like sam just beat me to some of this, oh well, I already wrote it:

Of all of the diverse topics that Krugman touches on, I found that his discussion of free trade and protectionism was the most interesting. Throughout the chapter there were interesting tid-bits that I hadn’t really thought about in past musings on free trade.

1) US trade is relatively free because exporters advocate free trade. With all the talk about being fair and considering both producers and consumers in our considerations of protectionism, I feel like exporters weren’t fully considered. Although it must be fairly obvious that exporters are the strongest lobbying group for dropping trade barriers, I had never considered that a large trade deficit (where exporters are outnumbered by import-competing groups) would lead to future protectionism. It seems that some forms of US protection (export and production subsidies) would lead to exporters joining demands for protectionism. With all of these factors leading to pushes for protection, why are we still relatively unprotected? I think Krugman is quite accurate in noting the American confidence in free-trade ideology.

2) Even more interesting to me were Krugman’s claims that protectionism might not be as bad as this ideology would have us believe. With the amount of time and energy spent proselytizing the benefits of free-trade, I was astounded to discover that US import restrictions only impose costs on world efficiency equal to one quarter of one percent of US GDP. Arguments that claim that protectionism could be an inherently good thing such as strategic trade policy theory seem to further weaken the hysteria surrounding the need for free trade. Although I still don’t believe free trade’s positives should be ignored, I thought it was interesting to be exposed to some argument suggesting that there might be creative views to look at the positives and negatives associated with opening markets.

Throughout this chapter, I constantly thought about what trade protection really is. Through some of my work on international agriculture I have started to naturally equate US and EU ag subsidies with third world tariffs and quotas. What is the fundamental difference between subsidizing producers on their exports to artificially lower export prices and taxing imports to artificially raise import prices? It seems that this argument could be further expanded to include almost any type of government expenditure. Doesn’t health care, education, non-corrupt property protection and law enforcement all reduce the cost of production for individuals and corporations? Do these policies not offer an unfair, government sponsored, advantage to some nations over others? It seems that the best way to argue for these programs in an economic light would be to use variations of Krugman’s ideas of strategic trade policy. I need to further explore this but maybe comments to this post and discussion tomorrow will help me flesh it out.