Thursday, July 31, 2008

When Talking Turkey is Talking Nonsense

Wayne Dowler (Department of Humanities, University of Toronto), writes in the Globe and Mail, Canada (31 July) HERE:

“Talking turkey”

According to your article India Nixes WTO Deal To Cut Tariffs (Report on Business, July 30), the chairman of the Canadian Turkey Marketing Agency says the World Trade Organization talks "didn't seem to be favouring our interests so I guess no deal is better than a bad deal." Adam Smith sure got it wrong. Of course the interests of producers trump the interests of consumers. Now that that comparative advantage is comparatively much less advantageous to Western producers, the old Corn Laws - well, massive subsidies to cotton producers and the like in the U.S. and supply management in Canada - look pretty good.

Still, Western negotiators will keep right on invoking Smith's free-trade principles to put those tariff-loving developing nations in their place.

I am not clear where Wayne Dowler gets the idea that Adam Smith “sure got it wrong”?

Is Wayne Dowler, an academic at the prestigious University of Toronto asserting that Smith said “the interests of producers trump the interests of consumers.” What exactly is he saying?

Is it that Smith said producers didn’t ‘trump the interests of consumers’ or that if he didn’t say that, he should have?

Reading what Adam Smith did say doesn’t help me understand the allegation made by Wayne Dowler:

Consumption is the sole end and purpose of production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting the interests of the consumer. The maxim is so perfectly self-evident, that it would be absurd to attempt to prove it. But in the mercantile system, the interest of the consumer is almost constantly sacrificed to the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.’ (WN IV.viii.49: p 660)

It seems to me that Adam Smith was perfectly correct and his comments are remarkably apt for explaining the remarks by the chairman of the Canadian Turkey Marketing Agency.

Being a publicist for the turkey producers (at least those that join the agency representing them), he is putting a good spin on the failure of the WTO round to remove tariffs, presumably on turkey meat, by looking at, for him and his members, the status quo has being better than reform which would benefit consumers by lowering the price of turkeys and simultaneously raising their real incomes".

I fail to see how ‘Smith's free-trade principles’, as understood by Smith, can be used ‘to put those tariff-loving developing nations in their place’.

The US, Canada and the EU are not ‘free trader’ economies at all. In agriculture particularly, of which turkeys are a part, they are protectionist in the worst mercantile tradition of 18th-century Britain.


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