September 10, 2003

Classic misdirection  

Trade talks in Cancun are underway, and they're finally getting a little press - including a somewhat enlightened NYTimes editorial. Body and Soul has more.

Meanwhile there's this sideshow over whether US companies can continue to use European names on 41 products: Porto, Cognac, Bologna, Manchego, and Feta, to name a few. And unfortunately, it looks like they've managed to connect the issue to the problem of agricultural subsidies:

The issue is vital to Europe, which is under heavy pressure to slash its lavish farm subsidies. EU farm officials say they might be able to justify cutting subsidies if they can get protection for small producers of specialty products. A names registry also would protect consumers by guaranteeing authenticity and quality, they say.
One odd feature of this argument is the complete disconnect between these specialty products and the EU farmers who would go under if agricultural subdsidies were eliminated. Basically they're saying that if they could squeeze more out of their Parmagiano-Reggiano, they'd have the economic wherewithal to retrain their former farmers into something else - more specialty food producers, business consultants, professors of god knows what - or even just support them through the government.

But the whole reason for subsidies in the first place is to protect the jobs of those farmers. Basic trade theory tells us that if we open trade completely (ie get rid of those subsidies) then countries will produce the goods for which they have a comparative advantage. In practice this means some workers will be laid off or retrained - which is why in the US we see organized sugar, cotton, and steel lobbies and government subisidies and tarrifs to protect them. But if the EU is willing to concede that those farmers' jobs will be reallocated, there isn't really any argument left for a subsidy policy.

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