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Free Trade Fact of the Day

Posted By Conn Carroll On March 31, 2008 @ 11:48 am In International | Comments Disabled

Protectionism is not just on the rise among liberals in the United States. Leftist governments throughout the world are seeking to quash free trade in favor of redistributionist schemes. In Argentina President Christina Kirchner’s new export taxes have sparked violence throughout the country and the Wall Street Journal’s Mary Anastasia O’Grady explains the stakes [1]:

But the greater motivation behind the export-tax increase is inflation. This government, it seems, will do just about anything to reduce inflation except the one thing that would solve the problem: Let the peso strengthen. It has imposed price controls on businesses; frozen, and then subsidized, energy prices; and prohibited the export of beef. Last year it fired the director of the government’s agency for inflation data because she refused to fudge the numbers. Even so, prices rose by an estimated 20% in 2007 and expectations for this year remain high. This would explain the new round of confiscatory export taxes. By discouraging farmers from sending food abroad, the government thinks it can increase food supplies inside the country and damp prices.

While making farmers furious and reducing the incentive to produce, this does nothing to address the causes of the inflation, which are monetary expansion and the failure of the economy to attract investment and expand productive capacity. A strong peso and a commitment from the government to respect private property are what’s needed to confront rising prices.

Instead, like loyal minions desperate to plug holes in a leaky dike, Mrs. Kirchner’s economics team is running around trying to compensate for the many Kirchner policy errors without freeing the economy. The inflation crisis is only the latest fiasco. Subsidies to offset the new export taxes cannot be far behind.

But never mind. Kirchner power does not lie in a rational economic model. The first couple’s idea of running an economy is to tax, prohibit, regulate, subsidize and otherwise micromanage every aspect of Argentine life so that no decision can be made without checking first with them. They are, at bottom, unreconstructed authoritarians.


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URL to article: http://blog.heritage.org/2008/03/31/free-trade-fact-of-the-day-18/

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[1] explains the stakes: http://online.wsj.com/article/SB120692466040375723.html?mod=todays_columnists

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