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A Tale of Two Islands – Part IV: The Losers February 3, 2014 7:59 AM | Tagged as Comparative Advantage, free trade

WSJ January 6, 2014 Page A11:  NAFTA at 20: A Model for Trade Policy by Mary Anastasia O’Grady

WSJ January 13, 2014, Page A15:  Leading from the Front on Free Trade by Robert B. Zoellick

So if both islands have benefitted, what’s the rub? There are at least five losers in this free trade deal. They are special interests who want to stand in the way of improving the well-being of the entire island, either from a person’s economic reason or for an ideological reason. They are known as protectionists. They want to protect their special interest, but they frame their arguments as if they are protecting the common citizen of the island.

First, the owners of the apple trees on the Apple Island are not happy. Their investment is going to waste. This is understandable, but progress and improvement of the well-being of the entire island depends on this water bottling operation. Some people will be forced to be flexible with their assets. The unused part of the island the innovative young man bought was from the apple tree owners. Creative destruction is a common phrase for capitalism. This is a good example. No product should be assumed to last forever. Younger minds often are the source of improvement over the older generation.

Second, the head of the apple and oranges pickers union on the apple island is out of a job. His workers are now trained in water bottling and the apple/orange industry is gone. Union leaders often fight free trade agreements.

Third, the Apple Island Environmental Protection Agency is sure the natural spring will run out some day and leave the island bereft of water. Also, they argue the flow into the ocean is good for fishing and stopping it may kill the fish (which the island eats along with their apples and oranges.)

Fourth, the xenophobes on the apple island don’t like the handsome athletes of the orange island coming to work each week and eyeing the apple islands beautiful young daughters.  They want to preserve the apple island culture. And they don’t want to have to travel to the orange island to see their grandkids.

Finally, The Tax and Spenders in the island council has long charged heavy tariffs (taxes on imports) on imports from arriving boats at their marina. Now the agreement to bring in apples and oranges and ship out water bottles is free of such tariffs. They have less to spend. They fight such agreements.

[The Biz Bucks Blog is primarily written to former students of Biz Bucks training courses to encourage their daily reading of the three opinion pages of the WSJ. This refreshes principles of Biz Bucks courses and improves business acumen on topics not discussed in Biz Bucks training.]

 


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