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To: Tradelite who wrote (17055)	2/10/2004 12:37:14 PM
From: gpowell	Respond to of 306849

Nice article. It does point to the difficulty in supporting "free trade" arguments. The costs of free trade are borne by a few while the benefits are spread among many. Thus, imposing barriers benefit a few while the cost is borne by many. This situation creates an asymmetric incentive structure for congress and lobby groups. As such, special interests have an influence on policy that is disproportionate with their size - there is money to be made with imposing barriers. This is one of the well-known government failures, which is analogous to a market failure. It is not well known that some of the discord between the north and south preceding the civil war was due to tariffs. The north wanted high tariffs against foreign manufacturers while the south, which was an net exporter of goods - and consumer of manufactured goods - obviously favored lower tariffs. After the civil war, the north imposed tariffs in the 40- 50 percent range, which remained until about 1934. Even as the US became a net-exporter of manufactured goods it was difficult to lower the tariffs because of asymmetric incentives. It was only after the democrats came to power, in 1932, that the tide began to shift. By 1934, congress passed the RTAA, which gave the power to enter into tariff agreements to the president – who was, in theory, less influenced by special interests. The benefits to trade and the economic needs must have been substantial for congress to willingly give up power and a source of election funds. BTW, a similar asymmetric incentive structure is at work with economists. Those that advocate the benefits of government spending will always find consulting jobs with lobby groups hoping to get a little bit of the money. While those that show the welfare loss to society of government activities do not find a comparable group willing to fund their research.