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Free Trade, Not Government Aid, Is the Answer to Tsunami Relief

February 4, 2005

Indignant over accusations of being "stingy" by the United Nations, leaders in developed countries responded to the devastating tsunami in southern Asia by acting as if they were participants in a game of high-stakes poker. One can almost picture President Bush, peering across a smoke-shrouded table and coolly telling Jacques Chirac, "I'll see your $100 million, and I'll raise you another fifty."

At last count the Bush Administration has promised $350 million in financial aid to the distressed region ? a figure that will almost certainly rise. Not surprisingly, few have dared to publicly question the "right" of the government to be charitable with taxpayer money, let alone the effectiveness of such government aid in helping the victims of this tragedy. After all, nobody wants to be accused of being callous in the face of such an enormous cataclysm.

But even if one is not bothered by the government's ability to disburse money as it sees fit or that funneling tax dollars through bureaucracies is inefficient and often wasteful, a better humanitarian alternative still exists. Instead of government aid, the U.S. should pursue freer trade. That is, the federal government should immediately move to lower or eliminate trade barriers on imports from countries battered by the tsunami.

That the countries exporting goods into the U.S. would benefit is indisputable. The boost to jobs, incomes, and economic growth would provide steady fuel to the recovery effort and could begin to forge a less hostile climate of opinion among the predominantly Muslim inhabitants. While free trade may not provide a sufficient financial response on its own, there are millions of additional dollars being donated by individuals and private charities that would make up the difference.

At the same time, American consumers would benefit from lower prices, which in turn would free up money to be spent on other goods and services. U.S. industries that utilize these imports would see their production costs decrease. The outcome would be lower prices for their products, higher wages, better living standards, and economic expansion. Who could possibly oppose progress? Unfortunately, a few politically connected domestic industries whose immediate financial interests would be negatively affected by the reduction or removal of import barriers.

For example, fifty percent of Sri Lanka's total exports are comprised of textiles. Naturally, Sri Lankan textile executives are pleading for reductions in tariffs on exports to the United States and Europe. While the Europeans have been receptive to the idea, the U.S. has been virtually silent. The reason is obvious: the White House is leery of incurring the wrath of the U.S. textile industry already inflamed by the January 1st demise of a thirty-year old textile quota regime. Although U.S. textile companies have had a decade to prepare for the quota system's termination, the industry has been successful in persuading the White House (and many Members of Congress) to support protectionist measures.

Another trade issue of particular relevance to the tsunami disaster is the White House decision in December to permit anti-dumping tariffs on shrimp imports from several countries, including tsunami-ravaged Thailand. Although pleas from the Thai government to lower tariffs on this crucial industry are being considered by the U.S. International Trade Commission, domestic shrimp producers are mounting a strong counter offensive.

Even the foreign aid itself is having a negative side effect on the export sectors of affected countries. In Sri Lanka, a sharp spike in the rupee driven largely by the massive influx of aid is putting a severe strain on Sri Lankan exporters. While financial aid is necessary and needed, the Sri Lankan economy would be better served by gradual inflows, not foreign aid one-upmanship currently on the part of contributing governments.

The sad truth is that Washington often chooses to assuage vocal special interests rather than take more beneficial (but politically risky) measures when it comes to foreign crises and trade. Pakistan ? whose assistance we desperately sought following the 9/11 attacks ? has repeatedly asked the Bush Administration to grant it freer access to our markets, particularly for textiles. Instead, the administration has given the Pakistanis billions of taxpayer dollars in direct aid. As in the current case of those countries decimated by the tsunami, a golden opportunity to foster goodwill among a predominantly Muslim country was wasted.

Whether it be Pakistan or Sri Lanka, the shortsightedness of such policy decisions in terms of both economic and national security is obvious. If President Bush's Inaugural message is to have future credibility, freedom of trade is among the first freedoms the U.S. should more vigorously pursue.

Mr. DeHaven is an Economic Policy Analyst with National Taxpayers Union. This piece first appeared at Human Events Online.