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U . S . C h i c k e n i n E v e r y P o t ?
N y e t ! R u s s i a n s C r y F o u l
B
Y
M
ICHAEL
R. G
ORDON
Moscow—A nasty little skirmish be-
tween Russia and the United States is
brewing here over a threatened trade
barrier.
But this fight is not about manufac-
tured consumer goods or high technol-
ogy, but about American chicken, which
has flooded the Russian market.
To the frustration, and considerable
anxiety, of American companies, the
Russian government has threatened to
ban further American poultry sales effec-
tive March 19. . . .
The ostensible reason for the Rus-
sian government’s warning is health—a
seemingly strange concern in a country
with a generally lax record in observing
safety standards, where virtually every
able-bodied man and woman smokes.
Today, no less an authority than the
Veterinary Department of the Russian
Agriculture and Food Ministry said the
ban was needed to protect consumers
here against infected poultry until the
United States improved its standards.
But the real agenda, American
producers contend, is old-fashioned
protectionism.
Agitated Russian producers, whose
birds, Russian consumers say, are no
match for their American competition in
terms of quality and price, have repeat-
edly complained that the United States
is trying to destroy the Russian poultry
industry and capture its market. And now
American companies fear the Russian
producers are striking back. . . .
The first big invasion of frozen poul-
try [into Russia] came during the Bush
administration. . . . The export proved
to be very popular with Russian con-
sumers, who dubbed them Bush legs.
After the demise of the Soviet
Union, American poultry exports con-
tinued to soar. Russian poultry produc-
tion, meanwhile, fell 40 percent, the
result of rising grain prices and declining
subsidies.
Astoundingly, a third of all American
exports to Russia is poultry, American
officials say. . . .
If the confrontation continues, the
United States has a number of possible
recourses, including arguing that the
Russian action is inconsistent with
Moscow’s bid to join the World Trade
Organization.
Some experts, however, believe
there is an important countervailing force
here that may lead to a softening of
the Russian position: namely Russian
consumers.
Russian consumers favor the Amer-
ican birds, which despite the dire warn-
ings of the Russian government, have
come to symbolize quality. And they
vote, too.
S
OURCE
:
The New York Times,
February 24, 1996,
pp. 33, 34.
I N T H E N E W S
A Chicken Invasion
A
THREAT TO
R
USSIA
?
C H A P T E R 9
A P P L I C AT I O N : I N T E R N AT I O N A L T R A D E
1 9 7
Tariffs and Trade (GATT), which is a continuing series of negotiations among
many of the world’s countries with the goal of promoting free trade. The United
States helped to found GATT after World War II in response to the high tariffs
imposed during the Great Depression of the 1930s. Many economists believe
that the high tariffs contributed to the economic hardship during that period.
GATT has successfully reduced the average tariff among member countries
from about 40 percent after World War II to about 5 percent today. The rules es-
tablished under GATT are now enforced by an international institution called
the World Trade Organization (WTO).
What are the pros and cons of the multilateral approach to free trade? One
advantage is that the multilateral approach has the potential to result in freer
trade than a unilateral approach because it can reduce trade restrictions abroad
as well as at home. If international negotiations fail, however, the result could
be more restricted trade than under a unilateral approach.
In addition, the multilateral approach may have a political advantage. In
most markets, producers are fewer and better organized than consumers—and
thus wield greater political influence. Reducing the Isolandian tariff on steel, for
example, may be politically difficult if considered by itself. The steel companies
would oppose free trade, and the users of steel who would benefit are so nu-
merous that organizing their support would be difficult. Yet suppose that
Neighborland promises to reduce its tariff on wheat at the same time that
Isoland reduces its tariff on steel. In this case, the Isolandian wheat farmers,
who are also politically powerful, would back the agreement. Thus, the multi-
lateral approach to free trade can sometimes win political support when a uni-
lateral reduction cannot.
Q U I C K Q U I Z :
The textile industry of Autarka advocates a ban on the
import of wool suits. Describe five arguments its lobbyists might make. Give a
response to each of these arguments.
C O N C L U S I O N
Economists and the general public often disagree about free trade. In 1993, for ex-
ample, the United States faced the question of whether to ratify the North Ameri-
can Free Trade Agreement, which reduced trade restrictions among the United
States, Canada, and Mexico. Opinion polls showed the general public in the
United States about evenly split on the issue, and the agreement passed in Con-
gress by only a narrow margin. Opponents viewed free trade as a threat to job
security and the American standard of living. By contrast, economists overwhelm-
ingly supported the agreement. They viewed free trade as a way of allocating pro-
duction efficiently and raising living standards in all three countries.
Economists view the United States as an ongoing experiment that confirms the
virtues of free trade. Throughout its history, the United States has allowed unre-
stricted trade among the states, and the country as a whole has benefited from the
specialization that trade allows. Florida grows oranges, Texas pumps oil, Califor-
nia makes wine, and so on. Americans would not enjoy the high standard of living
1 9 8
PA R T T H R E E
S U P P LY A N D D E M A N D I I : M A R K E T S A N D W E L FA R E
they do today if people could consume only those goods and services produced
in their own states. The world could similarly benefit from free trade among
countries.
To better understand economists’ view of trade, let’s continue our parable.
Suppose that the country of Isoland ignores the advice of its economics team and
decides not to allow free trade in steel. The country remains in the equilibrium
without international trade.
Then, one day, some Isolandian inventor discovers a new way to make steel at
very low cost. The process is quite mysterious, however, and the inventor insists
on keeping it a secret. What is odd is that the inventor doesn’t need any workers
or iron ore to make steel. The only input he requires is wheat.
E
CONOMIST
J
AGDISH
B
HAGWATI ARGUES
that the United States should lower its
trade barriers unilaterally.
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