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From: mmt@dciem.UUCP (Martin Taylor)
Newsgroups: can.politics
Subject: Re: Trade offsets (Eastern Myopia)
Message-ID: <1273@dciem.UUCP>
Date: Thu, 13-Dec-84 17:09:11 EST
Article-I.D.: dciem.1273
Posted: Thu Dec 13 17:09:11 1984
Date-Received: Thu, 13-Dec-84 19:00:38 EST
References: <854@ubc-cs.UUCP> <653@watcgl.UUCP>  <1271@dciem.UUCP> 
Reply-To: mmt@dciem.UUCP (Martin Taylor)
Organization: D.C.I.E.M., Toronto, Canada
Lines: 46
Summary: 


In connection with the increasing tendency of Third World countries
to use trade offsets, I said:
>>the selling Government has to get into the act to persuade somebody
>>not the least interested in the primary deal (lumber) to buy something
>>they would not otherwise buy (textiles).  Protection of the industry
>>producing the secondary product (textiles) is a separate issue that
>>may complicate the whole mess.  If Indonesia wanted its offset in
>>something someone in Canada wanted to buy, matters would be easier.

To which Donald Acton replied:
>
>Are you sure we don't want textiles?  Perhaps the perceived lack of demand
>for this product is a result of the protection of the Canadian textile
>industry which results in artificially high prices for imported textiles.
>
>       Donald Acton

I'm sorry; I didn't mean to imply that we don't want textiles.  It was
just using the example items from the original message.  News reports
had suggested that Indonesia was using textiles as trade offsets that
someone in Canada would have to buy if Indonesia were to buy BC lumber.

My point was not whether Canada would be better off buying Indonesian
textiles, but that it isn't Canada that would be doing the buying.  It
would be some business that would import the textiles, and that business
would have no interest at all in the lumber.  Indonesian textiles might
not be profitable, given that they could buy Korean (or even Canadian).
The Government would have to act as a broker at the very least, and
most likely would have to offer a subsidy.  Judging from Acton's previous
postings, he would probably not approve such a role for Government (sorry
if this puts words improperly in your mouth).

Trade offsets are very like protection.  In both cases the local industry
is given special tratment by its Government.  In one case the Government
forces other people to buy the product of the industry, and in the other
it forces people to pay a high price for the product if they don't buy
it from the local industry.  If you don't like Canadian protectionism,
you probably wouldn't like trade offsets either.  Personally, I think
that rare circumstances probably exist in which either is justified,
but normally they are both bad ideas.
-- 

Martin Taylor
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