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November 11, 1993

I would like to comment on yesterday's editorial "Nafta a Tool for US Economic Supremacy." The argument of the editorial is: "Although Nafta will not pose any clear and present threat, Taiwan may face stiff competition from Mexico in the long run." The reason for the increase in competition is that the U.S. has tariffs on some products like clothing. These tariffs will be removed for Mexico but will remain for Taiwan and other countries.

It is true that Taiwan will face greater competition from Mexico in the clothing and some other industries. This competition will give U.S. consumers an opportunity to purchase lower-priced goods and Mexican producers and workers an opportunity to profit. However, Nafta does not increase tariff barriers to other countries. And there are many goods for which tariff barriers either do not exist or are very small. As U.S. consumers and Mexican producers and workers get richer, their demands for these other items will increase. Taiwan will be one of the happy beneficiaries of a more prosperous U.S. and Mexico.

So long as a country does not raise its tariff barriers, other countries are bound to gain from an increase in its trade and wealth. Economists have taught this lesson for two centuries. Of course, every change in a government's policy harms somebody. Although nobody can tell exactly who will benefit and who will be harmed, the Economists show us that we can be confident that the gains will outweigh the losses.

If the people of Taiwan want to benefit even more from Nafta, they should urge their government to make an application to join. The general principle should be: reduce trade barriers whenever this is not a direct threat to peace.

Copyright © 1996 by James Patrick Gunning

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J. Patrick Gunning

Professor of Economics/ College of Business
Feng Chia University
100 Wenhwa Rd, Taichung

Taiwan, R.O.C.
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