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If Buying A Car Were Like Negotiating A Trade Deal

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I generally (and with my nose held tightly) support trade deals such as the TPP.  I generally (and with my nose held tightly) support trade deals such as the TPP not because they make trade free.  They never do.  I generally support trade deals because, given political realities, they make trade freer.  Such deals usually are better than the alternative, which is even less liberalization of trade.  Genuine and full free trade – which is unambiguously good – requires simply that the domestic government remove all extra taxes and other artificial obstacles that it has in the past put in the way of its citizens who wish to buy from, and sell to, foreigners.  In order to achieve true free trade, no deal with any foreign country or organization is required.

True free trade is best achieved – and (were it not for political realities) easily achieved – unilaterally.  Nevertheless, again, in practice trade deals generally do make trade freer than otherwise – at least, that’s my take on the historical record.

That said, trade deals are economically surreal.  If people bought and sold cars the way governments negotiate trade deals, the negotiations in the auto dealerships would go something like the following:

Buyer: Although it would greatly improve my family’s standard of living, I don’t really want that new car you have for sale.  But my spouse – who wants you to hire her – is pressing me to buy it from you.  So I’ll give you $300,000 for it.

Dealer: Are you kidding?  I wouldn’t sell this car for anything more than $100.

Buyer: I know you slick sales types. You’re constantly trying to swindle buyers like me into paying less money and then foisting an even greater quantity of stuff on us than we bargained for.  But I’m on to you, buddy.  I’ll not pay less than $250,000 for this piece of junk – and only for this piece of junk!

Dealer: Piece of junk?!  This car is the finest you can find anywhere on the globe!  And before you accuse me of being a swindler, you oughta look in the mirror.  You people come in here all the time, high’n’mighty, trying to give us way too much in exchange for our cars.  You can’t fool me, sir.  But, in the spirit of cooperation, I’ll be a good neighbor and raise my asking price to $1,000 if you also agree to take a second new car from our dealership for free.

Buyer: Ha!  $1,000!  Is that all?  And an additional car to boot?!!  Do you see “FOOL” written across my forehead, ’cause I don’t!  Look, I’m doing you a favor by being willing to buy a car – but just one car – from you in the first place.  Why don’t you acknowledge my self-sacrifice?  I demand that you accept no less from me than $100,000 for this one car.  I won’t pay a penny less for this car and just this car.

Dealer: Look, Mac.  It’s just business.  It’s nothing personal, you gotta understand that.  And I don’t make the rules.  To close the deal, my manager might be willing to forget demanding that you take the second car for free, but he absolutely won’t let me sell this baby at any price higher than $5,000 – well, maybe $6,000 (he’s feeling generous today).  And he, too, is under pressure from our company’s shareholders: if he lets this car go at a price higher than, okay, $7,500, he’ll get fired.  You really gotta put yourself in his shoes.

Buyer: I don’t give a *bleep* about his shoes.  I, too, have a budget that demands my careful attention.  If I pay less than $75,000 for this car, my family will think I’m a fool – and they’d be right!  And my wife would probably divorce me.  But, you’re correct: we both are rational people trying to strike a mutually advantageous arms-length deal.  Tell you what: $50,000 – bottom offer, nothing less.

Dealer: Maacccc!  $50,000?  Do you want to bankrupt our company?  Seriously, mister.  I can’t sell this car at such an absurdly high price.  $40,000, tops.  Absolutely not a cent higher.

Buyer: Come on, dude.  Really?  Look, my wife is really impatient for me to do you the favor of buying this car from you so that you’ll hire her.  And I want to keep my lady happy.  So I’m going to make a personal sacrifice and lower my buying price to $45,000 – and not a cent lower.  Not. A. Cent. Lower.

Dealer (sighing in clear frustration): Ok.  Gimme a minute with my manager.

Forty-five minutes later the salesman walks back gamely to the buyer, forcing a smile, and congratulates the buyer on landing a new car at such a ridiculously high price.  They then sign the sales agreement and shake hands, each wondering silently to himself if he got screwed in the deal.

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