Panamian Government Removes Restrictions on US Corn Imports, Essay Example

The issue of free trade is one of the most contested in economic theory: in the time of globalization, where the physical and technological barriers to potential global free trade are removed, the positives and negatives of this policy become even more fiercely debated. The article “Panamian Government Removes Restrictions on US Corn Imports”, by the U.S. Grains Council, shows some tensions of this debate. While the overall tone of the article is celebratory because it discusses how U.S. officials had successfully resolved an issue with the Panamian government so that Panama accepted U.S. corn imports, the article also demonstrates the negative side of free trade: the Panamian attempt to block U.S. corn imports wanted to safeguard Panamian corn producers. Therefore, the article reveals clear drawbacks of free trade: local producers in smaller countries can be destroyed when all trade restrictions are removed.

Free trade in itself is not a particularly complex concept. It is defined in the academic literature as follows: “the exchange of products and services between countries is ‘free’ when countries agree not to place any taxes on the products as they cross international borders.”[1] Yet the positives or negatives of the policy are more complex than the concept. The reasons why trade restrictions are implemented are to “limit competition from abroad.”[2] Trade restriction as a policy means that by limiting foreign goods, domestic businesses are protected. Proponents of free trade, however, argue that free trade is beneficial, as it simply “allows a country to take advantage of the opportunity to trade.”[3] (Irwin, 68) Economies may grow as the market available to these same economies is enlarged by a lack of trade restrictions.

Yet what the U.S. Grains article arguably shows is the negative reality free trade has for local producers of goods from smaller economies. The controversy over U.S. corn imports to Panama began when the Panamian government limited U.S. corn imports. The reasons for this policy decision was “to protect local corn producers and force the Panamian feed industry to buy local corn.”[4] The Panamian government’s gesture was clearly anti-free trade, because free trade was viewed as a threat to local Panamian corn producers. The U.S. Grains council, in contrast, saw the act as a violation of the FTA between the two countries and a blow to U.S. corn producers.

The article demonstrates that free trade’s lack of trade restrictions is potentially damaging for smaller producers. The Panamians wished to protect their corn industry. Yet this act was only necessary because the FTA between Panama and the U.S. threatened this industry. This shows the discrepancy inherent to free trade that favors larger and wealthier nations: the U.S. corn industry is hardly dependent upon Panamian imports of U.S. corn, whereas the corn sector of the Panamian economy is one of its fundamental sectors. For the U.S., Panama represents a small market among others, (see graph: http://www.grains.org/index.php/chart-of-the-week) whereas Panama’s native corn industry is one of the crucial features of its economy, as its vegetable products are its chief export. (see graph: http://logistics.gatech.pa/en/trade/exports ) U.S. hostility to Panama’s decision demonstrates the inequality that may exist in free trade agreements; furthermore, the Panamians were forced to overturn their decision.

This incident demonstrates the complex consequences of free trade policy. As the article notes, the policy adapted by the Panamians, while protecting Panamian corn producers, limits the choice on the market of available corn, thus affecting consumers. However, a significant portion of the production economy of Panama is protected with this act. Additionally, a question of government emerges: the Panamians’ decision to stop U.S. imports and then the decision’s reversal shows the extent to which free trade can limit small nations’ autonomy. While Panama entered into such an FTA with the U.S., the Panamian government, as the text writes, did use a “loophole” in the same agreement to protect corn farmers. That this decision was then reversed shows the enormous pressures larger economies can out on smaller economies when free trade agreements exist. From this perspective, the article reveals that the apparent freedom of free trade can also be a form of bondage for less developed economies and smaller states.

Works Cited

Colgan, Jeff. The Promise and Peril of International Trade. New York: Broadview, 2005.

Irwin, Douglas A. Free Trade Under Fire. Princeton, NJ: Princeton University Press, 2009.

U.S. Grains Council. “Panamian Government Removes Restrictions on US Corn Imports.”  U.S. Grains Council, 12 December 2013. Retrieved at: http://grains.org/index.php/2012-04-30-15-22-26/4442-panamanian-government-removes-restrictions-on-us-corn-imports

[1] Jeff Colgan, The Promise and Peril of International Trade. New York: Broadview, 2005, 26.

[2] Ibid., 26.

[3] Douglas Irwin, Free Trade Under Fire. Princeton, NJ: Princeton University Press, 2009, 68.

[4] U.S. Grains Council. “Panamian Government Removes Restrictions on US Corn Imports.”  U.S. Grains Council, 12 December 2013.