Myths of Protectionism

[Oddball]

The Unfairness of Fair Trade

<snip>

Imports always grow most rapidly when U.S. manufacturing is expanding, and shrink only when U.S. industrial production declines. One reason is that U.S. industries are this nation's biggest importers. Industrial supplies accounted for 24½ percent of all imported goods in the year 2000, and capital goods for another 28½ percent. From January to December 2001, imports of industrial supplies fell from $27.1 billion to $18.3 billion, or 33 percent. Imports of capital goods fell from $28.8 billion to $22.5 billion, or 22 percent. Far from reduced imports being a boon to U.S. manufacturers, falling imports mirrored falling world demand for manufactured goods.

The only proven way to reduce U.S. imports is to push the economy back into recession. A few folks in the government seem eager to do just that, always in the name of keeping trade "balanced" or "fair." U.S. manufacturers need imported supplies and equipment to produce much more valuable products. Manufacturing suffers whenever politicians attempt to raise the cost of imports with tariffs, though industries with the most lobbying clout may gain. Tariffs on sugar, nuts and dairy products raise the cost of production for U.S. manufacturers of breakfast foods and candy; tariffs on steel raise costs for U.S. manufacturers of autos and appliances; tariffs on leather raise costs for U.S. manufacturers of shoes; tariffs on fabrics raise costs for U.S. manufacturers of clothing; and so on. And tariffs raise the cost of living for consumers, reducing their ability to buy other goods and services (most of which are unprotected and unsubsidized).

<snip>

What accounts for all this trade hysteria? China accounted for only 103/4 percent of U.S. imported goods last year, according to the St. Louis Fed. And that was largely at the expense of imports that used to come from other countries. A decade ago, Japan accounted for more than 20 percent of U.S. imported goods, but Japan's share is down to 10.4 percent. Trying to reduce U.S. imports from China would just shift the source of imports to other countries, like Japan or South Korea. This is also why it makes no sense to talk about exchange rates between just two currencies as having anything to do with the overall U.S. trade deficit.

Mr. Snow explained to the Senate Banking Committee that the United States has a current account deficit because investment is rising faster than savings. A falling dollar could only "help" the trade deficit by inflating the dollar costs of commodities and credit, and thus shrinking business and residential investment. That's called a recession.

That brings us back to the point we started with: Imports always rise when manufacturing output speeds up, and fall only when U.S. industry declines. If some senators and Cabinet officials are as upset about imports as they sound, they had better devise a plan to toss the economy back into recession.

That may not be the intent of all the protectionist rhetoric and legislation floating about, but if that talk ever degenerates into actual trade warfare, the results would soon turn ugly.

The Unfairness of Fair Trade

 

[JBeukema]

I have to ask you this, even though it's off topic.

With your economic and political views, how the hell are you an advocate of Austrian economics? How does that even remotely fit into your broader economic viewpoint?

The Austrian School provides the only explanation of the boom-bust cycles I've encountered that makes sense, and while I disagree with a few of his examples and disagree on a few details, Thomas E. Woods Jr (of whom I've read more than of Ludwig von Mises himself) makes some excellent points and some very fine arguments to demonstrate the superiority of the market as opposed to the centrally planned economy. My view is that the role of the government in the market should pretty much be only that of enforcing mandatory transparency, prosecuting those who commit fraud, and enforcing laws requiring housing over gears and other basic workplace safety laws. I believe a minimum wage should be established to help prevent abuse, but that if it is placed at about subsistence level it will be sufficient to prevent the abuse seen in England in 1844 and that market forces between worker and employer will naturally drive wages higher than sustenance level. History shows us the flaws of market anarchy whilst more recent examples reveal Keynesian, Marxian, and other centrally governed systems to be just as likely to lead to abuse and inherently unstable as a result of their oft operating in opposition to market forces. A free market is healthy market, and a proper and limited regulation (as opposed to intervention and central planning) are necessary for a free market, as an oligopoly (especially when partnered with overreaching and authoritarian government) shuts down the very free competition and enterprise that makes the market the best system for fueling development, invention, and progress.

As highlighted in [ame="http://www.amazon.com/Science-Liberty-Democracy-Reason-Nature/dp/0060781505?tag=amaz98-20"]The Science of Liberty[/ame], (which I am currently reading) liberty and prosperity are found where the spirit of science reigns- and that spirit is of the free trade of ideas, of the renunciation of authoritarianism, and of learning from history and experimentation and letting the reality of what works, rather than dogma, govern our actions and policies.

 

[JBeukema]

http://www.usmessageboard.com/econo...on-of-the-proletariat-what-is-free-trade.html

 

[Paulie]

I have to ask you this, even though it's off topic.

With your economic and political views, how the hell are you an advocate of Austrian economics? How does that even remotely fit into your broader economic viewpoint?

The Austrian School provides the only explanation of the boom-bust cycles I've encountered that makes sense, and while I disagree with a few of his examples and disagree on a few details, Thomas E. Woods Jr (of whom I've read more than of Ludwig von Mises himself) makes some excellent points and some very fine arguments to demonstrate the superiority of the market as opposed to the centrally planned economy. My view is that the role of the government in the market should pretty much be only that of enforcing mandatory transparency, prosecuting those who commit fraud, and enforcing laws requiring housing over gears and other basic workplace safety laws. I believe a minimum wage should be established to help prevent abuse, but that if it is placed at about subsistence level it will be sufficient to prevent the abuse seen in England in 1844 and that market forces between worker and employer will naturally drive wages higher than sustenance level. History shows us the flaws of market anarchy whilst more recent examples reveal Keynesian, Marxian, and other centrally governed systems to be just as likely to lead to abuse and inherently unstable as a result of their oft operating in opposition to market forces. A free market is healthy market, and a proper and limited regulation (as opposed to intervention and central planning) are necessary for a free market, as an oligopoly (especially when partnered with overreaching and authoritarian government) shuts down the very free competition and enterprise that makes the market the best system for fueling development, invention, and progress.

As highlighted in [ame="http://www.amazon.com/Science-Liberty-Democracy-Reason-Nature/dp/0060781505?tag=amaz98-20"]The Science of Liberty[/ame], (which I am currently reading) liberty and prosperity are found where the spirit of science reigns- and that spirit is of the free trade of ideas, of the renunciation of authoritarianism, and of learning from history and experimentation and letting the reality of what works, rather than dogma, govern our actions and policies.

A simple 'because it's awesome!!!' would have sufficed.

But, fair enough.

As far as transparency goes, I'm not sure how we can trust the government to come through on that. Big business has government in its back pocket. We can't trust the government to do ANYTHING for the good of the people at this point.

I can live with regulations that make sense, but when they're written by lobbyists and pushed through by their bedfellows in congress, we lose.

 

[JBeukema]

I have to ask you this, even though it's off topic.

With your economic and political views, how the hell are you an advocate of Austrian economics? How does that even remotely fit into your broader economic viewpoint?

The Austrian School provides the only explanation of the boom-bust cycles I've encountered that makes sense, and while I disagree with a few of his examples and disagree on a few details, Thomas E. Woods Jr (of whom I've read more than of Ludwig von Mises himself) makes some excellent points and some very fine arguments to demonstrate the superiority of the market as opposed to the centrally planned economy. My view is that the role of the government in the market should pretty much be only that of enforcing mandatory transparency, prosecuting those who commit fraud, and enforcing laws requiring housing over gears and other basic workplace safety laws. I believe a minimum wage should be established to help prevent abuse, but that if it is placed at about subsistence level it will be sufficient to prevent the abuse seen in England in 1844 and that market forces between worker and employer will naturally drive wages higher than sustenance level. History shows us the flaws of market anarchy whilst more recent examples reveal Keynesian, Marxian, and other centrally governed systems to be just as likely to lead to abuse and inherently unstable as a result of their oft operating in opposition to market forces. A free market is healthy market, and a proper and limited regulation (as opposed to intervention and central planning) are necessary for a free market, as an oligopoly (especially when partnered with overreaching and authoritarian government) shuts down the very free competition and enterprise that makes the market the best system for fueling development, invention, and progress.

As highlighted in [ame="http://www.amazon.com/Science-Liberty-Democracy-Reason-Nature/dp/0060781505?tag=amaz98-20"]The Science of Liberty[/ame], (which I am currently reading) liberty and prosperity are found where the spirit of science reigns- and that spirit is of the free trade of ideas, of the renunciation of authoritarianism, and of learning from history and experimentation and letting the reality of what works, rather than dogma, govern our actions and policies.

A simple 'because it's awesome!!!' would have sufficed.

But, fair enough.

As far as transparency goes, I'm not sure how we can trust the government to come through on that. Big business has government in its back pocket. We can't trust the government to do ANYTHING for the good of the people at this point.

A problem of both the prevalence of business in Washington, and the gross expansion of the central governance (note decentralized social democracy; things like social safety nets, education, and medical care should be run at the local, county, and State levels (as local as is feasible)and the Fed should be drastically slashed and reduced back to its proper role. I've tried starting threads to list what programs and bodies should be done away with, but , not surprisingly, nobody wants to get rid of anything specific.

I can live with regulations that make sense, but when they're written by lobbyists and pushed through by their bedfellows in congress, we lose.

Agreed. The problem of overbearing and authoritarian centralized governance and that of the modern-day corporatism go hand-in-hand.

 

[Paulie]

Agreed. The problem of overbearing and authoritarian centralized governance and that of the modern-day corporatism go hand-in-hand.

It's fascism, and it has nothing to do with any particular party that may be in power.

We've been living with it for DECADES.

 

[JBeukema]

Agreed. The problem of overbearing and authoritarian centralized governance and that of the modern-day corporatism go hand-in-hand.

It's fascism, and it has nothing to do with any particular party that may be in power.

We've been living with it for DECADES.

“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power”

 

[Paulie]

Agreed. The problem of overbearing and authoritarian centralized governance and that of the modern-day corporatism go hand-in-hand.

It's fascism, and it has nothing to do with any particular party that may be in power.

We've been living with it for DECADES.

“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power”

Only when the voters of BOTH parties come to realize this, is when things will actually change.

 

[Baruch Menachem]

Corporatist facism is the last way we need to go. Individual power and individual reward is the best way to prosperity for all.

 

[JBeukema]

It's fascism, and it has nothing to do with any particular party that may be in power.

We've been living with it for DECADES.

“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power”

Only when the voters of BOTH parties come to realize this, is when things will actually change.

So long as they remain voters of parties, nothing will change.

 

[Paulie]

Corporatist facism is the last way we need to go.

Dude...

We've been going that way since at least the industrial revolution, albeit much heavier in the last few decades.

I mean, for crying out loud, they don't even HIDE it anymore! it's right out in front of our fucking faces!

 

[Oddball]

A simple 'because it's awesome!!!' would have sufficed.

But, fair enough.

As far as transparency goes, I'm not sure how we can trust the government to come through on that. Big business has government in its back pocket. We can't trust the government to do ANYTHING for the good of the people at this point.

I can live with regulations that make sense, but when they're written by lobbyists and pushed through by their bedfellows in congress, we lose.

Exactly backwards....It's gubmint that has big business in its back pocket.

Regulation is one thing, but giant bureaucracies like the FDA and operations like the Ag Department act as defacto protection rackets, for the Eli Lilly's and Cargill's of the world than they do for the small lab or farm....The best evidence of this is how they pay off both political political parties with nice fat campaign chests, in order to get those seats at the meetings where the regs are written. And with every new set of regs and new bureaucracy, there are lots of new little bureaucrat parasites to be lavished with their share of the loot.

The feds are Don Vito, the multi-nationals are Tessio and Clemenza.

 

[JBeukema]

Exactly backwards....It's gubmint that has big business in its back pocket.

wait for it.... he's about to refute himself...

The best evidence of this is how they pay off both political political parties with nice fat campaign chests, in order to get those seats at the meetings where the regs are written.

So the big corps pay money to the politicians and the politicians do as their donors ask... sounds like he was right and big corporations have the gov't in their back pocket.

 

[Shogun]

Meh. You're not important enough to bother with proofreading.

but, I'm important enough to comment about.. yea, you go ahead and keep telling yourself that and maybe, MAYBE your self esteem will do what your penis no longer can.


It sucks that you FMC's always seem to have giant, catastrophic economic disasters to disavow, doesn't it?

What the fuck is an FMC?

I'm a moderate social democrat who advocates a decentralized social democracy with protective tariffs and fair trade laws than ban imported goods produced in sweatshops to reduce the exploitation of the poor and make 'outsourcing' less attractive and keeps jobs and manufacturing inside the United States, with trade being supplementing rather than replacing American production and invention. Two birds, one stone.

i can gel with that. have a good day, sir!

 

[Toro]

Ah crap, sho's back.

I knew this thread would get Shogun's back up!

 

[Toro]

so how is that Irish economy these days?

Free trade did Ireland an enormous amount of good. For the first time in history, Ireland was richer per capita than England.

What's going on in Ireland is typical of what has happened in many countries around the world including ours - a credit boom created a housing bubble which lead to a collapse of the financial system. This has happened repeatedly throughout history - including "socialist" Scandinavia in the 80s and 90s. It has nothing to do with lowering trade barriers.

 

[Toro]

Myth 1: “The cost of protection and its flipside, gains from trade, are negligible.” ...
Myth 2: “Free trade may increase economic prosperity, but it is bad for the working class.” ...
Myth 3: “Free trade requires that other countries also open their markets.” ...
Myth 4: “Paul Samuelson abandoned free trade, and he was the greatest economist of his time.” ...
Myth 5: “Offshoring of jobs will devastate rich countries.”

Protectionist Myths - Project Syndicate

I dunno...those sound like strawmen to me.

The author is a well-known trade economist who has published numerous papers and studies on trade. He is merely summarizing the empirical evidence against protectionism in a nice easy format for Internet surfers to read.

 

[Toro]

I'm a moderate social democrat who advocates a decentralized social democracy with protective tariffs and fair trade laws than ban imported goods produced in sweatshops to reduce the exploitation of the poor and make 'outsourcing' less attractive and keeps jobs and manufacturing inside the United States, with trade being supplementing rather than replacing American production and invention. Two birds, one stone.

A lot of social democrats point to Sweden as a potential model. However, Sweden is friendly to capital and is a free trading nation.

Outsourcing has been an enormous boon to the poor in the third world.

Trade does not replace innovation. Protectionism discourages innovation because it decreases competition and insulates companies within their home markets.

 

[GHook93]

I read the entire article, not saying the premise is wrong, but the author relied mostly on, just trust me its a myth type argument. There was no hardcore proof to any of his assertions. I would like more evidence, proof and arguments behind what he is asserting!

Myth 1: “The cost of protection and its flipside, gains from trade, are negligible.” ...
Myth 2: “Free trade may increase economic prosperity, but it is bad for the working class.” ...
Myth 3: “Free trade requires that other countries also open their markets.” ...
Myth 4: “Paul Samuelson abandoned free trade, and he was the greatest economist of his time.” ...
Myth 5: “Offshoring of jobs will devastate rich countries.”

Protectionist Myths - Project Syndicate

 

[Oddball]

I'm a moderate social democrat who advocates a decentralized social democracy with protective tariffs and fair trade laws than ban imported goods produced in sweatshops to reduce the exploitation of the poor and make 'outsourcing' less attractive and keeps jobs and manufacturing inside the United States, with trade being supplementing rather than replacing American production and invention. Two birds, one stone.

A lot of social democrats point to Sweden as a potential model. However, Sweden is friendly to capital and is a free trading nation.

Outsourcing has been an enormous boon to the poor in the third world.

Trade does not replace innovation. Protectionism discourages innovation because it decreases competition and insulates companies within their home markets.

See: France.