CDZ Free Trade, Protectionism & Economic Nationalism

[Indeependent]

Neo-Con bullshit.

Oh, yes...however could I have forgotten that Adam Smith was a Neo-Con?

You may surely find folks here on USMB who agree with you. I doubt, however, that the overwhelming majority of them, likely having little to no idea of the similarities and differences among the ideas of Strauss, Wolfowitz, Jackson and Kirkpatrick, would as likely choose "none of the above" as "all of the above" were they asked "Which of the following played a central role in catalyzing and developing Neoconservative ideology" and the available offerings be Powell, Podhoretz, Marcuse, Kirkpatrick, and Bush I & II/Cheney.

Remarks like yours that I've quoted above may play well with such folks, but to me, it's puerile pandering like that, not the economic underpinnings, prudence and practicality of free trade, which of BS issue and be.

The fact that you quote the pompous ass William F Buckley belies your myopic view modern day Oligarchic Capitalism.

So you pontificate, Holy Father.

Interesting...you post War & Peace and I'M pontificating?

Yes, you are, because, like the Pontiff, you only make pronouncements and tacitly demand, on the force of your uttering, them that others accept them.

And the current version of Free Trade is only truly working for about 2% of the US and even fewer for India and China.

 

[320 Years of History]

Oh, yes...however could I have forgotten that Adam Smith was a Neo-Con?

You may surely find folks here on USMB who agree with you. I doubt, however, that the overwhelming majority of them, likely having little to no idea of the similarities and differences among the ideas of Strauss, Wolfowitz, Jackson and Kirkpatrick, would as likely choose "none of the above" as "all of the above" were they asked "Which of the following played a central role in catalyzing and developing Neoconservative ideology" and the available offerings be Powell, Podhoretz, Marcuse, Kirkpatrick, and Bush I & II/Cheney.

Remarks like yours that I've quoted above may play well with such folks, but to me, it's puerile pandering like that, not the economic underpinnings, prudence and practicality of free trade, which of BS issue and be.

The fact that you quote the pompous ass William F Buckley belies your myopic view modern day Oligarchic Capitalism.

So you pontificate, Holy Father.

Interesting...you post War & Peace and I'M pontificating?

Yes, you are, because, like the Pontiff, you only make pronouncements and tacitly demand, on the force of your uttering, them that others accept them.

And the current version of Free Trade is only truly working for about 2% of the US and even fewer for India and China.

So you say....

 

[Indeependent]

The fact that you quote the pompous ass William F Buckley belies your myopic view modern day Oligarchic Capitalism.

So you pontificate, Holy Father.

Interesting...you post War & Peace and I'M pontificating?

Yes, you are, because, like the Pontiff, you only make pronouncements and tacitly demand, on the force of your uttering, them that others accept them.

And the current version of Free Trade is only truly working for about 2% of the US and even fewer for India and China.

So you say....

Remove your head from your books and experience real life; unless, of course, you live in Beverly Hills.
Anyway, you can have the last post on your Neo-Con Bullshit Thread.

 

[320 Years of History]

We hear the rhetoric over and over:

• "Our country is in serious trouble. When was the last time anybody saw us beating, let's say, China in a trade deal? They kill us."
  
• "The leaders of Mexico, China, Japan and all the other countries that we do business with are smarter, more cunning and sharper than our leaders."

Yeah, yeah. Sounds good. Sounds like it makes sense to do something to change the trade relationship with China, Mexico, and other countries that have lower production costs than does the U.S. Sounds like "doing something" should be good for U.S. manufacturing and for creating domestic jobs in that economic sector. But is it really? Are we really hearing anything but insouciant demagogic hyperbole, rhetoric and misdirection, that avails itself of the general populace's ignorance of economic principles and parlays that ineptitude into fear and angst that, in turn, generate votes?

It's clear that Mr. Trump, the so-called "outsider," has discovered, like insiders before him, how to use the single greatest force fueling discontent within America: economic nationalism. The politics of economic nationalism have long driven insurgent candidacies, from Ross Perot to Pat Buchanan to Newt Gingrich. Mr. Trump now exploits it, promising to get tough on China, build a wall between the U.S. and Mexico, and more generally "make America great again."

Economic nationalists score points, of course, with angry and economically unsavvy populists when they suggest foreign countries are cashing in at America's expense. (Trump: Mexico is "killing us on trade"; NAFTA is a "total disaster.") But rarely, if ever, do they ever attempt to actually present what the whole of the professional economics world understands about free trade.

And just what is the economics community's stance on free trade with China and other low cost producers of intermediate and finished goods? Well, taking just one macroeconomics class in high school would give one the answer. Free trade increases prosperity for Americans -- and the citizens of all participating nations -- by allowing consumers to buy more, better-quality products at lower costs. It drives economic growth, enhanced efficiency, increased innovation, and the greater fairness that accompanies a rules-based system. These benefits increase as overall trade -- exports and imports -- increases.

• Free trade increases access to higher-quality, lower-priced goods. Cheaper imports, particularly from countries such as China and Mexico, have eased inflationary pressure in the United States. Prices are held down by more than 2 percent for every 1 percent share in the market by imports from low-income countries like China.
  
  Moreover, poorer Americans suffer more from tariffs than higher-income people. Not only do they spend more of their income on consumption goods, many of the goods they consume are subject to higher tariffs than more expensive goods of the same type. For example, imported cheap sneakers can face a tariff as high as 60%, while men’s leather dress shoes are subject to an 8.5% tariff. Similarly, plain drinking glasses face a tariff of nearly 30%, while expensive crystal glasses are taxed at 3%. (Edward Gresser, Freedom from Want: American Liberalism and the Global Economy Soft Skull Press. Brooklyn, NY. 2007. p 167.)
  
• Free trade means more growth. At least half of US imports are not consumer goods; they are inputs for US-based producers, according to economists from the Bureau of Economic Analysis. Freeing trade reduces imported-input costs, thus reducing businesses’ production costs and promoting economic growth.
  
• Free trade improves efficiency and innovation. Over time, free trade works with other market processes to shift workers and resources to more productive uses, allowing more efficient industries to thrive. The result is higher wages, investment in such things as infrastructure, and a more dynamic economy that continues to create new jobs and opportunities. (Bordeaux, Donald J. Globalization. Greenwood Press; 1st edition. Westport, CT. December 2007. pp 55-67.)
  
• Much of the change in the labor force is not the result of free trade but of innovation. New technology, such as apps on mobile devices, has displaced a staggering array of industrially manufactured products. Look at what smartphone apps have replaced for many people: radios, cameras, alarm clocks, calculators, compact discs, DVDs, carpenters’ levels, tape measures, tape recorders, blood-pressure monitors, cardiographs, flashlights, and file cabinets.
  
• The beneficiaries of trade restrictions are the inefficient firms and special interests that secure these protections against competition. The United States’ recent imposition of tariffs on Chinese-made solar panels resulted in China imposing tariffs on American polysilicon, raising the cost of solar equipment and reducing employment opportunities in both nations.

But that's just the obvious effects of free trade. Rarely, if ever, do they stop to concede how truly vulnerable the U.S. has become to what happens when foreign countries suffer due to breakdowns in free trading. Least of all do the economic nationalists countenance how bad things can get even when we're merely the victim of what economists call "knock-on effects" — consequences of consequences. But in our globalized world, that's definitely how it works. Witness the chain reaction of plummeting global markets roiled with fear over China's weakening economy. Or how the world trembled over the eurozone crisis. And so on.

In speech after speech, and during the presidential debates, Mr. Trump argues that China and its supposedly brilliant trade negotiators have been "killing" America. The GOP presidential frontrunner claims that Beijing's superiority over Washington is evidenced by the massive trade deficit between the two nations, as well as the flow of U.S. manufacturing jobs to China during the 2000s. And until American workers have an "even playing field," (What exactly does that mean in this context?) President Trump would slap a big tariff on Chinese exports to America. Mr. Trump would, ostensibly and so he claims, bring back manufacturing jobs and investment. Really? That's not what the preponderance of what I've read or studied suggests be the outcome of his proposed policies.

According to Mr. Trump's website:

In January 2000, President Bill Clinton boldly promised China's inclusion in the World Trade Organization "is a good deal for America. … Since China joined the WTO, Americans have witnessed the closure of more than 50,000 factories and the loss of tens of millions of jobs. It was not a good deal for America then and it's a bad deal now. It is a typical example of how politicians in Washington have failed our country.​

There's some truth to Mr. Trump's argument about the harm from Chinese trade for some American workers. As China became a global factory floor, Chinese living standards rose sharply. But U.S. labor markets haven't adjusted as quickly as economic models suggested they would. Some regions were hit hard and never recovered. As MIT economist David Autor, et al write in their recent paper, "The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade," workers in sectors affected by trade "experience greater job churning and reduced lifetime income. At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize."

On the other hand, there have been gains to U.S. welfare — especially to that of lower-income Americans — from cheaper imports. Since poorer families spend a larger share of their income on such goods than wealthier families do, their inflation rate has been lower, and their purchasing power higher. A 2008 study taking this differential into account found it offset the rise in measured income inequality from 1994 through 2005.

But set those potential consumer gains aside for a moment. Even knowing what we now know about the possible impact on U.S. jobs, should Washington have somehow limited trade and overseas investment with China — even at the cost of higher global poverty? Certainly the humanitarian answer is "no." Furthermore, what set of plausible public policies could have significantly offset the one-time economic shock to advanced economies of hundreds of millions of low-wage workers fully entering the global trading system?

There's also a longer-term economic benefit to the U.S. and the rest of the world from poor people getting richer, healthier, more educated, and adding their brainpower to the global intellectual stock for new invention and innovation. Yet while we should take into account the well-being of non-U.S. citizens, American workers can't be left to fend for themselves. Clearly we've long needed a stronger, pro-work safety net that helps the "losers" from trade through a variety of means including effective retraining, wage subsidies, and relocation assistance. While trade isn't the zero-sum game Mr. Trump seemingly imagines, there are trade-offs.

Perhaps this is overthinking Trumpism, something of which Mr. Trump himself certainly cannot be found guilty of doing. During one of the Republican presidential debates, Trump criticized air-conditioner maker Carrier for plans to move a plant and 1,400 jobs to Mexico from Indianapolis. He also didn't like the idea of Chinese investors buying the 134-year-old Chicago Stock Exchange, the first-ever purchase of an American exchange by a Chinese company. So Americans shouldn't invest in other nations, and neither should they invest in us? Taken at face value, what Trump's really arguing for is not "free trade" or "fair trade," but no trade at all.

An eloquent summary of the case for "free trade." There are reasons besides ignorance why the American people, a generation after NAFTA and GATT just aren't buying it.

1. Free trade isn't free. Tariffs and protectionism are alive and well in places like China, where the US runs a huge annual trade deficit and has for years. The feeling that the rules aren't fair is based on some real data.

2. Where are the jobs? The claim was made that free trade would increase manufacturing in the US. If that is so, millions of workers across the land haven't seen it. We were promised that, in addition to new and better jobs, the (small) number of displaced workers would be supported and retrained. The tiny effort made in that direction was a complete failure.

3. Where did the money go? The gigantic shift of American investment capital from the USA to low-wage countries was brokered by the Wall St. investment banks. The result: financial services overtook manufacturing as the prime source of America wealth. Wages, except for hedge fund managers, declined, the number of billionaires zoomed and our political system was taken over and utterly corrupted by the new wealth machine.

America has never had free trade, going back to Alexander Hamilton and the George Washington administration. American industry developed under protective tariff. Tariff and trade deals by the hundreds were used to adjust the American economy, making our workers the richest on the planet, and to drive our foreign relations in the direction of our national interest. Our dollar was the world's reserve currency and we were the biggest creditor nation in the world.

Within a decade of our one-way, so-called "free trade," the USA lost millions of manufacturing jobs and beame the world's biggest debtor. Our economy stalled and has never really recovered. Today's young people have a lower living standard and dimmer hopes than their parents -- a first in our history.

Something I neglected to mention earlier...I didn't exactly forget to mention this, but I did click post before I found an electronic link to a book I'd hoped might conveniently be available on line and for free....The specific text I had in mind is not, but one sufficiently similar is. I suggest you read History of the American Economy, specifically chapters two through thirteen. I think after reading them carefully, I think that no matter what observations you have heretofore made about tariffs, you'll find that the Colonists of the day desired free trade over protected trade much as I'm advocating for.

You mentioned the historic foundations of the U.S. I was a bit surprised to see you raise that era for the Boston Tea Party was for all intents and purposes a revolt against tariffs, the very sort of protectionist tariffs that free trade dispenses with. It's also probably worth noting, and if you read the suggested chapters from History of American Economy, that free trade works quite well for exactly the folks whom the founders wanted it to work: the merchant entrepreneurial class and farmers, in short, business principals.

Quite simply, free trade works for the owners and senior managers of the economic resources of land and capital, and those are exactly the people (aside from the smattering of religious zealots who landed in New England) who came to the U.S., established myriad businesses -- indeed, were it not for the greater opportunity to do so here than back in Europe, many of them would have had little reason to come to the New World colonies -- trading, producing, buying and selling, all manners of "stuff."

Of course, some people did come to the colonies hoping to find employment with the entrepreneurs and merchants, but those people came a labor. They were not, by and large among the subset of the population whom we today call the Founding Fathers; they came to the colonies to work for the Founding Fathers (and/or their colonial forebears), who in turn were land owners.

Make no mistake, however, there's a reason that in its early days that voting was restricted to land owners. Land owners were the owners of capital. They were also the people who were well educated, which for each and every one of them included understanding well Smith, Hobbes, Rousseau, and Locke, at the very least. No surprise then that in reading the debates from the First and Second Continental Congresses and our other founding documents are so beautifully eloquent and roundly reasoned, on both sides. Everyone who participated in them were members of the economic and intellectual elite of their time. There for the most part weren't founders who were present merely because they were serendipitously innovative, circumstantially and practically smart enough to make a buck, and subsequently wealthy.

That's in stark contrast with a good number of the folks who ascend to positions of economic and political influence today, many of whom have financial wealth and power that outstrips their mental acuity outside of the operational needs mandated by their entrepreneurial endeavors. Not sure about that...I bid you reach out to the principals whom you know and ask if they've critically read Wealth of Nations, Leviathan, and The Social Contract (both as discussed by JL and JJR).

As for why Mr. Trump opposes free trade, I cannot say. He's got a BS in economics, so it doesn't make sense that he would or does. In light of that, I also can't say why he's not been far more authoritative in his presentations of fiscal policy positions. Perhaps it's just another instance of his actually believing and understanding one thing and saying something else....truly I don't know. I know only that Mr. Trump has studied exactly the same economics I did, and I know that he's not invented any completely new or competing theories of trade that have been adopted by economists.


On a different note, if one were to ask me if I think free trade will make the average person notably wealthier, I'd answer "no." I'd answer that because I know free trade doesn't aim to do that to begin with. Were I asked if free trade makes goods more financially accessible for the average person, I would answer "yes," because that is exactly one of it's aims. Lastly, asked whether free trade boosts the fortunes of the captains of industry and finance, I'd answer "yes," because it does and that's for whom it attempts to do so and it does so exactly as illustrated in my earlier (long) post.

The thing that distinguishes me from many a politician and party hack is that I'm not afraid or ashamed to admit the good, bad and neutral (incidental) of free trade. I'm aware that advocacy for and against free trade principles for many folks is little but a matter of determining where the matter falls along partisan lines, and they accordingly are for or against it. That isn't the case for me. I'm for free trade, and I will remain so regardless of which party is for or against it. I'm for free trade because I am for it, for its own sake, not because I have some axe to grind, or because I want to curry the favor or one or several segments of society.

To close, I want to discuss why it is that free trade didn't have the labor impacts some 200 years ago that we see occurring today as a consequence of it. Frankly, the answer is quite straightforward: the world today is far "smaller" than it was 200+ years ago.

• Prior to the modern era, the challenges imposed by distance -- transport cost and risk, management oversight and risk, administrative management, etc. -- just didn't make it economically rational, operationally practical to "offshore" labor, be it agrarian labor or manufacturing labor.
• Prior to the modern era, there was no universal language of international business and most laborers could not read and write anyway, much less in multiple languages.
• Prior to the modern era, comparative advantages in production, because so many things could not be artificially produced, couldn't be obviated by machines and chemical compounds.
  
  For example, if one wanted carmine red garments, the only way to get them was to get cochineal bugs from which that hue was made. So regions that had the bugs in abundance had the comparative advantage on carmine red dye. If one wanted silk, one needed silk worms, which don't grow everywhere. Want bird's nest soup? One needs sparrow spit. On the other hand, nearly everyone could grow sheep, or something like sheep, so wool was produced everywhere; therefore, because nobody really had a comparative advantage (on a macroecon level) woolen textiles were produced locally. (Make no mistake, however; the principle of comparative advantage kicked in locally on the microecon level, which is why one guy made textiles and another guy made shoes, or whatever.)
  
  Trust me on this, much like many now overseas manufacturing jobs, bug harvesting up to the 19th century wasn't a highly skilled labor activity. Once synthetic/chemical (alternative) means were invented to produce carmine red dye, what do you think happened to cochineal-related industries and the comparative/absolute advantage they had? "Bye-bye" is what happened; bug harvesters had to find other work to do, and though they surely struggled for a while as they figured out what the hell that would be, eventually they found something else to do locally, or the moved to someplace that needed laborers.
  
  Remember the colonial folks from above who came to the colonies to work for colonial landowners? I'd wager some of them were former bug harvesters seeing as alizarin was invented in the 19th century. Just think about that for a moment. For something on the order of 1000 or more years the cochineal harvesting and dye making industry was a reliable source of work, until it wasn't. There's not one bit of difference with the former U.S. manufacturing jobs that are now performed outside the U.S. What is different is the technology that effected the demise of each industry: for red dye, the tech was chemistry basically; for, say, U.S. textile workers, the tech was mechanically and computer driven. The catalysts differed not the economic principles and effects.

I hope this gives you a better perspective on the matter of free trade. Free trade is not really a political thing, but there's no doubt that in order to obtain votes, politicians make it a political thing by relying on most folks' ignorance of free trade principles.

 

[320 Years of History]

So you pontificate, Holy Father.

Interesting...you post War & Peace and I'M pontificating?

Yes, you are, because, like the Pontiff, you only make pronouncements and tacitly demand, on the force of your uttering, them that others accept them.

And the current version of Free Trade is only truly working for about 2% of the US and even fewer for India and China.

So you say....

Remove your head from your books and experience real life; unless, of course, you live in Beverly Hills.
Anyway, you can have the last post on your Neo-Con Bullshit Thread.

Red and Blue:
So you say....

Red:
Clearly you don't pay much attention to what is right before you.

Blue:
So you say...let's see if this time you are for once correct.

 

[Fishlore]

Mr. Trump, or whomever, can mandate all the tariffs they want to, and force manufacturing back to the U.S. if they want to. If, however, nobody is buying it, it's not going to do much good for the U.S. economy because other nations will just keep buying those items from the lower cost producer, which, unfortunately won't be the U.S.
The purpose of the tariff tax is to raise the final sale price of imported products so that the cost advantage of the overseas producer is balanced out.

Your final two sentences show that you are interested in an argument rather than a discussion. Bye-bye