Republicans Should Pretend It's Romney's First Day And Act On China

Campaign for America's Future ^ | November 7, 2012 | Dave Johnson

[Toddsterpatriot]

If Americans buy American, there is no tariff.

There is a Freeper on this very thread who recommends a 100% tariff on all imports, even oil. If he gets his wish, do you think American oil will increase in price? Why?

[DannyTN]

That’s a seriously flawed analysis. First, although 50,000 factory workers in the American tire industry were being threatened by imports, they only considered the 1200 increase in employment after the tariffs, to be the “saved Jobs”.

Second, while the calculation of $716 million in additional tire costs to consumers for a year. They don’t ackowledge that was $716 million that was plowed back in the American economy. They act like it was all about the factory workers. They dismiss the money that went to the corporate offices, like corporate offices aren’t real jobs.

Sorry find a much less biased analysis. That institute promoted the WTO, NAFTA, and other free trade agreements. Of course they are going to try to skew their analysis to make it look like free trade is working and protectionism is wrong.

But a trip to walmart and shadowstats.com’s unemployment page tells you all you need to know about free trade.

[1rudeboy]

Actually, your analysis is flawed at the most fundamental of levels. If you make me pay $20 for an American shirt that otherwise would have cost me $15, you cannot claim that $5 is “plowed” into the economy. The only thing you’ve done is have the government tell me where the $5 goes. Why can’t I have the liberty to spend the $5 elsewhere?

[1rudeboy]

The WTO, NAFTA, and other free trade agreements? Darn, you make it sound like Ronald Reagan worked there.

[DannyTN]

"There is a Freeper on this very thread who recommends a 100% tariff on all imports, even oil. If he gets his wish, do you think American oil will increase in price? Why?"

Probably, it depends on what happens to demand and production.

If U.S. demand falls enough so that U.S. demand is less than U.S. production, then U.S. producers will compete for that market and drive price down to production costs or world price whichever comes first. In that case, I wouldn't expect a price rise from American producers. A floor price would be established at the world price because U.S. producers could export to the world market instead of selling domestically.

If U.S. demand exceeds U.S. production, then U.S. producers will be free to charge whatever they want competition free up to the tariffed import price or to the point where U.S. demand = U.S. supply, whichever comes first. A ceiling price would be the tariffed world price.

I doubt I'd advocate tariffing oil for a couple of reasons. Energy is a big component of our economy, and it's going to have some dramatic impacts on our way of life. With unemployment at 25% I wouldn't want to tariff oil unless I thought it's put an awful lot of people to work. If oil is really a finite resource, it's better to keep our oil in the ground, as long as we don't liquidate the country to buy other's oil.

[Toddsterpatriot]

If U.S. demand exceeds U.S. production, then U.S. producers will be free to charge whatever they want competition free up to the tariffed import price or to the point where U.S. demand = U.S. supply, whichever comes first.

Would the same thing happen to any tariffed import?

[DannyTN]

Reagan made the Japanese produce cars in America. He protected American motorcycles with tariffs and got foreign producers to produce bikes here too. He imposed tariffs on Japanese electronics. He negotiated "voluntary export restraints" very effectively on autos, machine tools and steel to create jobs in America.

And the companies that benefited instead of growing fat and lazy, were able to attract investment capital and retool and became much more competitive.

And he used trade policy to help crush the Soviet Union.

And Reagan intervened with loans to help Chrysler too.

Ronald Reagan: Trade Realist

[DannyTN]

"Would the same thing happen to any tariffed import?"

It really depends on the situation. Oil is a world commodity where world production is limited or at least had reached an equlibrium with price. THe current price is encouraging additional production as can be seen by the production in the U.S. Although that is also influenced by new technology.

What we want to do with an import tariff. Is...

• Bring industies back to the U.S. where we have lost them.
• Protect the industries we still have.
• Bring employment back up to full employment.
• Protect industries that are critical to our future. That includes high tech and military related industries.

But back to your question. Take an industry that has been completely devastated by free trade. Protect it with an import tariff.

• If the tariff is high enough, you'd expect to see domestic producers sprout up. Initially they are going to have a ceiling price of the tariffed world price. But as the number of domestic producers increases, you'd expect to see that price fall back through competition. If process improvements don't occur, I wouldn't expect them to ever be as cheap as the Chinese. Though through automation, we may achieve that. But that's okay, because we've put people that were unemployed back to work.
• And if the tariff isn't high enough, at least the U.S. gov't is reaping some revenues to help pay for the safety nets.

The problem with the Chinese senario in particular is that the communist Chinese government prevents the dollars from coming back and purchasing trade goods in return. Instead they focus the dollars into purchasing our debt and more companies to dismantle. That doesn't have an end game that ends well for the U.S. It's not a question of whether we address it or not. It's only a question of how weak do we become before we address it.

[1rudeboy]

Ronald Reagan was instrumental in creating the WTO, NAFTA was his idea, and he favored other free trade agreements. That was the portion of your comment that made me laugh out loud. Your idea is much funnier than some bozo trying to claim Reagan’s mantle as an excuse for the goverment controlling more of our lives (and raising taxes).

[1rudeboy]

Hmm . . . so now you’ve determined that increasing the price of something leads to more of that thing being sold. Truly revolutionary.

[DannyTN]

"Actually, your analysis is flawed at the most fundamental of levels. If you make me pay $20 for an American shirt that otherwise would have cost me $15, you cannot claim that $5 is “plowed” into the economy. The only thing you’ve done is have the government tell me where the $5 goes. Why can’t I have the liberty to spend the $5 elsewhere?"

Sure I can. That $20 went to an American company to pay American salaries and provide an American profit. Those salaries and profit in turn get spent primarily in the American market.

But in your buy foriegn scenario, you spend $15 on a chinese made shirt. $0.50 of that went to a Chinese worker, and will recycle primarily in chinese economy and the Communist government took about $13, leaving $1.50 for profit. So of your $15, maybe 2.00 comes back to buy trade goods and $13 comes back to buy debt. Plus of course your $5 savings, but you spent that at Wal-mart for more Chinese made goods.

So in the first scenario we have the full $20 multiplying throughout the American economy putting people to work. In the second scenario, we've got only $2-$3 recycling through the American economy and the other $17 is coming back to buy our debt or more of our companies to dismantle.

In the first scenario, that $20 paid income taxes, and the rest got spent, generating more income taxes, and again, as the multiplier wound down. In the second scenario, your neighbor Todd had to file unemployment.

In the second scenario you saved $5.00, less the additional taxes you'll eventually have to pay to support your neighbor Todd, less the additional taxes you'll have to pay because Todd is no longer paying his fair share of taxes, plus the interest on the debt that the government had to borrow because Todd's not paying his fair share and the goverment has to support him, less the downstream effects.

It wasn't just Todd, but Sarah at the thread manufacturer and Jim at the Machine repair company that all lost their jobs when Todd lost his. And since Todd, Sarah and Jim aren't working, they aren't buying from you so your sales are down too. Maybe you can get the Chinese to buy from you before you join Todd in the unemployment line. Good luck with that.

[1rudeboy]

We just spent the better part of the evening discussing how domestic producers raise prices when tariffs are placed on their importing competitors. That was the context of my comment. I did not read any more of your reply because you got it wrong.

[DannyTN]

"Hmm . . . so now you’ve determined that increasing the price of something leads to more of that thing being sold. Truly revolutionary."

I didn't say that. All other things being equal, an increase in price usually increases supply and decreases demand.

An increase in import tariff however increases domestic supply and reduces foreign supply.

[1rudeboy]

This thread sorta' reminds me of an argument I had with a lib about corporate income taxes. He said that people don't pay the tax, the corporation does. I asked him, "where does the money come from?" He replied, "the corporation." I asked, "doesn't the corporation have to raise its price to pay the tax?" He replied, "not if it is in a competitive market, it cannot."

Voila! Prosperity!