Posted on 02/04/2016 6:18:16 AM PST by Kaslin
One of Donald Trump's talking points and biggest applause lines is how "they" -- Japan, China and Mexico -- are "beating us in trade" and are "taking our jobs." He proposes tariffs, for example, on Chinese goods in retaliation for that country's alleged "cheating."
To someone who is out of work in an industry where foreign workers do what he or she once did, Trump-like protectionism sounds appealing. But Trump actually proposes punishing the American consumer. As economist Milton Friedman says, protectionism discriminates against low prices.
It is certainly true that many countries prop up or subsidize companies or even whole industries by providing capital or special privileges. This allows them to produce goods and services "below cost" -- or at prices below what a competitor could charge and still make a profit. But doing so also means that taxes in that country, which could have gone to a more productive use, are squandered to keep a company in business that otherwise wouldn't exist or would have gone out of business. This means consumers in other countries with which the "cheater" country trades can buy those imported goods at a cheaper price.
Trump proposes to retaliate by placing tariffs on those imported goods. But this prevents American consumers from benefitting from the "cheater" country's folly of propping up companies that would not survive but for the taxes spent to keep it alive. Why compound the stupidity?
Another justification for this kind of protectionism is that a foreign country "exploits" America through the use of "slave labor" which, as to wages, causes a "race to the bottom." Certainly forced labor, as when "blood diamonds" are mined by workers with guns pointed to their heads, is criminal and immoral. But free laborers offering to work for less money than others is how poor countries become wealthier -- by allowing other countries to buy goods more cheaply.
NAFTA, the North American Free Trade Agreement, established in 1994, has become exhibit A on how "we lose" on trade. After all, many American jobs have been "outsourced" to Mexico. But that looks at but one side of the ledger. That an American pays less for certain things frees up capital to spend on something or on someone else. A machinist sees his job "shipped to Mexico," but the planner or analyst hired by a company with the "savings" might not see the direct relationship between free trade and the fact that he or she has this new job. When NAFTA was debated, businessman and presidential candidate Ross Perot predicted "a giant sucking sound" as jobs and incomes would be lost to Mexico.
The American Enterprise Institute writes: "It is an article of faith among protectionists that NAFTA harmed American workers. ... The justification may be that NAFTA went into force at the beginning of 1994 and the U.S. trade balance with Canada and Mexico, two of our top partners, then deteriorated.
"But the American job market improved as these trade deficits grew. Unemployment fell more than two points from the beginning of 1994 through the middle of 2000. Already high labor force participation edged higher to its all-time record by early 2000. Manufacturing employment rose until mid-1998 and was above its pre-NAFTA level until April 2001. Manufacturing wages rose. The strength in the American job market from 1994 to 1999 is not due primarily to NAFTA, but it is plain that the job market, including manufacturing, strengthened after NAFTA."
Trump is also schizophrenic on this issue. On the one hand, he opposes illegal immigration, which most often is an economic decision where, for example, a poor, unskilled worker from Mexico sneaks into America to make money. On the other hand, Trump deems it unfair and a form of "cheating" if an American company relocates to or builds a factory in Mexico to take advantage of that unskilled Mexican worker's willingness to work for less.
If Trump were talking about the excessive taxes or regulations that induce American companies to leave the U.S. or to put factories in foreign countries, that would be one thing. The U.S. general top marginal corporate income tax rate is the highest in the industrialized world -- and, worldwide, is only exceeded by Chad and the United Arab Emirates. Unnecessary regulations also increase the cost of doing business stateside. But this is not Trump's argument.
About free trade, the father of modern economics, Adam Smith, in 1776 wrote in "The Wealth of Nations": "In every country it always is and must be in the interest of the great body of the people to buy whatever they want of those who sell it cheapest. The proposition is so very manifest that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind. Their interest is, in this respect, directly opposite to that of the great body of the people."
Trump means well. But so what?
America has had a quarter-century experiment with “free trade” agreements.
The jury is in. At least with the voters.
They suck.
Larry Elder is a good guy but he doesn’t get it either.. we always go into these trade negotiations ready to give away the farm and the other side always knows it
Not that anyone cares anymore, but Obama signed the TPP yesterday.
Thanks to all who contributed to that.
At the Bildeberg meeting @ Baden-Baden, Germany in 1991 David Rockefeller walked up to Bill Clinton and asked him what he thought about NAFTA. Clinton replied, “If it’s important to you, Mr Rockefeller, it’s important to me.” Rockefeller replied, “Thank you, Mr President.”
Retaliate? WTF are you talking about? If this was boxing they’d have stopped it five years ago.
Wow! A Trump hit piece? Here on Free Republic!
Coming Up:
TRUMP KICKS PUPPY. REFUSES TO APOLOGIZE.
TRUMP NEEDS HELP GETTING DRESSED IN THE MORNING
POLLS PROVE VOTERS FAVOR CANDIDATES WITH FOUR LETTERS IN THEIR NAME
CRUZ: THIS IS A ONE MAN RACE AND I’M THE ONE
Oh, wait... that last one is real...
you mean some of our great senatorial candidates?
This has to end and Trump's the only guy in the race with the balls to talk about it.
Another lie. The Chinese already slap hefty duties on all of our exports to them.
Once Trump gets Mexico to pay for the wall everything will be Even Steven! /s
IBTSHL
(In Before the Smoot-Hawley Lie )
Sounds like a form of NIMBY argument - we really need to do something to level the playing field for Americans, but anything we do will cause some short to mid-term discomfort for many so we maybe ought to not do anything because we’re comfortable with what we complain about daily....
....because I really, really want the globalist defense of what they’ve done to the US economy
Yes, all of those fraudmeisters.
Lil Teddy had nuttin’ ta do wif it though. /huge sarc
It works like this: picture an employed factory worker with an executive pissing down his back and telling him its raining.
I wouldn’t be surprised if Trump if nominated called for a VAT tax.
Tariffs are the wrong answer, the Chinese will retaliate.
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HELLO! The Chinese already impose tariffs on what little of our goods they import from us. The problem with the “free trade” agreements is that they are only “free” in one direction.
You have to ask yourself, do I believe someone who actually participates in international commerce, or do I believe someone who writes and talks about international commerce?
Larry Elder! Who Knew! This Trump campaign is better that having Madame Defarge knitting the names of everyone to be killed in the French revolution! By the end of this, all the GOPee will be outed!
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