Posted on 03/13/2016 9:33:18 AM PDT by impimp
Free trade is again under attack, despite having been, for over a century, the basis of America's wealth. Some groups in the United States blame free trade for the loss of manufacturing jobs, while others blame it for exposing some U.S. producers to foreign competition.
Free trade, however, is good for America, and for a very simple reason: It allows American workers to specialize in goods and services that they produce more efficiently than the rest of the world and then to exchange them for goods and services that other countries produce at higher quality and lower cost.
Specialization and free trade allow the U.S. to become more competitive and innovative. Innovation constantly provides new technologies that allow Americans to produce more, cure more diseases, pollute less, improve education, and choose from a greater range of investment opportunities. The resulting economic growth generates better-paying jobs, higher standards of living, and a greater appreciation of the benefits of living in a peaceful society.
New technologies bring about change, which, as U.S. economic history shows, benefits society as a whole. In the process, however, some sectors suffer until they can adapt to the new changes and begin to benefit from them. Today, Americans are experiencing some of that "suffering" because new technologies are challenging old methods of production.
This change is especially visible in the manufacturing sector, just as it was in the agricultural sector 100 years ago. But in the same way that it adapted then to a new, more industry-based society, America will adapt again to a new, more knowledge-based society.
(Excerpt) Read more at heritage.org ...
Yes, they were definitely against tariffs.
I am not going to judge them to harshly because states right supersedes all and defending your state form invasion is the only thing that matters. Like Lee did, you go with your state, not FedGov™.
This shows that trade and tariffs are not subjects to be taken lightly. The Free Traitor™ fascist attitude that there can be no discussion about it will eventually cause bloodshed IMO. I see it a lot right here on Free Republic.
Further when the same country engages in merchantilism, the protection of its domestic industries by making any natural counter-trade impossible, as does say China again, then they suppress economic production in your own country.
Now, you argue fine, the Chinese subsidize the standard of living of Americans by producing consumer goods cheaply freeing up American labor to work on higher skilled goods. But there the theory fails because China, and Japan and other Asian countries specifically target the high tech products that in the past provided the high income jobs.
What they take in return is cash and credit against the United States. And this is sort of like a reverse mortgage. And, however bad an idea a reverse mortgage might be against your private home, eventually you will die, no longer need the home, and they can liquidate it to recover their costs of paying you a living as well as a nice tidy profit for themselves. Your kids certainly lose. Society also loses because we have encouraged a large economic activity, finance, that provides no net productive benefit overall, and in fact just moves some of the value of your home into someone else's pocket.
But the real issue is that the reverse mortgage against America is going to come due before America dies, we hope. What it has done is transfer American wealth (the ability to produce goods and services) from America to China.
It is all well and good saying that other industries might rise to take their place, but they do not.
And, it is even worse. Consider education. It is said that education is the protection against losing the low-skill jobs going oversees. So you borrow $200,000 to get a college degree - let us presume it is actually a useful degree in a field of engineering. Instead of graduating and buying a house your mortgage is now your student loan. Even more so, that high income job you were going to get as a EE is evaporating, because, to the extent that the work needs to be done here in the US, folks are clamoring to bring in foreign trained EE's.
There is a substantial development of the theory of geographic advantage in economics in recent years (that krank Krugman was not always a krank and quite legitimately won the Nobel Prize for his brilliant work in this area). One of the presumptions of geographic advantage is the nexus of centers of economic productivity - e.g. Sheffield for steel in the UK, or Silicon Valley in California. The cost of land is high and the cost of labor is high because the cost of the products is high (Ricardo's theory of rents again).
Allow the nexi of production to go elsewhere, and you give up those synergies that make locating the next great thing here a likely and profitable venture.
Yes, those particular people would be better off if their jobs were protected. But the tradeoff is bad for the country: the job losses outside those protected industries would be much greater than the saved jobs in those industries.
Prices for cars, air conditioners, etc., would go up for all consumers, since we would have removed the foreign competition. As a result, even people who kept their jobs would find that their dollars wouldn't go as far and their standard of living would drop.
Those higher prices paid by consumers for the protected goods would be money not available for other consumer items, which is why there would be job losses and economic contraction in the general economy.
Another way to look at this is that the cost to the economy for each job saved would be many times the wages for that job — probably hundreds of thousands of dollars per job. The benefits are concentrated but the costs are distributed across the country; so the costs aren't as obvious, but they're nevertheless very real.
By the way, all of this just looks at the direct effect of the introduction of a tariff. If other countries retaliate by imposing their own tariffs on goods they import from the US, that makes things even worse for us.
You still won’t balance the budget that way. Instead you’ll slowly strangle the economy; each year, GDP and tax revenue will drop.
As the recession grows, people will blame Republican policy and go whole hog for the Democrats and socialism.
This happened in 1932 when the US replaced Hoover with FDR, leading to nearly a century of left-wing economic policies. The whole thing is a bad idea.
central_va: Unless you are unemployed.
If the country wants to help these people, it would be far less expensive for the US to increase unemployment benefits and introduce an extensive job retraining program.
What are you talking about? Are you high? Domestic sources of product will come on line or unused factory capacity will come on line. Economic active will go thru the roof!!
This happened in 1932 when the US replaced Hoover with FDR, leading to nearly a century of left-wing economic policies. The whole thing is a bad idea.
Smoot-Hawley had a tiny marginal affect on the Great Depression.
I thought this was a conservative site.
I’m not crazy about the idea, and I’m not really proposing it. But if you need to do something, job retraining is more conservative than protectionism: it helps the people put out of work at far less cost to the economy, and it doesn’t throw good money into propping up uncompetitive industries (instead the money is invested in US human capital). Moreover, it preserves the free market for purchases without distorting price signals; this maximizes economic growth. Economic growth, with a rising tide lifting all boats, is ultimately the only way to resolve economic distress.
Time will tell. I don’t believe you are right about an economic boom — but if the country does move toward protectionism, I hope you are. Or at least that income taxes and regulations will be reduced dramatically, counteracting the contractionary effect of a tariff.
You’re right about domestic production growing to fill in the gap left by the missing imports. But the catch is that it will be at higher prices. As consumers pay higher prices for those goods, less money is available for everything else, and the pain gets spread throughout the economy. The total pain distributed throughout the economy will be greater than the total dislocation caused by the original job losses.
That’s why, even with increased domestic production in targeted industries, GDP overall will drop, and total number of jobs will drop with it.
“Those higher prices paid by consumers for the protected goods would be money not available for other consumer items, which is why there would be job losses and economic contraction in the general economy.”
That is already taking place and has been taking place due to the modern versions of “free trade”.
Why is it that the United States economy became the most powerful on earth and it was done without the present trade agreements? It was done by building factories and growing the manufacturing base, not shipping them overseas and claiming that was a good thing?
You free traders are idiots. I have been reading the writers of free traders for years. It like they belong to some kind of mindless religious cult.
I read one guy who goes around the globe preaching free trade. He claims that the United States should get rid of every tariff on imported goods, every tariff, even though the rest of the nations do not.
You’re too worried about what other countries do and fail to identify the root causes of our companies moving elsewhere, mainly the cost/profit benefits which a company should maximize and is negligent if it does not. Countries that defy the simple laws of supply and demand economics by doing things like wage and price controls (”artificially cheap”) will fail sooner or later.
All of this government economic manipulation amounts to changing the measurements on a scale and thinking that changes the actual weight of the thing being weighed. Sooner or later, economic realities crush such futility. The strongest countries are those that allow open competition and voluntary market exchanges without government interference.
Again, as I’ve outlined, the federal government’s minimum wage and price (tariffs) controls, among other things, are the root causes of our GDP being lower than it should be and the migration of certain industry.
Mindless? Hardly — support for free trade is well-justified by rational analysis.
The costs to the economy of a tariff are far greater than the benefits. Unfortunately, the costs are dispersed over many more people than the benefits, which are concentrated in the protected industry, so the costs are less obvious. But when you add them up, the costs are greater, and tariffs pull the net economy down (even though some Americans will benefit, many more Americans will be hurt).
The effects of the 2002 steel tariffs have been extensively analyzed. Of course, one effect of the steel tariff was to raise the price of steel. As I recall, there were something like 50 times as many jobs in the steel-consuming industries as in the steel-producing industries. The steel-consuming industries were hurt by the higher price of steel, and the result was loss of jobs in the steel-consuming industries.
So, yes, the tariffs may have saved some jobs in the steel-producing industry, but far more jobs were lost in the steel-consuming industries. So it was a net loss to the economy. (It’s not even clear that jobs were saved in the steel producers, because US steel production dropped, presumably due to the higher prices.)
Moreover, all consumers paid more for cars and other items that used steel, so the increased costs ended up affecting the country as a whole negatively.
Another frequent reaction to the imposition of a tariff is retaliation with tariffs on goods that US companies export to other countries. When that happens, our export industry suffers too.
Blue Collar Voters: Trade is Killing Us
McClatchy DC
April 2, 2016
http://www.mcclatchydc.com/news/politics-government/election/article69551672.html
http://freerepublic.com/focus/f-news/3416750/posts
...
Establishment voices of economists, government and business officials argue that trade deals are critical in a global economy, and great for America. But critics such as organized labor call them “death warrants.”
And in blue collar communities in Wisconsin and across the industrial Midwest, that economic angst, coupled with some sense of betrayal, helps explain the roiling politics of 2016.
Wisconsin votes Tuesday. But soon after come other industrial states, including Pennsylvania. And all could be battlegrounds this fall in the general election.
And a lot will look like Milwaukee, once known as “the machine shop to the world,” now grappling with a new economy.
Wisconsin has lost more than more than 68,000 manufacturing jobs since the mid-1990s and the first of several controversial trade pacts with Mexico, China and others took hold.
...
Wealth is created by making stuff. Or more correctly making stuff other people would like to have. The more (good) stuff you make the more wealth you have created. Cars, corn, casinos, whatever were all made by somebody or a group of somebodies. While gold bars or barrels of oil were not "made" they were discovered and processed into a usable product by somebody so I am going to throw them into the same bucket as the (good) stuff somebody made. There is no other way to create wealth other than making stuff. Everybody not involved in making stuff is just getting a slice of the wealth created by somebody making stuff.
A doctor maybe preforming a valuable service by saving your life but he has not created any wealth. Dido the bartender that hands you a beer after a hard day of bashing Trump.
Does our trade policy encourage us make more stuff here or does it encourage our producers to produce else where?
Ok lets do the math. Making stuff produces wealth our trade policy encourages our producers to produce else where. Ergo our trade policy is causing us (USA) to lose wealth. Put another way we are getting poorer while the productive nations (China) are getting richer.
:) logic is your friend.
Yes there are other reasons manufacturing and jobs are fleeing the USA but trade our policy is not helping producers here at home.
One last thing our "trading partners" in Asia and else where are not engaging in "free trade" with the USA. That is a fallacy perpetuated by the globalist seeking to destroy the American middle class so they can implement a NWO. With them on top of course.
Wealth is created in three ways: by mining, agriculture and manufacturing. There are no other ways to create wealth. None.
Anyone not directly involved in those things is only adding value at the margins and not creating anything. If another country is exporting those durable things to you and you are not doing those wealth creating activities anymore then your country is growing poorer by the day.
You may not care but just so you know what is happening....
Great Britain was the first country to commit suicide by de industrializing. They are the example to NOT follow.
Funny how they don’t teach this in bidness skool.
Where is this “Free Trade” of which you speak?
Before all of the free trade bull caca started in ernest around 1980 I don't recall the USA resembling a North Korean style dictatorship. LOL.
Giving China unfettered access to the American market while serverly restricting their own maybe ‘Free Trade,’ but it isn’t free trade.
A ten percent import tariff.
So true. Moving toward a service industry is the way to third world status.
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