Clarifications on the Case for Free Trade

Ludwig von Mises Institute ^ | 4/12/04 | Paul Craig Roberts

[cyborg]

I forgot to add what can we do about it without impeding any progress? I keep hearing that we'll impede progress if we prevent offshoring, if we stop illegal aliens from picking vegetables. BTW, i don't see how letting a Mexican lady take my mother's job as a nursing aide is helping progress.

[m18436572]

bump

[ninenot]

If you're only capable of doing the inept level of work that Chinese workers perform at, why should you be paid top dollar for it?

You must have been missing in action for the last, oh, 10 years.

The Chinese are using exactly the same machinery and equipment as is used in US plants; thus, for practical purposes, their production capabilities are identical to ours.

The ONLY difference (outside of the shipping) then, is the cost of labor.

And the argument here is that 'offshoring' manufacturing to arbitrage labor costs is destructive to America--and CERTAINLY to American workers.

Unfortunately, this is a political question which Bush simply cannot address without namecalling, and Kerry--well, he has at least 12 positions on the issue, but NONE of them suggest that offshoring is to be halted.

[ninenot]

it's not the wild wooly days of early industry and I think unions do more harm than good

Thus, union membership in private industry is now down to around 13% of the workforce.

But it's not all 'peaches and cream.' As Rudeboy will testify (I think he's in IR)---one generally gets the labor relations one deserves.

There are still quite a few barbarian-type supervisors out there; but you are correct, there are LESS than in the 'bad old days.'

[ninenot]

"What we are experiencing is a situation where reasonable corporate objectives are potentially clashing with what's good for the country," said Gomory. "There certainly are circumstances under which cheaper goods produced by offshoring do benefit those whose jobs are untouched; there are also situations when offshoring results in a negative impact that can reduce the nation's overall income."

"For example, it's wrong to assume that productivity increases abroad are always good for our country, just as it's wrong to assume that they are always bad."

"A trade relationship can prove to be simultaneously good or bad on three different levels. In other words, it can be good or bad for workers, good or bad for the country and good or bad for the world, all at the same time," said Gomory. "In a modern free-trade environment a country has a vital stake in the competitive strength of its industries.

Well, Poohbah, if you can show us which parts of the above quotes are flat-out untrue because of "liberal bias," we'll be glad to accept your complaint.

[rdb3]

Here's the deal. If Product A costs $5.00 while comparable Product B costs $4.00, Product A is going to lose every time.

It's just that simple, really.

What infuriates me with protectionists is that they simply refuse to address the issues which add to the cost of American made products that make them artificially high. I'm talking about the costs that have nothing to do with the production of goods.

But, no, protectionists want to wrap their arguments in terms of "patriotism" while refusing to clamor as loudly against the reduction of governmental meddling with the market. Therefore, the protectionist argument goes in one ear and out the other to me. The protectionist can demagogue the issue with folks who lose jobs, but that's like locking the barn door once the horse has already gotten out. What does this lead to? More governmental regulations and restrictions, that's what. And here I was thinking that this would be anathema to Right-thinking people. Guess I was wrong.

It never cease to amaze me how social conservatives can swing so wildly Leftward economically.

Until protectionists argue as stringently against governmental meddling with the market as they do against free trade, I'm not even listening.

Show 'em my motto!

[raybbr]

If you're only capable of doing the inept level of work that Chinese workers perform at, why should you be paid top dollar for it? If you can't compete on price, compete on value delivered.

At what point do we get to enjoy our lives or, should we just work 18 - 20 hours a day so we can compete with near-slave labor in China?

[rdb3]

Poohbah: If you're only capable of doing the inept level of work that Chinese workers perform at, why should you be paid top dollar for it? If you can't compete on price, compete on value delivered.

raybbr: At what point do we get to enjoy our lives or, should we just work 18 - 20 hours a day so we can compete with near-slave labor in China?

You're comparing apples to oranges here. But to address your question, we could start by getting the government out of the way of making it nearly impossible to complete dollar for dollar.

Show 'em my motto!

[1rudeboy]

What is IR? Information Resources?
In any case, I am not. I am a student with a net worth of -$100,000.00 and climbing.

[1rudeboy]

falling? Let's simply say "heading in the wrong direction."

[Poohbah]

The Chinese are using exactly the same machinery and equipment as is used in US plants; thus, for practical purposes, their production capabilities are identical to ours.

OK. Then what you're telling me is that the American worker is unable to produce a travel alarm clock that will survive a trip in my luggage, either.

Fine. I'm still not going to pay him more than the product is worth.

[raybbr]

You're comparing apples to oranges here.

Labor is labor. We are competing agianst Chinese labor. Regulations, too. But, aren't we always told that the major cost in a corporation is labor? Or is that another fallacious statement put out by super-capitalists to drive down labor costs?

[ninenot]

OK. Which Gummint tax/reg programs are YOU going to eliminate? OSHA? EEOC? FLSA? Income tax?

Even if you assume, for the sake of the argument, that 50% of these programs are poppycock, that only reduces "gummint overhead" to about 25% of GDP.

And the likelihood of modifying/eliminating these programs? You'd do better in Vegas. MUCH better.

[ninenot]

In prior posts, you acted as though you knew ALL ABOUT Industrial Relations.

Your qualifications are now zip a dee doo dah.

Back to the books, and you better hope that your NW is not in real estate.

[ninenot]

The "cascaded" cost of labor in any end-product is around 70%.

Here's where the number comes from: cost of labor to mine the raw materials, plus cost of labor to transport, plus cost of labor to fabricate, plus cost of labor to transport (again...) etc.

Not to mention the 'indirect' costs of labor in administration, sales, etc.

It's actually quite significant.

Most people understand (also correctly) that "cost of labor" at ANY ONE STAGE is only about 10-15%--and that's simply "direct labor," not including administrative overhead, sales, etc.

[raybbr]

Don't you know by now that Rude.. is an expert in economics, trade, real estate, unions, business, as nauseum?

[raybbr]

Most people understand (also correctly) that "cost of labor" at ANY ONE STAGE is only about 10-15%--and that's simply "direct labor," not including administrative overhead, sales, etc.

So, for them to say the labor is the most significant cost in any stage of production is a lie? Correct?

[rdb3]

OK. Which Gummint tax/reg programs are YOU going to eliminate? OSHA?

Yep.

EEOC?

Yep.

FLSA?

Yep.

Income tax?

Most definitely.

Even if you assume, for the sake of the argument, that 50% of these programs are poppycock, that only reduces "gummint overhead" to about 25% of GDP.

Great! Then it would be time to go after the remaining "poppycock" nonsensical regs and taxes.

And the likelihood of modifying/eliminating these programs? You'd do better in Vegas. MUCH better.

Really? Then I'd wager the same odds for protectionists. If you can't compete dollar for dollar, you lose. Like my late uncle used to say, "Don't make me choose between you and my money cause you will lose every time."

Show 'em my motto!

[rdb3]

The "cascaded" cost of labor in any end-product is around 70%.

Then that means we must squeeze out that 70%.

Show 'em my motto!

[rdb3]

Labor is labor. We are competing agianst Chinese labor. Regulations, too.

Stop right there. "Regulations, too?" Yes, regulations! If you put the noose of regulations around your neck that artificially raise the cost of doing business, don't be surprised when the trapdoor opens when you can compete without that noose. Don't be surprised. That's only common sense.

Or is that another fallacious statement put out by super-capitalists to drive down labor costs?

Super-capitalist versus super-socialist. Hmmm... I'll take the mantel of super-capitalist and take it proudly.

Show 'em my motto!