What to Expect When You’re Free Trading

New York Times ^ | January 16, 2008 | STEVEN E. LANDSBURG

[LowCountryJoe]

Rochester

IN the days before Tuesday’s Republican presidential primary in Michigan, Mitt Romney and John McCain battled over what the government owes to workers who lose their jobs because of the foreign competition unleashed by free trade. Their rhetoric differed — Mr. Romney said he would “fight for every single job,” while Mr. McCain said some jobs “are not coming back” — but their proposed policies were remarkably similar: educate and retrain the workers for new jobs.

All economists know that when American jobs are outsourced, Americans as a group are net winners. What we lose through lower wages is more than offset by what we gain through lower prices. In other words, the winners can more than afford to compensate the losers. Does that mean they ought to? Does it create a moral mandate for the taxpayer-subsidized retraining programs proposed by Mr. McCain and Mr. Romney?

Um, no. Even if you’ve just lost your job, there’s something fundamentally churlish about blaming the very phenomenon that’s elevated you above the subsistence level since the day you were born. If the world owes you compensation for enduring the downside of trade, what do you owe the world for enjoying the upside?

[Snip]

One way to think about that is to ask what your moral instincts tell you in analogous situations. Suppose, after years of buying shampoo at your local pharmacy, you discover you can order the same shampoo for less money on the Web. Do you have an obligation to compensate your pharmacist? If you move to a cheaper apartment, should you compensate your landlord? When you eat at McDonald’s, should you compensate the owners of the diner next door? Public policy should not be designed to advance moral instincts that we all reject every day of our lives.

[Toddsterpatriot]

“So a higher GDP, greater overall wealth, increasing standard of living and a larger selection of goods (among other things) is a bad thing?”

None of these things are brought about by trade.

That's why you grow your own food, make your own clothing and build your own electronics? Because spending money to buy these goods from more efficient producers would lower your standard of living?

[xjcsa]

You ever get the feeling the people we're discussing these topics with have never taken a basic econ class?

Yep. They all need to spend a year listening to Thomas Sowell or something.

[Toddsterpatriot]

If they can read, they need this book.

Applied Economics

They are definitely stuck in stage one.

[xjcsa]

I think I owe a huge debt of gratitude to a college professor of mine who used Sowell's Knowledge and Decisions as the textbook for a semester-long class. It did amazing things for my thinking.

[fortheDeclaration]

[U.S. companies now have to compete with foreign companies that are not subject to the same government regulations regarding environment and worker protection that they are.]

So what? Would you like for EU countries to dictate our protections in oredr to accept trade? Do not answer. Any answer that you would give would likely kill someone else's liberty to make their own decisions. You talked of sovereignty in this post that I'm responding to, is that a one-way street? What about consumer sovereignty? Believe in that?

The only consumer exists in a truly free market, not a controlled one.

[ Well, that is the problem, it isn't individuals trading it is Governments that are still pulling the strings and calling the shots. ]

What!?

Yes, managed trade is just that, trade that is managed between nations, not individuals.

[ So, U.S. business is under a handicap of competing with nations that do not have the same restrictions we do. ]

Because most restrictions are a good thing, right?

Not restrictions that hamper free markets.

[ Moreover, these trade agreements have organizations which punish nations with trade sanctions if they do not comply with their rules, violating that nations sovereignty. ]

Dennis Leary moment (two words): voluntary membership.

Voluntary membership by who?

.

When the 1994 Congress was elected, the lame-duck Congress, with the approval of Grincrich and Dole allowed NAFTA to get passed, knowing that the incoming Congress would never had passed it.

These 'trade agreements' which supersede U.S. domestic laws, are put on a 'fast track' so they can't be amended.

[ Free trade is simple, remove all international hindrances for individual to do business, including the import-export bank. ]

But domestic hindrances can stay. Look, you're the one who thinks the trading partners that we trade with should reside in countries with restrictions and regulations like ours in order to do business. Stop talking out of both sides of your mouth and get principled.

Did I say that the domestic hindrances should stay?

But if those burdens are in place the average U.S. businessman is operating at a distinct disadvantage against business's that are being subsidized by foreign governments to get control of that particular market.

If you are going to remove the protection for that business, you need to remove the restrictions as well or all you are doing is sending that business to the foreign competitor, who is operating from a distinct advantage.

Now, if it is just a matter of removing tarriffs and letting the U.S. business compete on an international market that is fine, but you can't make agreements with governments that force the individual business to compete while tying its hands as well.

So, it is you who need to think about principles, the principle of the true free market vs the managed market pretending to be a free one.

[Toddsterpatriot]

When the 1994 Congress was elected, the lame-duck Congress, with the approval of Grincrich and Dole allowed NAFTA to get passed, knowing that the incoming Congress would never had passed it.

NAFTA passed in December 1993. The Gingrich Congress was elected in November 1994.

[fortheDeclaration]

Yes, it wasn't NAFTA, but the WTO that was passed in the lameduck session.

Some Revolution Jeffrey Tucker

The Republican leadership and their advisers are confirming Murray Rothbard's doubts. Writing in the Washington Post, Rothbard noted the vast ideological divide between the voters and those who control the Republican Congress. His prediction: the leadership will defend the old order of government control even as its legitimacy is unraveling. The revolution was betrayed, he said, even before the Republicans took control.

Since his article appeared, the Republican elites have thwarted the will of the newly elected backbenchers who campaigned against Washington. In only a few short months, the leadership has worked to sustain Leviathan and all its works, both foreign and domestic, under a new philosophical pretense.

Trade and Empire. The first bad sign appeared days after the election. Reeling from his party's defeat, Clinton--backed by the banking, media, and corporate establishment--demanded that Congress ratify the Gatt treaty establishing the World Trade Organization to manage the international trading system. It was both economically unsound and extremely unpopular, facts which provided the political and economic reasons to say no.

Clinton had tried to force a vote before the election, but as part of their pre-electoral charade, the Republicans blocked it. To fool the voters, Newt Gingrich and Robert Dole even hinted that they opposed the WTO.

The election confirmed the voters' desire for an end to insider rackets like the WTO. But within days, the Republican elites--with ideological cover provided by D.C. think tanks dependent on political approval--told the administration they wanted the vote taken before the new Congress assembled. So in a lame-duck session, they shoved through the most unpopular trade treaty in several generations.

http://www.mises.org/freemarket_detail.aspx?control=256

[fortheDeclaration]

No argument from me. I believe in free trade. I don't beleive in the Kool-Aid Drinking Free Trade philosophy which equates open borders with free trade and MFN status for a hostile country like China with an allied country like Japan. It is much like the immigration "advocates" who want to blur the lines between legal and illegal immigrants. People with common sense can tell the difference. But most of our policy makers lack common sense.

Agreed.

Governments need to stay out of the trade issues and just remove the barriers.

In immigration, they need to enforce the laws and protect the borders.

[fortheDeclaration]

Merchantilism, then, is production based, not consumer based. By this definition the Arab states and China are merchantile. They each are building vast reserves of capital by exporting substantially more than they import. Their capital, however, is based on the dollar, in that their largest consumer is the US. While they can spend dollars with most other countries, eventually they must return to us for an exchange of their hoarded dollars. Thus, they end up spending the very dollars with us that we have spent with them. Is this not the essential argument for free trade?

Yes, it is, as long as we are truly free trade and not falling into their mercantalism as well, which sees trade as warfare and not a benefit to each person in the transaction.

Their subsidized exports are a boom to U.S. consumers, since we are getting products that are largely being paid for by their citizens.

[Louis Foxwell]

I don’t buy into pyramid operations either.
*****************
Of course you do. Every major corporation is a pyramid organization. The work force at the bottom, management in the middle, ownership at the top. If it is a publicly held stock company the Bd of Dir’s is at the top. Same with government, bureaucracy is classic pyramid organization with elected officials functioning as bothersome gnats.

[Louis Foxwell]

You miss the point. Exchange for what. Sitting on a pile of cash is meaningless unless that cash is leveraged to do something such as exchanging it for goods and services.
As to your bank exchange argument, think billions. Where do the banks go with their dollars? In the final analysis our dollars must be spent with us at the point where the hoard has grown beyond its use as an international bartering tool.

[1rudeboy]

Do you understand what I am referring to when I say that I am three steps earlier in the chain?

Not this morning, I haven't had coffee. Please help me out.

[maui_hawaii]

I might need to go back a re-read my posts but I will try to do it from memory.

I was talking about what I refer to as "economic environmentalism".

I was making the case that government has the responsibility to create a healthy environment for business on a macro scale, in fact on a global scale. On a micro scale business has to compete to survive. Huge difference.

We can create an analogy comparing the US to a greenhouse... if the government does its part to create a nice environment then the plants on the inside of the greenhouse(businesses) grows.

In a greenhouse you need water, fertilizer, good soil, light etc etc. In business you need low taxes, lower burdens on business and an overall good framework.

When I said I was referring to 3 steps earlier in the chain, I was referring to us building the right environment. I was referring to the framework.

Once the framework is up then the seeds are planted, business grows and a truly competitive situation arises. Without the right framework you don't truly have economic freedom or a competive driven market.

When you have the right framework in place it lends itself to creating that economic freedom you are talking about in your post above.

Now on an international scale, the US has just as much, if not more responsibility to stand up for things that allow our companies to compete in international markets.

When we do that what we do is essentially add another wing onto our economic greenhouse.

Lots of people though say government has NO role and the only thing the government should ever do is nothing. When we take that kind of liberatarian economic view into the international arena it doesn't fly. Liberatarians hurt America more than they help it when they doggedly claim 'economic freedom' allows them to buy what they want from whatever country they want to buy it from. Aside from being unconstitutional, it is bad economics.

The US government has a role to compel those who want to trade with us to drop their barriers as we will ours... and when we do so we end up with a synergistic system.

I say economic freedom is great... but it is confined to the confounds of the proverbial economic greenhouse that we build.

In building an effective system we will at times have to tell businesses a straight up "No" and tell countries the same thing. The government has the right to regulate trade with foreign nations and they should use that right to create a stronger international system.

In a nutshell some restrictions create more economic freedom than having no restrictions. Rules are nessesary.

[William Terrell]

This still happens and we still trade amongst ourselves, do we not?

Less and less as time goes by. As as time goes by, we become weaker in the world. It's happening before your eyes. Remember, a service based economy has to have manufactured objects to sustain it.

Wrong! We became a wealthier nation through trade.

If we were "trading" we would become a wealthier nation. But we are a debtor nation and the illusion of wealth is increasing that debt. Therefore, we are not "trading".

We're not dependent. We choose to get quality goods at less cost. And the best thing is is that government here do not plan these things...consumers make choices and so do businesses that deliver the goods we consume.

When critical components for our war machines are made offshore, we are dependent. (Did you know that last year the president stopped legislation that required that critical components be domestically made?)

Consider the origin of the things we buy, then consider where we would be if those origins were to stop sending us those things. Now, they may or may not, but reductio ad absurdum shows the nature of a condition.

Walking the world in self sufficiency is a position of strength and walking in dependency is a position of weakness. I'll pay $30 more for sneakers to get that strength. You apparently won't. In this way, you are a danger to my welfare and safety.

We get quality of goods at less cost as far as the physical attached price tag goes. And for a while. Do you know how one creates a monopoly? Do you know why monopolies are bad?

Consumers are stupid and think no further than the moment and the urge.

But the individuals and businesses from these countries sure like having as wealthy customers.

Yeah, for a while. Then ideology kicks in.

Individuals making choices is engineered? You don't have a firm grasp on the reality of voluntary transactions, do you?

Individuals choose among the options available to them, and they, like you, choose with no thought for the future.

From my point of view you do not know your subject matter, are a doom & gloomer, and do not understand capitalism or Homo economicus very well.

I know what I see, friend. Calling a hawk a handsaw doesn't make it cut wood.

[Toddsterpatriot]

The election confirmed the voters' desire for an end to insider rackets like the WTO. But within days, the Republican elites--with ideological cover provided by D.C. think tanks dependent on political approval--told the administration they wanted the vote taken before the new Congress assembled. So in a lame-duck session, they shoved through the most unpopular trade treaty in several generations.

That's an interesting theory from a Lew Rockwell guy. Do you have any real proof? All I could find was the following.

(2) GATT/WTO. This legislation (H.R. 5110) implemented the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), a global trade compact that established the World Trade Organization (WTO) bureaucracy. The House approved this legislation during a lame-duck session on November 29, 1994 (Roll Call 507) by a vote of 288 to 146, with the Republicans voting 121-56 and the Democrats 167-89.

Doesn't look unpopular to me.

[scarface367]

If we were "trading" we would become a wealthier nation. But we are a debtor nation and the illusion of wealth is increasing that debt. Therefore, we are not "trading".

So if I give slips of paper to receive a good that's not trading?

Consider the origin of the things we buy, then consider where we would be if those origins were to stop sending us those things.

So let's just make everything in America instead? Another question, if another country stops trading with us, aren't they impacted as well?

Do you know how one creates a monopoly? Do you know why monopolies are bad?

Where's the monopoly?

Consumers are stupid and think no further than the moment and the urge.

So let's have the government step in to save us from ourselves?

You really need to realize that economics is not a zero sum game. Someone is not made better off at the expense of someone else. Understand this. Or better yet read up on basic economics.

[William Terrell]

So if I give slips of paper to receive a good that's not trading?

Not on a international level, which is where our problem lies.

So let's just make everything in America instead? Another question, if another country stops trading with us, aren't they impacted as well?

Yes.

So what?

Where's the monopoly?

That's what people ask in the beginning when the new company moves in to run the competition out of business with artificially low prices.

So let's have the government step in to save us from ourselves?

Our current economic situation is the government stepping in.

The ultimate summation of the bottom line is that you, and others like you, are willing to compromise Americans security, safety and welfare for cheap tennis shoes.

I object.

[1rudeboy]

Consumers are stupid and think no further than the moment and the urge.
--William Terrell, January 17, 2008

We who live in free market societies believe that growth, prosperity and ultimately human fulfillment, are created from the bottom up, not the government down. Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefiting from their success -- only then can societies remain economically alive, dynamic, progressive, and free. Trust the people. This is the one irrefutable lesson of the entire postwar period contradicting the notion that rigid government controls are essential to economic development.
--Ronald Reagan, September 29, 1981

[1rudeboy]

Nobody spends somebody else's money as carefully as he spends his own. Nobody uses somebody else's resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.
--Milton Friedman, date unknown.

[fortheDeclaration]

Clinton had tried to force a vote before the election, but as part of their pre-electoral charade, the Republicans blocked it. To fool the voters, Newt Gingrich and Robert Dole even hinted that they opposed the WTO.

Clearly the incoming newly elected Republicans would have blocked the Treaty, that is why the lame-duck voted it in instead.

Had it been popular, why not let the incoming newly elected Congress vote on it and not the defeated 'lame-duck'?