[Utmost Certainty]

Yawn. Inane protectionist policies.

You might want a crash course in this: http://en.wikipedia.org/wiki/Comparative_advantage

[dennisw]

Sorry but no-sale on your dinosaur era theories of free trade. They just don't wash today. Free trade is a very strange Anglo-American obsession. How come high IQ nations like Korea, Japan and China laugh at such pie in the sky theories and certainly don't conduct business this way. They build and protect their industries and jobs

1. Free trade within our 50 states---great idea! (and written into our Glorious Constitution*)
2. Free trade in world markets? Only for chumps and losers/

 

*Article 1 - The Legislative Branch
Section 8 - Powers of Congress

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

[wastedyears]

What’s wrong with wanting to protect the country? We’ve been blown wide open for far too long.

[algernonpj]

Yawn. Inane protectionist policies.

You might want a crash course in this: http://en.wikipedia.org/wiki/Comparative_advantage

Ahh .. good ole Ricard and 'comparative advantage'.

For Ricardo's theory of comparative advantage to work, a country's labor, capital, and technology must not move offshore. Ricardo himself admits this. International immobility is necessary to prevent a business from seeking an absolute advantage by going abroad. His theory only works for such factors as geography and climates. Ricardo assumes that patriotism will check investment abroad even under absolute advantage.

From: The Works and Correspondence of David Ricardo, Vol. 1 Principles of Political Economy and Taxation [1817], Chapter Vii, On Foreign Trade:
"The same rule which regulates the relative value of commodities in one country, does not regulate the relative value of the commodities exchanged between two or more countries"
...
From Ricardo's discussion of the famous example of Portugal producing wine and England producing wool:
"The difference in this respect, between a single country and many, is easily accounted for, by considering the difficulty with which capital moves from one country to another, to seek a more profitable employment, and the activity with which it invariably passes from one province to another in the same country.

It would undoubtedly be advantageous to the capitalists of England, and to the consumers in both countries, that under such circumstances, the wine and the cloth should both be made in Portugal, and therefore that the capital and labour of England employed in making cloth, should be removed to Portugal for that purpose.

Experience, however, shews, that the fancied or real insecurity of capital, when not under the immediate control of its owner, together with the natural disinclination which every man has to quit the country of his birth and connexions, and intrust himself with all his habits fixed, to a strange government and new laws, check the emigration of capital. These feelings, which I should be sorry to see weakened, induce most men of property to be satisfied with a low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations."

Ricardo's theory of comparative advantage does not apply to today's world. Just look at our current sad economic situation.

[algernonpj]

Yawn. Inane protectionist policies.

You might want a crash course in this: http://en.wikipedia.org/wiki/Comparative_advantage

Now as to tariffs:
In 'An Inquiry into the Nature and Causes of the Wealth of Nations', Adam Smith envisioned a world of small local businesses run by the owner, and the employees of these businesses.

Adam Smith listed the following conditions to impose tariffs:

Book IV, Chapter II, 'OF RESTRAINTS UPON IMPORTATION FROM FOREIGN COUNTRIES OF SUCH GOODS AS CAN BE PRODUCED AT HOME':
"As there are two cases in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestic industry, so there are two others in which it may sometimes be a matter of deliberation, in the one, how far it is proper to continue the free importation of certain foreign goods; and, in the other, how far, or in what manner, it may be proper to restore that free importation, after it has been for some time interrupted.

1.When the industry is necessary for national defense. Smith uses the example of the navy and shipping.
"The first is, when some particular sort of industry is necessary for the defence of the country. The defence of Great Britain, for example, depends very much upon the number of its sailors and shipping."

2. When domestic production is subject to an internal tax which makes it more difficult to sell domestic products compared to foreign products.
"The second case, in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestic industry, is when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former".

3. When a nation to whom one exports, imposes a tariff on one’s exports.
"The case in which it may sometimes be a matter of deliberation how far it is proper to continue the free importation of certain foreign goods, is when some foreign nation restrains, by high duties or prohibitions, the importation of some of our manufactures into their country. Revenge, in this case, naturally dictates retaliation, and that we should impose the like duties and prohibitions upon the importation of some or all of their manufactures into ours. Nations, accordingly, seldom fail to retaliate in this manner
. . .
The short term increase cost of goods, will be offset by long term advantages. There may be good policy in retaliations of this kind, when there is a probability that they will procure the repeal of the high duties or prohibitions complained of. The recovery of a great foreign market will generally more than compensate the transitory inconveniency of paying dearer during a short time for some sorts of goods."

3.Smith also argued that when tariffs are repealed, it should be done slowly.
"Humanity may in this case require that the freedom of trade should be restored only by slow gradations, and with a good deal of reserve and circumspection. Were those high duties and prohibitions taken away all at once, cheaper foreign goods of the same kind might be poured so fast into the home market, as to deprive all at once many thousands of our people of their ordinary employment and means of subsistence. The disorder which this would occasion might no doubt be very considerable."