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?
The Chinese import something from us?....
We don't have a free trade agreement with China.
Trump thinks so many levels above most people - this is another example of it. Tariffs are a *negotiations tool* - People don’t understand that, and then write ignorant opinion pieces like this one.
Tariffs served a valuable function and propelled and transformed the USA to industrial power house up until 1913. They are part of US history and good part at that. The income tax era that Free Traitors defacto support not so much.
Yes the ratio is about 3:1 in favor of the gooks.
Being able to make stuff besides printing bills of exchange matters.
Freepers who clearly understand that you can’t just pay burger flippers $15 an hour don’t seem to get it that the days of millions of American men standing on the line, bolting together washing machines, or snapping tubes into TV chassis, are over. Over.
We need to figure out how to make an economy work under that reality.
The “reality” is that Goldman Sachs & the rest of the transnational crony capitalists do not give a flip about Main Street. Do you think they care if a Mexican flop house opens next door to you? Do you think they care if your kids teacher doesn’t have time for them because the class is full of non English speakers?
We need to pump the breaks now. We’re being led by the nose by people who do not have our best interests at heart. Until people like you understand that nothing will change.
Right! But Larry Elder apparently thinks we do.
It damn sure does. The next time any American buys some cheap piece of Chinese made junk they should ask themselves if the money they're saving is worth subjecting millions of Chinese laborers to near slave condition and subjecting millions of American workers to forced idleness.
“Tariffs are the wrong answer, the Chinese will retaliate.”
A meaningless threat. China already controls imports through both tariffs and non-tariff barriers.
A tariff is OK to raise revenue, that’s what taxes are for. Our Internal Revenue Code contains a lot if items that are designed to manipulate behavior, which is not what taxes are supposed to do. Tariffs designed to discourage buying imported goods are in that same classification.
Let the buyer and the seller beware, and have the freedom to make their own decisions.
Milton Friedman once said that the problem with free trader is that its beneficiaries are many, and they don’t know who they are, while its victims are few, and they do know who they are.
What’s lost in this whole debate is individual freedom and responsibility.
The Chinese already have tariffs on our products. They just call it something else. Combine that with the currency manipulation and this so called free trade is a loser for the US. The Koreans have another flim-flam scam that falls under the free trade guise. Korean machine tool companies can sell at a loss and receive a check from the government at the end of the year to make up the difference. Anyone that thinks we have free trade in this world are delusional. This “free trade” is part of the reason why our wages have not increased over the past 25 years.
Yes. Re-negotiating flawed trade agreements is not going to hurt the American consumer.
Well, he does.
Nearly every day!
Yet amazingly, that type of work is still done in the USA albeit a lot less of it. But given enough time the Free Traitors™ will complete their mission of de industrializing the USA leaving future generations of Americans defenseless against Asia and the Chi Com regime which is not going anyway. Thanks Free Traitors™.
If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage. The general industry of the country, being always in proportion to the capital which employs it, will not thereby be diminished ... but only left to find out the way in which it can be employed with the greatest advantage.
In other words, the assumption that Adam Smith made was that capital within a country would be redeployed to where a comparative advantage existed. It did not assume that the total level of production in the home country (e.g. England or say the U.S.) would be diminished in favor of a foreign competitor (e.g. France or in our case China).
I love you——In a manly kinda way.
Everything needs to be considered to be on the table.
If Chinese think Donald is a little crazy, that can help.
Your first problem is having a girlfriend in that cesspool of a city.
Other than that, the socialist jerks in Ottawa like to make sure they make money on any cross border shopping, or everyone would go south of the line and not a soul would buy a damn thing in this overpriced socialist cesspool (Canada, minus Alberta and Saskatchewan).
So anything over a certain dollar amount, they simply make you pay duty on it. Hurray!
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