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 fly in this ointment is that we don’t have a kumbaya world.
Yes, even that is levels above what we are used to in our politicians/negotiators.
Unpredictability.
We haven’t seen competent leadership for so long many don’t even recognize it when they see it.
Elder is the sort of libertarian who treats ‘free trade’ as a religious tenet.
East Asia with it’s keiretsus, chaebols, and qiyejituan love Americans like him, his foolish indifference to their practices give them an enormous advantage over American competitors.
And all the while the same current crop of so called conservatives praise and admire Reagan, who put a 100% tariff on Japanese electronics!!
How long can we tolerate being lied to about what conservatism really is. Real Constitutional conservatism starts and ends with America first!!
If the founders were alive today their biggest issues with governance would be the hordes of third worlders coming here to live off of tax payer benefits and the loss of jobs by corporations shifting everything overseas. We are losing our heritage and our wealth all at the same time.
I said that kind of half kidding.
All goodness comes from God in the end. A fair symbiosis can be beneficial to both parties. But Trump can be beneficially crazy in the sense of not bowing to sacred cows that turn out to just be some men’s idols.
Where do you see that?
I bought my 7.5 y/o son a Daisy Red Ryder, like I had 35 years or so ago. He found it under the Tree this AM. He loves it, shoots it well (with shooting goggles of course). Then, while I was looking at this classic American X-Mass gift, there it was stamped in the metal.... "MADE IN CHINA". WFT?????? An all American (or so I thought), airgun company is importing Red Ryder BB guns from China? Is it just me, or does this just stink? Granted, I got it on sale for $29.95 at Dicks Sporting Goods on Black Friday, but even if they cost $100.00, if they were still made in the USA, I would feel better about it. The metal looks good, it shoots as fast and accurate as I remember, but the wood looks sub par, not as nice as my old one. But for me, the "MADE IN CHINA" stamp just kills it.
Turn it around and ask the voter if they want to pay 30% or 40% more for their laptop or their tablet or their HD TV or their Nikes or their smart phone or their clothing or their furniture and see what answer you get. The industries that China and southeast Asia have taken are the ones that can be done with a poorly educated workforce. And their poorly educated workers still are cheaper than our poorly educated workers.
Just to be fair, the phenomenon could warn us against idolatrous treatment of our blessings.
We might even want fewer material things if we can’t worship ourselves through them.
Cyber man hug. Eat raw meat, it helps.
The question could be fairer put as: would they welcome a lower welfare bill, less social problems with the unemployed, and a higher average salary, even though the price of “cheap junk” would be more? What if this ended up a wash or better?
The math has to be done. We do not have a single-variable issue here.
The title of the article is “Clueless About Free Trade” and Elder says, “He proposes tariffs, for example, on Chinese goods in retaliation for that country’s alleged ‘cheating.’” So wouldn’t you conclude that Elder thinks we have a “free trade” agreement with China?
I’m not sure what a Mexican flop house has to do with tariffs.
That does sound like the presumption.
And it is quite reasonable to ask: is that where we are?
It is part of knock-on effects.
Free Traitors.
Batman knows...
It ain’t even free trade anyhow. It’s always been out of balance. Free trade would look like something in which the money flow was close to neutral and it was more like swapping our crops for China’s junk.
Which is why we experienced that huge wave of illegal immigrants in the year after NAFTA went into effect. It destroyed the Mexican small farm economy.
Libertarians who know the price of everything and the value of nothing saw no problem with it, unless it happened to be their own neighborhood that was overrun and turned into Tijuana.
Remember the auto import quotas of the '70s? American manufacturers responded by raising prices and cutting quality. Worst cars ever built. Nothing before or after as bad.
Raise the price on Chinese appliances 45% and the result will be that locally-made appliances will go up 44%.
The retailers who sell better quality stuff need to explain why cheap Chinese made junk really isn’t cheaper. Our economy is starting to bring some manufacturing back to the US for a variety of reasons, but it actually is starting to happen.
If you buy tools or appliances from a big box retailer, know that it’s not the same quality as the same brand sells through specialty stores. The internal parts are cheaper and they don’t last as long. But the burden is on the retailer to explain that fact to the buyer. It’s not free trade’s fault.
My plumber showed me the inside parts of a faucet that he sold and the parts from the same faucet at Home Depot. I bought the more expensive one because it was better and would last longer.
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