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?
That just sucks! Now the government wants to remove country of origin labels from our food. This crap needs to stop.
If Free Trade is so good why is so hard to find out where a product is made? Why are products clearly labelled? If it doesn’t clearly say Made in the USA then it’s not.
Free traders in a mercantilist world are suckers. Yeah, we can buy more of their crap and live well, but off borrowed money, because the Nation cannot build wealth.
Never mind the "higher average salary" fantasy, how would you guarantee lower welfare, fewer social problems, etc. in such a way as to show benefit to the consumers who see their costs go up?
Tariffs used to be the only money supply of the Federal Government. Was this evenly assessed across the board? If so, a burden of course, but also not an unfair subsidy to anybody unless it was America in general.
And this is not a single variable problem. I’d rather get a job from even a crony than from nobody at all.
Tariff Act of 1789
Michael P. Malloy
The Tariff Act of 1789 (1 Stat. 24), signed into law by President George Washington on July 4, 1789, was the first substantive legislation passed by the first Congress. This act, together with the Collection Act of 1789, operated as a device both to protect trade and to raise revenues for the federal government. The constitutional authority for the act is found in the powers given to Congress “to lay and collect Taxes, Duties, Imports and Excises” and “to regulate Commerce with foreign Nations.” Among other things, the act established the first schedule of import duties and created an additional duty of 10 percent on imports carried on vessels “not of the United States.”
U.S. TRADE POLICY
The specific provisions of the act are of little interest (by 1799 it had been superseded by subsequent, more detailed legislation). However, the act remains significant for setting the basics of U.S. trade policy. In supporting its enactment, Alexander Hamilton argued that tariffs would encourage domestic industry. Other nations offered their industries significant subsidies, or money given by a government to support a private business. Hamilton contended that a tariff would protect U.S. industry from the effects of these subsidies. (Concerns over “dumping” -imported goods sold at less than their fair value to gain unfair advantage over domestic goods—would also be addressed in the Tariff Act of 1816.) Another argument in favor of tariffs is now easy to forget. Before the income tax was authorized by the Sixteenth Amendment in 1913, the tariff was a key source of federal revenue. Thus, for over a century import duties (along with domestic excise taxes) were the major source of government revenue, with sugar duties alone accounting for approximately 20 percent of all import duties.
http://www.encyclopedia.com/doc/1G2-3407400280.html
It is a do-the-math situation. And you beg the question by calling it a fantasy. It is a fantasy in the way that your household budget is a fantasy.
What we have are deals and agreements. I think our negotiators work to ensure our grain is allowed in to other countries and in return we lose our manufacturing. Agro business has loved free trade. Manufacturing - not so much. In my tin foil hat moments I always wonder if becoming the world's breadbasket is a way for the US to become the defacto world empire - the indispensable nation. We run the world by feeding it - but in exchange we lose our manufacturing base and our national identities.
I’m kind of amused that cowboy duds now are made in China. Whoopie ti yi yo, get along little chow meins.
That would be less ironic if we were selling them more beef too.
I think it would be great to put the $29.95 Daisy and the $100.00 Daisy side by side, and let Americans vote with their wallets.
You tariff junkies up for the challenge??
Scrap paper and corrugated to package the electronics they ship here.
Well for those who still revere icons of Americana, one that could certify that not just it but all its parts were made in USA and met a high quality standard, might sell even better after all. This is not a high volume item, people don’t buy dozens of Daisies.
That is the point, that is a good thing. With a built in profit margin domestic competition will spring up driving prices to return to "normal" lower levels. That is how it works. In the meantime the tariff brings in non income tax revenue which reduces the burden on the tax payers. It is like a Vietnamese Law firm - win-win.(Nguyen-Nguyen)
Other countries have slave labor and at a minimum throw tariffs on all our goods to destroy our sales elsewhere. Not free trade.
We need a global $15 minimum wage so we can compete with our own stupidity.
“I’m not sure what a Mexican flop house has to do with tariffs.”
Then you need to read up on what happened when NAFTA removed all restrictions on the import of corn and wheat into Mexico. An enormous number of unemployed Mexican small farmers headed north across the border.
He [Elder] didn’t say we have an agreement with China.
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So what? It’s the implication. Ben Carson didn’t say he was leaving the race. Donald Trump didn’t say he supports Obamacare. I was in Syracuse NY when NAFTA was ratified. The Carrier Air Conditioning plant was closed down within the year and moved to Mexico. The Chamber of Commerce’s concept of “free trade” sucks.
I remember. America made really great cars up to 1972, then the oil crises hit and Japan got lucky because they had a small vehicles that were needed at the time. Pure luck. Amercan engineers were dumb founded and made same really crappy cars for a while but then they caught up . Thank God for embargoes and tariffs they saved the US auto industry. Hurray for protectionism! Hurray for America!
The made in USA Daisey BB guns did not cost $100. He said even if.....
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