The Logic of Trade

Washington Times ^ | 8/18/03 | Daniel T. Griswold

[MonroeDNA]

Whenever an expert touts a totally new theory, invention or miracle medicine, a healthy dose of skepticism is called for. The recent writings of Paul Craig Roberts fit the mold. He claims that two centuries of economic thought in support of free trade, dating back to Adam Smith and David Ricardo, have been overturned by new developments and his own unique insights. But reality is more straightforward, and far less ominous, than he depicts.

[harpseal]

I'd prefer software written in India.

1) The mathematics would actually be correct. As oppossed to the NASA pukes who mixed British System Units with Metric Units and fried $millions of high-tech tax fodder in the Martian atmosphere.

You have not used Indian sofware. Furthe your example from Nasa was not the Sodtware programmers per se who programmed what they were given per the NASA rules. questioning the software requirements was something teh programming team did they were told to program it the way they were told. At least accordinbg to Computrer world at the time. Which if you do not want questions for your programmers go to India for your software

2) The online help and manuals would be written in literate English rather than in Yospeak.

You have not dealt with indian softweare manuals

3) They'd deliver the entire product rather than just delivering some of the product and a ReadMe telling you when the patch was due in.

You have never had to deal with delivery of product from India. there actually is a quality differnece and it is not in india's favor but they sell based upon the argument it is so much less expensive.

[harpseal]

Free Trade as it is soimetimes called is a hit against the United States of America. And if we are talking the current trade ebnvirornment what exactly is Free about average tariffs of 70%, non tariff barriers and currency amnipulation to subsidize exports?

[harpseal]

Please start arguing the facts.

[harpseal]

By the way I would love to have an honest debate about Free Trade with someone who could post on regression analysis that shows the costs and the benefits of a tariff and proves that the net cost outweighed teh benefit in terms of jobs overall economic growth etc. It needs regression analyysisi of both sides not just the costs as seen by a study commissioned by those with an agenda in case you were thionking of posting a link to that Steel tariff hot peice taht has been posted several tomes and is always cited by thos ewho dislike tariffs.

[searchandrecovery]

I wish he would tell us where he got his facts (e.g. American companies invest less than $2 billion a year in China, and far less in India.).

[MonroeDNA]

I admire your pro 2A posts more than you can imagine, just so ya know. I also appreciate your intellect, and thoughts, on this subject.

I am about as anti-China as you can get.

And our borders should be sealed, tight. Period.

That said, I think government should be small, minimal, and let us capitalists do what we do best.

I will personally never outsource to a communist country, but that should be my decision. That is my philosophy, anyway. Nobody tells me what to do.

Hence, I am Libertarian. I Don't do drugs, don't associate with people who do, and think that everyone should stand or fall on their own. Nobody owes me anything, and I don't owe anyone anything.

[MonroeDNA]

I write my own software, BTW.

[lelio]

If it cost nothing to set up shop in India then, by definition, zero US capital investment would flow to India.

Yep, that got a chuckle from me as well. What if China builds the plant for you through their communist system? You've invested nothing and the Cato institute doesn't think it counts.

Odd that the author doesn't mention trade deficits which is what people are concerned about.

[LibertyAndJusticeForAll]

Besides not directly saying "trade deficits", there is no mention of OPIC, stolen intellectual property, national security risks, the 40% devaluation of the Yuan, the flooding of the market with cheap goods to dry up U.S. manufacturing, the tariffs that China applies, the slave labor that China uses, and the obvious fact that this is not a "free" market. It is a very manipulated market.
This article does not really try to "fairly" argue with Paul Craig Roberts ideas. Rather it comes across as a sort of emotional tirade against reality. And, the reality is that our economy is in trouble.

[harpseal]

I have no problem wityh your stand as stated but here is my proposal fr fixing much of what ails the US economy and it is package worked out to attrct teh maximum support to get all the measures passed except maybe the irrelevancy.

In no particular order of importance.

1. Get rid of government subsidies for offshore investment of US companies. OPIC is the first such program which should go but support of World Bank programs that subsidize the outflow of Capital would be another.

2. Use tariffs on those nations which are engaged in unfair trade practices such as currency manipulation (China and India for example), those nations which refuse to open their markets to US products (China for example with its 50% tariffs on US consumer goods and non tariff barriers), those nations that subsidize competition to American Industry (airbus for example) and those nations which have slave conditions for their workers.

3. Use tariffs and other means to prevent the relocation of jobs offshore that are essential to the national defense. If necessary take control of the company seeking to export vital technology or industry by means of eminent domain (No I do not like this last option and I will only defend its use as an absolute last resort like say in the case of rare earth magnets essential to smart bomb technology). Provide a hardened, widely distributed infrastructure to supply all that is needed for our military units and civil defense that can be continued to be deployed in the event of any military attack.

4. An immediate end to guest worker programs. If people wish to come to the USA to work and make a life let them immigrate according to the rules.

5 Provide economic development zones where the corporate income tax is zero for operations within these zones. In order to operate in this zone a company must agree to only purchase American components if available and employ only American citizens or legal immigrants in these operations. These economic development zones shall be eventually be expanded to include every bit of every state once the benefits are shown I would like them to be totally implemented immediately but I realize4 that may be overreaching.

6. Scale back unnecessary regulation including the tort system. Institute a cap on punitive damages, limits on class action suits, and limits on liability to the actual percentage of liability with no plaintiff able to collect if said plaintiff was involved in the commission of a felony at the time of the alleged tort or was more than 49% negligent in the alleged tort. Note that the loser in a frivolous lawsuit shall pay the attorney fees of the winner. There are many other regulatory structures that also need to be included that need to be included such as repealing the Family leave mandate, getting rid of OSHA etc.

7. Increase the domestic content in purchases by the Department of defense and give absolute preference in non-domestic content to proven allies of the USA over say the French or Germans. The only reason any content for DOD purchase may come from non US allies is that content is not available elsewhere and is essential.

8. Do not allow expense involved in moving operations overseas to be included in business expenses under the IRS code.

9. Prosecute for perjury anyone who has made a false statement in order to employ an H1B or L1 visa worker. I will be lenient on the actual perjurer if he/she was ordered to make this false statement and he/she provides testimony to aid in the conviction of the person ordering the perjury. Just because a person is a CEO does not give them a pass on criminal behavior.

10. Prosecute anyone who orders the transfer of vital defense technology or funds a R&D project that could be of use to our military overseas except to strong allies of the USA. Make the necessary enhancements to our espionage laws so that continued support or funding of any R&D in a nation whose government has threatened the USA is guilty of espionage. The UK and Australia come to mind as meeting these criteria for being eligible for transfer of technology first. There will be other nations and a gradation of what can be transferred to which specific nation. Under no circumstances may technology be transferred to any nation whose government has threatened the USA within five years without a complete change of government or specific exemption from Congress and the administration.

11. Deport all illegal aliens immediately and take measures that prevent the entry of any more illegal aliens. Fine all companies knowingly employing illegal aliens Criminal sanctions should be imposed on anyone helping an illegal alien stay in the USA in violation of our laws.

12. Decrease the punishing levels of taxation on companies and eliminate the double taxation on corporate dividends. See effects of item 5 for how minimal this will be if item 5 covers the entire USA. Eliminate all IRS provisions that inhibit free use of independent contractors by businesses for example section 1706.

13. Eliminate the minimum wage so that the worker can be paid based on productivity. Overtime compensation will remain the same but instead of 150% of the "wage" the worker would receive 150% of the production pay. If one through 13 are enacted # 14 becomes an irrelevancy as no one will be working for that low a wage

You will note absolutely every point is very conservative. They all seek to improve the overall business climate within the USA so the Free Market will prevail. Now there are two points that have tariffs involved. I did not use all of adam Smith's justifications for tariffs as it is designed as a compromise to garner maximum support. The first is point 2 which is under the retaliation hjustification for tariffs although it might also qualify under the break markets open justification. You will note that my propoasl is at worst revenue neutral at best an overall tax cut.

The idea is to minimize welfare so that even some of the long term hard coreunemployed will be able to take those jobs nobody wants.

Minimum wage will become an orrelevancy because quite honestly if one improves teh business climate in the USA we may need increased immigration to satisfy the needs for labor but I will always prefer landed immigrants who have a desire to become citizens over guest workers.

If I must be classified as something I guess libertarian might fit the bill but I guess just old fashioned American who wants minimal governemnt is fine with me. I do not support totalitarian nations engaging in predatory trade practices having free entry into the American market. I do not support government subsidized business competeing with companies who do not have the government giving them money to enter the market and stay in the market and I think if a foreign government wishes to do that it should be balanced by a carge on their subsized products being sold in the American Market.

When I first started discussing Free trade I thought I would have to do huge quantities of research but I saw a problem threatening the very survival of the USA. I think I have pretty much held my own in these discussions and I have had many people contact me to say they support my plan and they have been very complimentary.

However, one thing I have noticed there are a great many "Free Trade" or as I refer to it "unfree trade" advocates who will use the same tactics as gun grabboids, misleading or false statistics, only presentring one side of an argument when both sides would lead one to the opposite conclusion etc.

Thank you for your kind words. I hope you can support my plan enough to send a letter to every politician you can find. If enough letters get out maybe it will outweigh the bribes campaign contributions from those who have a vesteed interest in suckling on the public teat.

[A. Pole]

Telecommunications technology does indeed allow a new range of services to be traded today, but that trade is still subject to the same economic constraints as trade in goods.

What a moron! "Exporting" jobs means eliminating American production in order to increase imports. Perfect way to emulate Argentina.

[raybbr]

There is nothing alarming about the fact that Americans spend 1 percent of our income on products made by the one-fifth of mankind that lives in Mainland China.

How can he possibly come up with this number? Everything on the shelves is made in China.

[palmer]

Nobody owes me anything, and I don't owe anyone anything.

I think your argument is a little weak here. You owe taxes and if you buy Chinese imports instead of paying a little more for American made you will owe even more in taxes because our economy will be missing the ripple effect from the manufacturing jobs. The money saved by buying from China is typically spent on even more stuff from China (the Walmart syndrome) rather than invested in new productive capacity here.

The other problem with our tax burden is it is subject to politics. Tax money is given to favored companies in exchange for malinvestment. Case in point, Clinton bringing GM to China where they have been losing money ever since.

[mo]

Quite frankly the incentive to investment overseas is that the offshore dollar, after adjusting to the local tax and regulatory structure and to the exchange rate, is worth over twice what it is domestically. Almost every other country, outside Western Europe, has an "immature" tax and regulatory environment -that in the USA effectively taxes us at about a 60% rate.

[ArneFufkin]

1. Get rid of government subsidies for business. Period.

2. No tariffs, especially with your example. Our imports and exports are distinctly separate economic events. We want to buy their crap, they don't want to buy our crap. The proprietary magic of laundry detergent, shampoo, paper towels and disposable diapers is a genie who's left the bottle, we have no value add to provide the Chinese. If they don't want to buy our top products: Department 56 Snowbunny Collectable Porcelain Figureines, Class Action Tobacco Lawsuits and Ron Popiel Spray on Hair products, that doesn't mean we can't buy Clay Aiken oven mitts, air sickness bags and plastic stuff we expect will break from them. We buy cheap stuff from countries so poor that their population can only afford the cheap stuff they're selling to us. I would hope we have a negative balance of trade with these countries.

3. The military knows how to run a logistics operation. Our firmware and software is an ongoing artistic work in progress, and it is that capability of innovation and adaptation that ensures we have an invulnerable grip on our hardware systems. No foreign adversary can ever reverse engineer USMC Lt. General Jim Conway or the guy perched over a tube in a J-STAR or any of the other superprofessionals who work our soldiering defense.

4. The Colorado Avalache make their organization better, their competition better and the league better when they bring Joe Sakic, Peter Forsberg and Milan Hejduk onto their team. We want the best and brightest in the U.S.A., we intend to win and we want the world's alpha males and supermodels plying their trade here, for our firms.

5. See Number One.

6. Amen Brother.

7. I want the best of class materials available at the best price, regardless of original country of manufacture, in any weapon, tool or physical asset we provide our military.

8. Moving expenses are a legitimate cost of business, impacting profitablility and ROI to shareholders. If the expenses are AARP legitimate domestically, they're legitimate internationally. The income derived from overseas operations remains taxable domestically, the expenses derived to produce that taxable income should be allowed as well.

9. Perjury is a false statement under the auspicies of a legally binding oath or obligation. Hiring an H-1B to leverage a labor opportunity shouldn't rise to that level of unique import. Nobody should have to lie to want to hire the best individual for the job.

10. Our Federal Government needs to BUY the ownership of proprietary technologies and processes developed by Privately owned corporations under contract. Our government needs to own ALL the patents, copyrights and intellectual property we fund Loral, Honeywell, Boeing, GM and Bell to invent and design. American taxpayers should get a little residual from every autofoucus-based camera the Japanese sell, Honeywell designed that technology for our warplanes for mucho $billions.

11. The identification, arrest, processing and deportation of 5 million entrenched illegals is fantasy. Let's address the reasons people leave their families and homes, swim across the Rio Grande as criminals to reach a place where they don't speak the language or know who is who and where to go.

12. Amen brother.

13. Let's let compensation issues be a contractual agreement between each unique employer and his individual or collective providers of labor service.

[harpseal]

1. Get rid of government subsidies for business. Period.

I have no problem with this per se.

2. No tariffs, especially with your example. Our imports and exports are distinctly separate economic events. We want to buy their crap, they don't want to buy our crap. The proprietary magic of laundry detergent, shampoo, paper towels and disposable diapers is a genie who's left the bottle, we have no value add to provide the Chinese. If they don't want to buy our top products: Department 56 Snowbunny Collectable Porcelain Figureines, Class Action Tobacco Lawsuits and Ron Popiel Spray on Hair products, that doesn't mean we can't buy Clay Aiken oven mitts, air sickness bags and plastic stuff we expect will break from them. We buy cheap stuff from countries so poor that their population can only afford the cheap stuff they're selling to us. I would hope we have a negative balance of trade with these countries.

No our imports and our exports are not distict events. Where do you come off thinking you have a right to harm the USA by bringing in imports from China. Congess has the right to impose any duty they wish per the US COnstitution. Why do you insist on a policy that has never been proven. I have an open solicitation to anyone to post a full regression analysis of the costs and benefits of a tariff in US History that shows a NET harm. I have in the past posted such an analyis that shows a net benefit from one case. Maybe then we can have a discussion based upon facts. I note I do not accept a tariff that is combined with a tax increase and tightening monetary policy as proof that the tariff harmed the economy. Remember I said the analysis said both sides for a net figure. Certainly, if tariffs are bad these studies should abound and a link should be easy to find? I have searched and many other Free Trade advocates have searched yet they have not been able to meet this challenge.

Now your ranting about snow bunny collectables is IMHO irrational and I find it very difficult to refute irrstional rants except to point out they are irrational.

3. The military knows how to run a logistics operation. Our firmware and software is an ongoing artistic work in progress, and it is that capability of innovation and adaptation that ensures we have an invulnerable grip on our hardware systems. No foreign adversary can ever reverse engineer USMC Lt. General Jim Conway or the guy perched over a tube in a J-STAR or any of the other superprofessionals who work our soldiering defense.

No one has a higher respect for our US military. However, I find the exporting of our miltary technology treasonous. The fact that the men and women in harms way are the best at what they do does notmean that their technological edge should be exported to nations that have declared their hostility to the USA. that will get American military people killed uneccisarily.

4. The Colorado Avalache make their organization better, their competition better and the league better when they bring Joe Sakic, Peter Forsberg and Milan Hejduk onto their team. We want the best and brightest in the U.S.A., we intend to win and we want the world's alpha males and supermodels plying their trade here, for our firms.

I do not have a problem with immigrants. I do have a problem with short circuiting the normal immigration process to provide a company with the ability to get arround the need to pay a market wage for skills they need such is a subsidy to the company taken directly from teh pool of potential employees. No one has a right to immigrate to the USA or to bring any specific foreign national into the USA.

5. See Number One.

6. Amen Brother.

7. I want the best of class materials available at the best price, regardless of original country of manufacture, in any weapon, tool or physical asset we provide our military.

With military equipment there are issues of continuing supply and technology transfer. During the recent war in Iraq a Swiss company denied the UK a continuing supply of certain war materials. Your objection ignores this need and could get American military people killed. If we become engaged in a more protracted campaign where much of our existing inventory is expended teh reliability of supply becomes crucial. Without reliable supplies it is far more likely Americans in harms way will die uneccessarily. Amatures and small units focus on tactics Generals focus on logistics.

8. Moving expenses are a legitimate cost of business, impacting profitablility and ROI to shareholders. If the expenses are AARP legitimate domestically, they're legitimate internationally. The income derived from overseas operations remains taxable domestically, the expenses derived to produce that taxable income should be allowed as well.

Not for capital going offshore.

9. Perjury is a false statement under the auspicies of a legally binding oath or obligation. Hiring an H-1B to leverage a labor opportunity shouldn't rise to that level of unique import. Nobody should have to lie to want to hire the best individual for the job.

Well now since the H1B program requires a statement under oath there is no American available for the job and the H1B is getting the prevailing wage perjury has been committed. I want to see it prosecuted. You are arguing for ignoring the requirements of an existing law that qualifies as a subsidy to business because by definition it allows them to short circuit the normal market by ignoring the usual requirements for immigration and bring people in with no immigarnt status.

What is your real agenda?

10. Our Federal Government needs to BUY the ownership of proprietary technologies and processes developed by Privately owned corporations under contract. Our government needs to own ALL the patents, copyrights and intellectual property we fund Loral, Honeywell, Boeing, GM and Bell to invent and design. American taxpayers should get a little residual from every autofoucus-based camera the Japanese sell, Honeywell designed that technology for our warplanes for mucho $billions.

Why? Do you think these companies have a right to export Technology that was originally Federally funded and they orifinally agreed to not export without consent? You are becoming irrational again.

11. The identification, arrest, processing and deportation of 5 million entrenched illegals is fantasy. Let's address the reasons people leave their families and homes, swim across the Rio Grande as criminals to reach a place where they don't speak the language or know who is who and where to go. Thank you Hillary Clinton. while we are at it when can have midnight basketball to address the root causes of gang violence in cities.

12. Amen brother.

13. Let's let compensation issues be a contractual agreement between each unique employer and his individual or collective providers of labor service.

As I stated in the point itself this point should be irrelevant if the other 12 are passed.

Now the summ total of your objections seem to be you think teh USA should be part of some internationalentity and our borders pretty much erased. Your irrational hatred of traiffs is one indication of this. What do you have against a Free Market in the USA? Clearly there is no such thing as a world Free Market. You are not against tariffs or subsidies in any other part of the world only in the USA. You seem to have a great deal of sympathy for the poor Chinese but no sympathy for hard working Americans put out of work by government policies taht allow subsidies to infect our relatively free market.

I must ask this question are you an American or landed immigrant in the USA? If you are you should seriously consider rethinking your stand on these issues due to your obligations as a citizen or landed immigrant. If you are not then you have so no such duties to this nation.

[dixie sass]

One point for you.

[ArneFufkin]

Revise point 8: AARP = geezer who works inder GAAP! LOL

[adam_az]

I didn't ask to be on your ping list, please stop including me in your message to: field.

thank you.