The bulk of international trade analysis (and also the available evidence) demonstrates that a policy of trade liberalisation is best. Given that, why are so many folk on here protectionist in tone? There are numerous possibilities: 1) Simple ignorance of economic reality 2) Petty left who confuse trade with a blubbering about the 'evils' of capitalism 3) Right wingers who favour nationalism and therefore show a natural contempt for economic rationality 4) A sub-group of Keynesians who reinterpret mercantilism 5) Followers of international political economy that use multinationals, particularly in the face of inefficiently low powered unionisation, as a means to show distrust over possible neo-liberalism But which dominates and have I missed out other possibilities?
Protectionism isn't best, the problem is virtually no one is opperating with free trade. China is manipulating the value of their currency through several policies that are keeping their RMB low compared to the dollar. China also requires companies that want to sell products in China to enter into joint venture agreements that require technology to be given to China. Singapore uses tax holidays and industry specific subsidies to attract corporations. A lot of countrys in Europe use "Buy (Country) First" campaigns. I fully support fair trade agreements, but everyone has to be opperating by the same set of rules for it to be efffective.
I'll add the 'its about fair trade, honest' angle to the list. Let's be honest about it though! Fair trade really should be used to understand the links between trade and economic development. It was the US, via the Washington Consensus, that has deliberately eliminated fair trade (supporting the first mover advantages of firms from the rich North)
I'm not a protectionist or an economic nationalist. The problem that many people against Globalized Free Trade say is that it's good for the USA in the aggregate, but that the benefits of it tend to flow to the owners and shareholders of the companies and the American People by and large do not see much gain because the value of their labor becomes depressed by 3rd world competition, despite lower prices at the store. Many people think that poorly educated people should have a right to sell their labor extremely expensively regardless of the abundance of labor supply.
I actually agree with what your saying, but the economic development has been achieved. Also we need to stop trading economic favors for geopolitical gain. I understand that the Washington Consensus started this, but it doesn't mean we should keep it going.
We can't make simple comment over wage effects as much trade is intra-industry in nature, with the gains from competition leading to productivity gains and therefore labour gains. We do have the likelihood of labour losing in inter-industry trade with labour abundant country. However, as your remark implies, we're then just really arguing over redistribution effects (and possible general structural problems that ensure winners compensate the losers; a result we'd need to minimise the threat of damaging protectionism by easily bought politician)
But it hasn't! There's evidence, for example, that trade liberalisation- forced on countries by the Washington Consensus- has actually led to net reductions in well-being for developing countries. The US, with of course her European comrades, have a long history of imposing unfair trade that disrupts economic development (and therefore imposes many social ills on us, from illegal immigration to problems associated with population growth)
The bulk of the data suggests that trade liberalization is good if chains are attached. Free trade is undeniably good if the trade agreements also include common labor, wage, and agricultural standards between the involved countries. Otherwise the rich country starts bleeding money and jobs for the poor, which causes bottom-up destruction of the economy. Free trade is great if it occurs between two countries with similar standards of living. It's not so great when one of the countries is an unregulated hellhole that allows what amounts to slavery for pathetic wages. The essential difference can be expressed as one of intent. If free trade is promoted for the purpose of circumventing labor regulations and wages, it will not be effective. If free trade is promoted for the purpose of harnessing innate comparative advantages, it will be effective. Look at how free trade works in the EU. You are missing pieces of the picture. Free trade has a number of required conditions that must be present for it to work well; labor migration, fair labor standards, wage standards, agricultural harmonization, judicial systems with the authority to handle international disputes, etc. It's not as simple as just lowering trade barriers--the simplistic free trade the US practices is an economy wrecker.
No it doesn't. It simply refers to the numerous gains for the developed country, but the possible market failures that can impact on the developing world (summed up by the distinction between static comparative advantage and dynamic comparative advantage, with the economies of time added to our understanding of opportunity costs) No common standards are required. We do have the case of factor price equalisation though which, given it doesn't occur, merely demonstrates that protectionism is only rational in the case of economic development. Sorry, but this is unsupportable drivel. The poor south specialises in labour intensive or land intensive product. The rich north, by definition, should be shifting resources to capital intensive product. That relies on technical progress. Vague reference to "common labour, wage and agricultural standards" is only a poor attempt at shifting the analysis away from innovation. This is just 'innocence' of basic trade theory. Inter-industry trade analysis, as shown by the Heckscher-Ohlin approach, is based on 'very different' countries. Its those differences that ensure specialisation according to opportunity costs. With 'similar countries' we're typically referring to intra-industry trade and the analysis summed up by 'new trade theory' (e.g. the belief that entrepreneurs will sell their product at home and the 'homogeneous' abroad in order to maximise size of market and minimise risk from investments) This makes no sense at all. Specialisation according to comparative advantage will, by definition, impact on wages. Basic isoqaunt analysis will inform you of that. Given CAP, referring to free trade with the EU isn't a cunning idea Try and support that with some evidence! Please make sure you refer to author, year, title and journal.
That's nothing but voodoo. That only works under a naive assumption where trade refers only to exchanges of goods. If it involves an exchange of work, the developed country clearly loses in proportion to the developing country's gains. The only time that ever works out well for both parties is when it involves the exchange of natural resources for finished goods. If we're talking about moving production from the developed country to the developing country, it clearly imposes more burdens on the developed country than it provides in benefits. The developed country loses large amounts of its tax base, its citizens generally become poorer, and the government has to assume greater expenses to cover the cost of social welfare for the now-unemployed or underemployed. Common standards are both an economic requirement for effective free trade and an ethical requirement for the reduction of human suffering. Giving desperate people the option of taking self-desutrctive slave-jobs or die is sheer exploitation. It's unethical, and when it displaces jobs for free people, economically destructive for all but the very top. This is evident enough given that free trade without labor standards has almost never caused an increase in real wages or a more even distribution of wealth. The global south is still poor, and the global north is still rich, but the wealth in the global north becomes more concentrated at the top as those on the bottom lose their jobs and any possible opportunity for upward mobility. That analysis rests on the unsupportable assumption of completely fungible labor that can be artificially and completely sifted in the most strategically optimal direction. Real people don't work that way, and labor markets cannot be shifted on a whim. Just because we may want more engineers does not mean we'll have the ability to force more people to become engineers. This unavoidable truth is the reason why labor standards have to be part of free trade agreements for the developed country to receive a net benefit for a majority of its people. Otherwise the developed country just bleeds jobs and the economically displaced workers can't find work to replace it. I would also add that complete economic efficiency isn't really the ultimate goal in most political systems. People really don't give two (*)(*)(*)(*)s about increasing GDP if that doesn't show up in their own paycheck. Economic growth that flows to the top and never to the bottom isn't a policy that can be sustained forever. It's economic growth that provides no benefit for most people--and therefore a suboptimal political policy on that basis alone. You're not explaining how these economies are supposed to shift to "capital intensive" economic models. What do you do with the majority of people who aren't able to become engineers and scientists and businesspeople? It seems to me that you're ignoring the cost of providing social welfare programs to them, the cost of massive economic restructuring programs, and the inherent inefficiencies of central direction of labor reorganization. In what way do you think it is economically optimal for the government to create false incentives in the labor market to speed along a transition to an economy that can benefit from unequal free trade? There are efficiency costs inherent in artificial restructuring of the labor market just like there are efficiency costs that result from trade barriers. You can eliminate both sorts of costs if you restrict free trade to trade between equal partners, and never between unequal actors. Wage standards don't mean everyone is paid the same, it just creates a floor that prevents slaves from displacing the jobs of free people. Just because there is a $7.25 an hour minimum wage doesn't mean a person can't be paid $20 an hour. CAP is what allowed wage and labor standardization, which is the only reason free trade within the EU was practical. Otherwise EU expansion would have resulted in destruction of originating members' economies. Some of us don't have a convenient subscription for JSTOR or other academic journal repositories anymore.
No, unlike your comment, its based on appropriate economic analysis. Ricardian analysis, subsequently supported by the Heckscher-Ohlin model (crikey, you could at least be abusing the Leontief Paradox by now!), misses out on the nature of imperfect competition. For the likes of Krugman, that imperfection is used to understand how intra-industry trade between similar developed nations develops. However, that is naïve as it ignores the significant effects it has on our understanding of comparative advantage. Either way, youre peddling guff as youre ignoring that the analysis into rational protectionism (at least in the short term) is focused on the developing world. Your The bulk of the data suggests that trade liberalization is good if chains are attached was on a par with number 2 in my opening post. Wrong again. A simple trade model will assume aspects such as labour and capital immobility. However, it only does that to show how specialisation will find mutually beneficial exchange that apes what is achieved with mobility. As we move towards more modern approaches we also refer to the exchange of know-how. This only intensifies the distinction between static and dynamic comparative advantage. All gain. You could try and come out with an advanced argument, such as how outsourcing can impact negatively on the firms ability to maintain its organizational knowledge (particularly when demand conditions are more volatile due to international competition). Wrong again! Natural resource exploitation is one aspect where empirical evidence can support a result thats at least akin to a zero sum game: i.e. resource depletion, coupled with domestic pollution problems, can lead to reductions in well-being. Of course this is an aspect of developed nation multinationals exploiting a weak nation; weakness generated by a failure to deliver specialization according to dynamic comparative advantage. Wrong again. Except for the case I mentioned above (where we focus on organizational knowledge issues within the context of the theory of the firm), were referring to an increase in firm efficiency (which then has a positive impact on the host nation) and an inter-sectoral adjustment that include a re-allocation towards innovation. Present me with one study that links outsourcing and US poverty rates! Your reference to underemployment also lacks thought, given youd expect outsourcing to have a greater impact on the low skilled that are typically underpaid and cannot be underemployed. Nope! We know, for example, that free trade has benefited labour standards in the developing world. Those westerners against free trade and typically in favour of greater absolute poverty. Standard petty left cliché. Trade increases wages in labour abundant countries. Labour standards are related to economic development. This is standard in capitalism as, with economic development, there is an increased focus on to skilled labour. To support the continuation of a skilled labour pool, labour standards (including high minimum wage rates) are key. An argument against free trade will harm economic development and therefore ensure the continuation of low quality jobs. The poor south becomes richer because of trade. The only issue, as referred to earlier, is the failure to deliver specialization according to dynamic comparative advantage. That provides no justification for US whinge though. The failure to react to the redistribution effects created through trade provides no justification for protectionism. It only describes a weak electorate who has enabled a more inefficient form of capitalism to evolve. Labour is, by definition, a fungible factor. However, youre merely trying to hide from your previous error: which failed to appreciate the gains from shifting to further specialization to capital intensive product. The shift to such product isnt artificial but reflects the further gains to be had from economic efficiency. Not a cunning comment! We have no need to force folk. The price mechanism naturally delivers incentives. This is just repetition of your unsupportable comment. Can you move to something more concrete? Refer me, for example, to a paper that shows that the aggregate US unemployment rate is related to trade patterns. You can be better off without us being made worse off isnt a goal? Youd have to refer to some behavioural economics that refers to how we are motivated not by our own well-being but how we do compared to others (i.e. were prepared to give up income in order to ensure the git down the road is made worse off) The profit motive achieves the shift to capital intensive product. Read up on Heckscher-Ohlin. Labour of course isnt one factor of production. We treat it like that in order to simplify the analysis. Despite specialization in capital intensive product, wed expect a distribution of skills set that isnt picked up in a simple isoquant approach. However, one should note that the US stands out with an abundance of low wage labour. This result doesnt reflect trade, but a particularly inefficient form of capitalism. Countries where trade represents a much greater share of GDP also have a much smaller supply of low skilled labour and a greater tendency towards upskilling. Another one for you to support! Present some analysis that shows trade is linked to social welfare programs to them, the cost of massive economic restructuring programs, and the inherent inefficiencies of central direction of labor reorganization. Youre going to struggle. This is a nonsensical question. The government should merely show discipline. The politician is always a potential victim of influence costs. A tariff, for example, will clearly generate greater producer surplus at our expense. That surplus can be shared amongst politician and (increasingly inefficient) firm. With liberalization, the market creates incentives; incentive which- without doubt- create sufficient winners to compensate the losers. Your unequal trade stuff, as already said, is cobblers as the whole notion of unfair trade is focused on the developing countries denied the gains from dynamic comparative advantage. This has no bearing at all on my comment. Youve simply ignored that the wage changes from trade are merely part of the economic efficiency gains. Now there are problems with wages, particularly given capitalism guarantees underpayment. However, one can of course compare Germany and the US. Look at the importance of trade for Germany and also note its much lower working poverty rate. Youve again for unsupportable cliché. CAP reflected an internal conservatism that ensured unfair trade continued. To suggest that it allowed wage and labour standardization is nonsense (particularly as European labour markets have not converged) In short, youre making opinion that you cannot support with evidence. You can save your efforts though. You wont be able to support your arguments.
Much of the "evidence" that supports trade liberalisation is controversial, some of it is biased, and there exists plenty of isolated instances where the costs of free trade exceeded the benefits. Even in the cases where free trade brings a net economic benefit, that benefit is usually not equally distributed, and the wealthy industrialists have been using their wealth to buy up all the land, making it more unaffordable for the poor. I am well aware of the theory of "comparative advantage". Yes, it is obvious that free trade has the clear potential to increase economic efficiency. But because of natural resource-inequality, this "efficiency" will not necessarily translate into better living standards. Then there are also "extraneous costs", such as environmental pollution, that corrupt governments have problems addressing. Those of the liberal economic school of thought often completely ignore anything which is not consistent with their emphasis on the benefits of "the invissible hand".
Why don't you provide some examples so I can access the quality of your information? You're going to have to come out with stuff that demolishes trade theory, given Ricardian analysis/Heckscher Ohlin/New Trade Theory are complementary approaches. Now there will be evidence that disputes the conclusions of the simple models: factor price equalisation, for example, doesn't occur (but, given the assorted market failures in capitalism, that was a naive position). We can also refer to how specific developing countries can be damaged; but that refers to the distinction between static and dynamic analysis. We've already covered this old chestnut. First, in a developed country, intra-industry trade (rather than inter-industry) will be much more important. The redistribution effects are then much lower and typically concentrated on consumer benefits (in terms of choice, quality and lower price). Second, redistribution effects (as predicted by Heckscher-Ohlin) is no excuse for coercing a reduction in exchange opportunities. It only provides a justification, within a social welfare context, of ensuring redistributive policies elsewhere. This isn't a high powered comment. Natural resource inequality, for example, provides one appreciation of the determinants of comparative advantage. Heckscher-Ohlin is merely an understanding of the importance of factor proportions and how it impacts on opportunity costs. Corrupt governments ensure protectionism; so you're essentially going around in circles! In terms of developing countries, your argument really should be that tariffs provide a cheap means to revenue raise (and therefore provide public goods required for development). However, that also can be understood within comparative advantage. We just have to factor in that the economies of time require supporting mechanisms such as security and human capital investment. You'd have a point if trade liberalisation was reliant on liberal international political economy. It isn't. The liberal approach may have, for example, naive views over the effects of multinationals (coupled with an inefficient equilibrium created through static comparative advantage). However, that only informs us of the need for multilateralism to avoid simple criteria: as demonstrated by the blanket policies enforced by the Washington Consensus.
Hello, Unemployment in America is very high right now. During the 1990s, unemployment was not high, and we opened our doors to globalization and started pushing our corporations through the door. We paid them with tax breaks and subsidies if they would make the investment to hire third world slave labor for their factories. We knew at the time that this would allow our corporations to make more profits, and this would allow them to hire more employees here in america that are able to do things that third world slave labor cannot, like speak english and go to college. Horay for world trade! Like The Great Prophet Adam Smith decrees: "world trade is always good, no matter what, dont be a jerk." Fast forward 20 years. The same policies are in place. Do we really need to subsidize the removal of factories from America and placing them into third world countries? Do we really need to pay companies to do that? what if we paid companies to build those factories in America? A small stimulus package of $1million to cover the cost-savings that a firm would get by moving their factories to Somalia would give jobs to hundreds of americans, and would directly result in more than $1mil going into our DOMESTIC AGGREGATE DEMAND. SO WHICH part of "economic reality" do I have a "simple igorance" of? Will we increase employment by shipping more factory jobs to China? Because the corporations will make more profits. Let's do the math. 1000 American Factory workers at $10 an hour = $10,000 an hour. 1000 chinese workers at $0.10 an hour = $100 So horay for the corporation, they now have $9000 in spare money per hour! Will they hire $9000 an hour worth of workers with that money? No, they won't, because they need people to buy their products in order to increase the amount of workers they have. They don't just magically expand every time they have a profit. they are currently experiencing near-record profits as a result of labor market actions just like this one I have described, and they will not hire jack. Because we are in a low-demand crisis. that is why we will benefit from protectionism IN THE SHORT RUN.
Perhaps you could refer to an empirical study that supports your views on tariffs and employment? Given its so popular in the available literature, try Smoot-Hawley. Without that support you're merely coming out with a different flavour of economic nationalism and its ugly mercentilist backbone
Sorrowfully, I will have to ask you to provide this data. I don't feel like googling for you, since I simply have logic to support my (probably tangential) addition to your thread. Because this is difficult data to gather. I will have to refer first to a point i made in my previous point: Corporations in america will not hire more AMERICANS as a direct result of pro-globalization Should America care about hiring non-AMERICANS in the short run? Will hiring AMERICANS-ONLY increase "domestic aggregate demand"? Smoot Hawley what? what are you what? What?
I didn't ask for a load of incoherence. That's a poor dodge tactic. I'll ask again: Perhaps you could refer to an empirical study that supports your views on tariffs and employment? Given its so popular in the available literature, try Smoot-Hawley. Without that support you're merely coming out with a different flavour of economic nationalism and its ugly mercentilist backbone If you can't then just say so
For at least three years, I have one objective that I support: Increase employment in America. I am not aware of other objectives which are more important. I am open to suggestions. I am sorry that I may have conflicted, foolishly. I am religiously devoted and almost surely misunderstood you, Mr. Original Poster, I know that you and I have agreed in other threads. The problem is that I am a rude internet jerk. Also, America rules until a euro king tells us otherwise. Then you are our slave. Beg for it. I wish you didnt have to beg for it. I wish we had some sort of Christian Party, which was devoted to the ideals of Christianity, and then we would donate to the Euro like it was our duty. Sadly, we have only the obvious anti christ problem. they are hilarious, seriously, but, I mean could you imagine one of them saying 'america needs to bail out europe because of world stabilty or like something' I am referring directly to the situation that existed in europe right after ww1. America got a lot of gold, because we were on the gold standard. Ask yourself: Why did America get so much gold during the 1920s? Why did Germany and France argue about how much money Germany owes to France? Could America have helped by SPEWING GIGANTIC AMOUNTS OF MONEY into Germany? Who cares! That did not happen! Except Germany built an autobahn during the great depression and then a bunch of tanks and stuff and they spent a lot of money and how did they do that? Wait is this thread about history or what?
Then why can't you support your protectionism prance with empirical evidence? One would think that, if one was genuine, one would ensure that one can support one's argument!
I apologize for my last quote, I believe I submitted it before you submitted this post that I have quoted. Give me a minute to google that, while you will, of course, not google the issues that I brought up. (edit - smoot hawley of course caused inflation and therefore has nothing to do with my objectives nor those of the last..... 70 years.... why did you refer to smoot hawley?)
There's nothing to google. Your post was standard non-economic twaddle used to offer fake arguments in support of protectionism. I've already covered that in the protectionist 'types'
Already said! Smoot-Hawley has been extensively studied. If protectionism increases employment it would be the obvious place to start
Oh. Reiver, must I produce the definition of empirical again? Reiver thinks economic theory means empirical, and what you see with your own 2 eyes does not. The problem with global market socialists like Reiver is labor is labor, and so jobs going to Chinese labor is just as good as his own nation. The problem with neocons like SM, is they don't realize that globally they are just as left as the left, as all labor is the same to them as well, it is easy money betraying one's nation, but are so busy enjoying today they don't see tomorrow is world government about to tax everyone of their global transactions so people like Reiver can place their gains wherever they deem the most needed. Basically, western nations are way too nice, the definition of treason is far too simple, and neocon in purpose is an oxymoron.
IT WAS ABSOLUTELY NOT TWADDLE I PRESENT TO THE AUDIENCE THE FOLLOWING SAMPLE OF WHAT IS CONSIDERED, BY THE ESTEEMED MR. REIVER TO BE AND I QUOTE: "TWADDLE": I prepared an apology for you Mr. Reiver, because I knew that you and I do agree more than you think. I knew, before I posted my defense of economists against the onslaught of anti-economists, that you deserved recognition as a knowledgeable observer, Mr Reiver. MISTER REIVER HAS ACCUSED ME Of improperly dictating the following facts: An american factory will be more expensive to an american corporation That same american corporation will save money by hiring slave labor in china American corporations, as of NAFTA and Clinton (I love Clintons) has been given tax breaks and subsidies FOR HIRING foreigners, ON PURPOSE and dubya and maybe probably obama have not changed this. It is a big deal, it is easily defensible, which i did. REIVER YOUR ARROGANCE makes me smile a lot. I explode with anger constantly, but I do not believe in free will. Logically, this means that you deserve the same respect as my mother. I hope that you will see that this is exactly how I behave, even though your opinions are so stupid and wrong- no just kidding. You are smart and I came to this thread in order to play devil's advocate. My problem is that I know about how to play devil's advocate way better than actual republicans, they are so lacking in verbal intelligence... its.. its a thing. You are talking about Smoot Hawley Tax Act which was literally enacted in 1930. NINETEEN THIRTY AD THOSE LAWS DONT MATTER IF THEY ARE FROM 1930! ARE YOU FOREIGN?!!?!? SMOOT HAWLEY!@?! Ok did Ron Paul tell you that we need to remove Smoot Hawley and other things? Why am I talking about Smoot Hawley? I am talking about physical gigantic buildings which contain workers. Are you talking about gigantic buildings which contain either chinese workers or american workers? Are we comparing those two things? edit - I commend the esteemed Mr Reiver for not bringing to the public eye, my obvious arithmetic error
