A Case for Free Trade

Discussion in 'Economics & Trade' started by Tommy Palven, Oct 11, 2016.

  1. Tommy Palven

    Tommy Palven Active Member Past Donor

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  2. Ted

    Ted Banned

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  3. AFM

    AFM Well-Known Member Past Donor

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    The fact that very few understand this is a tribute to the progressive take over of public education and the deliberate omission of basic economic education from the curriculum. It's truly sad to see how easily the American public can be fooled by the false promises of protectionism. Both parties now advocate protectionism as a way to maximize growth of the US economy.
     
  4. Ted

    Ted Banned

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    the anti-intellectual brain dead liberal approach is that if you protect American industry you are protecting American jobs in the protected industries.
     
  5. Quantum Nerd

    Quantum Nerd Well-Known Member

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    I didn't know Trump supporters were liberals.
     
  6. Ted

    Ted Banned

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    Dear, our subject was not whether Trump supporters are liberal but rather whether free trade is good. Do you understand now? LIberals get confused so change the subject rather than try to learn. Do you want to be a liberal all your life?
     
  7. AFM

    AFM Well-Known Member Past Donor

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    The lesson was clearly made in the implementation of the steel tariff signed by GWB in the early 00's. ~ 50K steel jobs were saved but ~ 150K jobs were lost in the US economy because the price of steel had been artifically made high resulting in less products (resulting in fewer employees) using that steel being sold. That was only ~ 15 years ago but the lesson has not been learned by some.
     
  8. Woolley

    Woolley Well-Known Member

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    Free trade is simply a means for moneyed interests to expand their ability to skim the profits from a larger pool of sheep. It is a clever way to sell the idea that a producer of goods in country A demands or needs to sell those goods in country B or country A will lose jobs. What it really does is encourage a race to the bottom in terms of worker compensation while insuring that profits remain as high as possible. Since profits do not get spread across the work force in country A, the owners of corporations and banking interests protect their cuts without any responsibility to their own nation. We call this capitalism and justify it by immediately calling any curtailment of it as communism.
     
  9. AFM

    AFM Well-Known Member Past Donor

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    A clear case of not understanding economics. ^^
     
  10. Ted

    Ted Banned

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    so we should have no free trade between individuals,cities, states , and countries????????????????If every person had to make what he consumed every person would die. isn't thinking fun??
     
  11. Woolley

    Woolley Well-Known Member

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    We do have free trade between cities and states thanks to the commerce clause. As for international trade, I support free trade between equal partners, fair trade with unequal partners.

    - - - Updated - - -

    I understand economics very well. It does make me smile when someone uses this line of rebuttal. Here is a place where you can broaden your economic horizons...

    http://angrybearblog.com/

    I have known several of the writers there for years.
     
  12. Seth Bullock

    Seth Bullock Well-Known Member Past Donor

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    We have a trade deficit of around $500 billion/year.

    Why does the question have to be one of protectionism or free trade?

    Why can't we have free and fair trade?

    And, it would seem to me (I am not a businessman or professional economist) that wealth is created when a product is created from raw materials. Almost everything else is an adjunct. For example, I have a good friend who owns about 1000 acres of timber. He and his family have been managing that land and its timber for two generations. They make a very good living. But it would be absolutely worthless if people didn't make stuff out of timber. So essentially, he produces the raw material, and industry creates products from it. Once the product is produced, adjunct industries like shipping and selling to end users take a piece and add some to its final cost. But the real wealth - that is, the value of those raw materials - is created by industry.

    You may accuse me of being simplistic with my example, but it seems to me that we must encourage the presence of industries in this country that create things of value. And, it seems to me that unbridled free trade encourages industry to leave this country, and the lion's share of the wealth that is created by the production of products is going to the people's of other countries.

    Now if that results in cheaper goods for our consumers, that's fine, provided that other nations are buying an equal amount of the goods we produce. But it seems to me that when we get lopsidedly on the negative side of the trade balance, America as a whole loses. This is not fair to American citizens.

    My approach would be offer carrots to producers who will move to or stay in our country. Protectionist measures like tariffs or quotas should be the "stick" of last resort and used sparingly.

    Comments?
     
  13. BleedingHeadKen

    BleedingHeadKen Well-Known Member Past Donor

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    It doesn't cost the politicians anything. They come out on top when they push protectionism, and then win even more when they pose government solutions to the problems that they cause.

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    If one has a responsibility to one's nation to protect jobs/wealth/whatever, why not the same responsibility to protect one's state, or region, or city, or neighborhood? Why, objectively, the nation versus any other lines on a map you can think of?
     
  14. AFM

    AFM Well-Known Member Past Donor

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    The steel tariff was very quickly removed. It didn't cost the politicians anything because very few US citizens understand economics. They fail to understand the law of comparative advantage and the most important lesson of economics which is to consider not only the short term effects on a small group but the longer term effects on the entire population.
     
  15. AFM

    AFM Well-Known Member Past Donor

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    You don't understand economics. The law of comparative advantage indicates that it is better for the US to get it's steel from China if that steel meets specifications and is less expensive. Why is that - because the lower priced steel from China results in benefits to the US consumer - more jobs (due to the reduced cost of production in US products made with the Chinese steel) and lower consumer prices. Even if China imposes a complete restriction on US goods imported into China the exact wrong thing to do is retaliate with tariffs on Chinese steel. Of course it is better that China not restrict imports via tariffs.

    Trade deficits are meaningless. Trade is the integral of a set of transactions between parties located in different countries. China has our paper dollars and we have their steel.
     
  16. AFM

    AFM Well-Known Member Past Donor

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    Clearly you don't - please do some homework on the law of comparative advantage. It is net beneficial for production to take place where the costs of production and resulting prices are at the minimum. What does the angrybearblog have to do with any of this ??
     
  17. Seth Bullock

    Seth Bullock Well-Known Member Past Donor

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    Thanks for the discussion.

    But in your example of cheaper Chinese steel, you are saying that we buy their cheaper steel and we use it to produce products. So their industry makes steel out of their raw materials, and our industry creates something of value out of it. I see no problem with that because both countries benefit, provided that their country buys an equal amount of our products and raw materials. You also said "it is better that China not restrict imports via tariffs." I agree with that as well. Why do we call it "free trade" if China is restricting imports with tariffs? It sounds to me more like "unfair trade" if that is the case.

    Another thing I find bothersome is the fact that China is buying far less U.S. products per capita than the amount of products the U.S. is buying from them per capita. China has about 4 times the population of the U.S. The Chinese are consumers too, right? It seems to me then that if the Chinese are going to tap into our consumer market, then we should be able to tap into their consumer market which is 4 times the size of ours. It would follow that they would only have to let us in by a small percentage to even out the trade imbalance.

    The other thing I have a hard time accepting is the idea that the trade imbalance doesn't matter. At $500 billion/year, that's a trillion dollars every two years. An imbalance in the tens of millions probably wouldn't matter, but after a point, we have to admit that it does matter. The imbalance as it is now is too much to say it has no consequence. It seems to me that for a healthy economy and a healthy job market to exist, there needs to be a balance of production, adjunct business, and consumerism. I think that we have let that balance get out of whack, so to speak, and so, with fewer production jobs in the country, we see wage stagnation, a growing underclass, and a middle class that is struggling.

    I understand that the production end of our economy will never employ as many people as it used to no matter what we do about trade. Automation has replaced human workers. I understand that. But still, I want that trillion dollars (per 2 years) back in the pockets of American workers and consumers.

    I do think we should work out fair arrangements with other countries. Fair to them, fair to us. And then put this issue to rest and move on.
     
  18. Woolley

    Woolley Well-Known Member

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    I think I understand why you are bothered by my opinion regarding the outcomes of what you believe to be orthodox economics. Unlike me, you actually believe economics reveals truth or perhaps is a science. There are very few truths in economics especially in regards to outcomes of this or that economic philosophy. We can look at outcomes as guides to future results though. The outcomes of comparative advantage arguments include a race to the bottom for costs, that is the very essence of the suggestion is it not? Production will flow to the lowest cost scenario. It is true, left unfettered by any other responsibility or duty, the true capitalist will indeed move towards lowering costs without a care in the world for any other factor. I am not sure why you think this is something profound, it has been true for thousands of years. Yet a careful look at the outcomes of this type of behavior reveals the true cost to society if left unchecked or regulated by a more powerful force than pure selfishness or a desire for profits.
     
  19. AFM

    AFM Well-Known Member Past Donor

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    The comparative advantage argument is an argument for maximizing the average standard of living which helps the low income workers/families much more than the higher income.

    Your comments on the selfishness on the profit motive suggest an endorsement of communism. Communism does not and will not work and is responsible for ~ 100 million deaths since 1917. Profits are an indicator of the correct allocation of resources. And competition ensures that profits are in a sense minimized because if they become excessive in the case of one particular company competitors will enter the market.

    Your comments do not bother me in the least as they are very easy to refute by the historical record.
     
  20. AFM

    AFM Well-Known Member Past Donor

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    Trade imbalance does not matter. Production must flow to those entities which have comparative advantage resulting in minimum pricing. That is market efficiency. In fact in times of the highest US growth we have had the highest trade "deficits" because the wealth being created in the US is being used to purchase products from other countries which can be produced more inexpensively. The only way to realize more exports from the US is to negotiate the removal of any import tariffs/regulations from individual countries and of course to minimize the costs of production (business income taxes, ObamaCare, etc) in the US.

    Even if we cannot negotiate trade deals with for example China to "force" them to buy our exports the US is still better off economically. As I've said the absolute worst action is to retaliate with tariffs on Chinese imports which will do net harm to both the US and Chinese economies. Using import tariffs as a threat may result in actions to open closed markets however.
     
  21. Ted

    Ted Banned

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    sure it does. If suddenly nobody wants to buy from a country because its workers are suddenly lazy or inefficient and therefore suddenly expensive it will run a growing trade deficit that will matter as a signal that the country is suddenly poorer relative to those with whom it suddenly stopped trading.
     
  22. Ted

    Ted Banned

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    for costs and therefore for prices which make consumers richer. 1+1=2
     
  23. AFM

    AFM Well-Known Member Past Donor

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    That country is in jeopardy of losing comparative advantage. But it would still be to the benefit of those countries with comparative advantage to use their resources maximizing wealth production and buying auxiliary items from those countries with less economically efficient production environments.

    Here is a free book:

    http://steshaw.org/economics-in-one-lesson/contents.html
     
  24. Ted

    Ted Banned

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    exactly and the resulting trade imbalance would matter as an indication of decline.
     
  25. AFM

    AFM Well-Known Member Past Donor

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    That might be masked however by the reduction in wealth creation which would limit the amount of goods which could be purchased by that country. In the case of the US it is often the case that the highest trade "deficits" occur during times of economic prosperity (high gdp growth rates).
     

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