Can someone explain to me why trade agreements are a good idea?

[SammyJr]

http://en.wikipedia.org/wiki/Comparative_advantage

What is America's comparative advantage over China?

 

[SammyJr]

Ha! Hahahahaha!

Get rid of NAFTA and enjoy your oil/water/energy/materials/lumber prices going through the roof.

Free trade benefits everyone in the end. Lower production costs and larger markets to sell in = good for everyone*.

*Except for people who need jobs and those of us who pay taxes for social services.

The only way to show a benefit of free trade is to ignore the massive externalities generated by it.

 

[SammyJr]

Protectionism is why the United States is pretty much the only country in the world that uses HFCS as a sweetener instead of cane sugar. Consumers like you and me waste money propping up the domestic agriculture industry through the use of subsidies, tariffs, etc. If we got rid of all these artificial influences in the market, it would be cheaper to import cane sugar from countries like Brazil than to produce HFCS domestically, which would mean cheaper food for us (and this might have tertiary benefits, such as less taxpayer money being required for programs like food stamps).

Just one example of the folly of protectionism. Not to say that it doesn't have some advantages and free trade doesn't cause problems, but I think when you look at the big picture, the advantages of free trade far outweigh any disadvantages. Plus a lot of people just based on ideology don't like the idea of the government and artificial hands meddling in markets.

You have picked a very bad example of protectionism and one that is essentially corporate welfare. We need well thought out protectionism to protect the American worker, discourage dependence on foreign nations, and to encourage American innovation on American soil.

 

[ConstipatedVigilante]

Much manufacturing is low skill "everyman" work. Anyone can do it with minimal training. With these jobs overseas, does it also benefit the U.S. consumer to pay for increased social spending for these unemployed/underemployed former manufacturing workers? Does it benefit the U.S. consumer to have less security in their job and less opportunity for promotion and raises? Do you think this situation contributes to the fact that almost half of Americans pay no income tax?

In a nutshell, are lower prices at Walmart worth the social and economic costs of high unemployment and lack of living wage work?

What do you suggest be done? You can't force companies to open manufacturing centers here. And if tariffs are raised, those same underemployed/unemployed people will have a higher cost of living due to the higher cost of manufacturing in the U.S. Does that benefit them?

 

[SammyJr]

We have the best education system in the world. We need to use it to produce the people who design, produce, and market the things that are made in those factories overseas. We also send a lot of people overseas to oversee production.

China/India/Mexico's comparative advantage is cheap labor. Ours is smart people.

Google "People of Walmart". Americans are a diverse group. We need all kinds of jobs for all kinds of people. Unless, of course, you like paying for the People of Walmart with your taxes. I would prefer them gainfully employed in a living wage job suited to their intellect.

Try taking some basic economics. Trade agreements benefit EVERYONE. Everyone produces more and receives more from trade.

Try looking around. Our country has gotten worse for most since this belief took hold. People who used to work in factories and pay their own way now work at Wal-mart and on the taxpayer dime. Sure, price tags are lower but our national debt is growing and in no small part due to social programs for people who could be gainfully employed at a factory.

 

[SammyJr]

What do you suggest be done? You can't force companies to open manufacturing centers here. And if tariffs are raised, those same underemployed/unemployed people will have a higher cost of living due to the higher cost of manufacturing in the U.S. Does that benefit them?

If the tariffs are set so that it is cheaper to produce goods in America, then companies will do so. If they don't, then that's more opportunity for new patriotic American firms. And those unemployed/underemployed people? They could work at these factories and get off the dole.

 

[ConstipatedVigilante]

If the tariffs are set so that it is cheaper to produce goods in America, then companies will do so. If they don't, then that's more opportunity for new patriotic American firms. And those unemployed/underemployed people? They could work at these factories and get off the dole.

Those companies that produce in America will also be weighed down by the increased cost of manufacturing, and their expansion will suffer. This will cost us jobs in the long run. Tariffs also created deadweight loss where no one gains anything. Deadweight loss is always to be avoided.

Try looking around. Our country has gotten worse for most since this belief took hold. People who used to work in factories and pay their own way now work at Wal-mart and on the taxpayer dime. Sure, price tags are lower but our national debt is growing and in no small part due to social programs for people who could be gainfully employed at a factory.

Do low-skill jobs at factories really pay better than Walmart? Is that really better work? The problem with welfare is welfare itself. What we have is such a lenient program that people aren't motivated to actually get off the dole, so they just stay on it for free money.

 

[her209]

By making the assumption that capital is immobile, he implicitly makes an assumption about trade imbalances.

Make me wonder how two countries that rare-metal uses backed currency would do against each other when one country sends more of its dollars to the other.

 

[SammyJr]

Those companies that produce in America will also be weighed down by the increased cost of manufacturing, and their expansion will suffer. This will cost us jobs in the long run. Tariffs also created deadweight loss where no one gains anything. Deadweight loss is always to be avoided.

There are 300 million+ Americans. There is plenty of room for expansion here. What jobs will this cost us? Seriously? The factories are gone.

Do low-skill jobs at factories really pay better than Walmart? Is that really better work? The problem with welfare is welfare itself. What we have is such a lenient program that people aren't motivated to actually get off the dole, so they just stay on it for free money.

In the rural south, textiles and furniture used to start at $10/hr full time with benefits. This is above what Wal-mart pays, plus the full time status and benefits. Many thousands of these jobs have been lost and there aren't even enough shitty jobs to go around.

The problem is that there aren't enough living wage jobs that anyone can do. If welfare were to disappear today, it wouldn't magically create jobs. Welfare sucks. Only a small minority of people on the dole want to be on the dole. If there was something better, like a steady factory job, they'd take it.

 

[Throckmorton]

What do you suggest be done? You can't force companies to open manufacturing centers here. And if tariffs are raised, those same underemployed/unemployed people will have a higher cost of living due to the higher cost of manufacturing in the U.S. Does that benefit them?

I think this opinion is caused by the conservative myth that wealth is limitless and created by merit.

If jobs are being exported, you have no wealth to begin with, so cost of living is moot. I don't see how we can survive as a consumer based economy, no matter how low the cost of living is. If your Wal Mart job pays you less than a living wage, you can't even afford to live even by buying goods only from Wal Mart.

The third world has very low cost of living, and low wages. Do you want to live there? I'm FROM the third world, and it's not the libertopia you may be thinking of.

 

[Throckmorton]

It seems pretty obvious and simple... Free trade = equalization. It's like having two tanks full of fluid, connected by a valve. Common sense tells you that the wider you open the valve, the faster they'll become equal.

Considering we're the rich and powerful, why would we want equalization? I'm all for helping poorer nations, but how much can they possibly benefit from everybody being equally poor? Think of how many innovations have come from the developed nations that benefit the entire world.

 

[Infohawk]

It's interesting how protectionism is on the rise in the US. I myself wouldn't mind seeing some. How soon until we start seeing some trade barriers implemented in the US?

I agree with Throck's point that free trade is equalization. We're seeing it right now as the US turns into a third world country with a rich elite and poor masses. Even worse is that the US only has intellectual property at this point. No sovereign country has to respect that if they don't want to.

With that said there are still advantages to open markets. People forget the US is one large open market and that for a long time it dominated Europe's economy because of that fact.

The real question is what are we going to do with the unnecessary people around the world. We're just not going to need laborers at some point. There's only so many accountants and lawyers we need, what do we do with unskilled of the world?

 

[ConstipatedVigilante]

I think this opinion is caused by the conservative myth that wealth is limitless and created by merit.

If jobs are being exported, you have no wealth to begin with, so cost of living is moot. I don't see how we can survive as a consumer based economy, no matter how low the cost of living is. If your Wal Mart job pays you less than a living wage, you can't even afford to live even by buying goods only from Wal Mart.

The third world has very low cost of living, and low wages. Do you want to live there? I'm FROM the third world, and it's not the libertopia you may be thinking of.

I've seen the third world, and no, it isn't what I want in our country. But refusing to use the resources of other countries to help ours is just silly. The U.S. cannot possibly compete with Chinese/Indian/Indonesian sweatshops. We have strict labor laws that do not allow us to maintain competition with that level of labor pricing. Forcing U.S. companies to manufacture in the U.S. will only make them raise their prices, and in turn consumers will want foreign-made goods (unless, of course, there is a huge quality discrepancy). The only way to make Americans buy American is to make foreign goods the same price or more expensive, which effectively lowers the value of the dollar.

I don't know how to solve the problem of low-skill jobs drying up, but forced protectionism isn't it. If anything, what we need to do is encourage foreign companies to manufacture here to avoid import costs. That will both create jobs and encourage foreign investment in our country.

 

[SammyJr]

I've seen the third world, and no, it isn't what I want in our country. But refusing to use the resources of other countries to help ours is just silly. The U.S. cannot possibly compete with Chinese/Indian/Indonesian sweatshops. We have strict labor laws that do not allow us to maintain competition with that level of labor pricing. Forcing U.S. companies to manufacture in the U.S. will only make them raise their prices, and in turn consumers will want foreign-made goods (unless, of course, there is a huge quality discrepancy). The only way to make Americans buy American is to make foreign goods the same price or more expensive, which effectively lowers the value of the dollar.

Hence the need for protection for the American worker. We can't compete without dropping to their level.

I don't know how to solve the problem of low-skill jobs drying up, but forced protectionism isn't it. If anything, what we need to do is encourage foreign companies to manufacture here to avoid import costs. That will both create jobs and encourage foreign investment in our country.

Import costs? Those are also known as tarriffs.

 

[Craig234]

We have the best education system in the world. We need to use it to produce the people who design, produce, and market the things that are made in those factories overseas. We also send a lot of people overseas to oversee production.

China/India/Mexico's comparative advantage is cheap labor. Ours is smart people.

You're talking about a legacy benefit - brought about by the liberals here building the top education system - that is fast changing with the last few decades of the right.

How many Ph.D's are China and India making compared to the US today? How many from here are foreign?

Even decades ago, our technology companies were filled with H1 Indians. China and India have been growing their *development* capabilities. US firms use foreign offices.

And 'smart' isn't the issue.

Indians have had the reputation as some of the best mathemeticians in the world for a very long time, for example - and their top school is rated well above our top.

 

[ConstipatedVigilante]

Import costs? Those are also known as tarriffs.

Yes. But we need to provide incentives for manufacturing here, not just dis-incentives for not doing so.

 

[Craig234]

Yes. But we need to provide incentives for manufacturing here, not just dis-incentives for not doing so.

They're called profits.

 

[silverpig]

Well Jeesh, what did we do before NAFTA?

You used a lot less oil is what you did.

 

[Craig234]

You used a lot less oil is what you did.

You sure about that?

 

[ConstipatedVigilante]

They're called profits.

What guarantees that the average American cares whether or not the car was made in America? Nothing. The average joe wants a car that will get him from point A to point B to point C without breaking down. The company reaps profits if it doesn't have to ship from Japan/South Korea/Europe to the U.S., but it also reaps profits if it avoids the hassle of creating a plant on U.S. soil and the associated bureaucratic headaches. You have to create a large incentive for manufacturing here.

I am absolutely in favor of creating jobs here, but I don't see a way to do it without making everyone suffer higher prices and while avoiding stifling companies' expansion.

 

[Craig234]

What guarantees that the average American cares whether or not the car was made in America? Nothing. The average joe wants a car that will get him from point A to point B to point C without breaking down. The company reaps profits if it doesn't have to ship from Japan/South Korea/Europe to the U.S., but it also reaps profits if it avoids the hassle of creating a plant on U.S. soil and the associated bureaucratic headaches. You have to create a large incentive for manufacturing here.

I am absolutely in favor of creating jobs here, but I don't see a way to do it without making everyone suffer higher prices and while avoiding stifling companies' expansion.

Scenario 1 no incentive/disincentive
US labor: $20 hour
Foreign labor $1 hour
Profit: build overseas

Scenario 2 disencentive:
US labor: $20 hour
Foreign labor: $1 hour + $24 hour tarriff = $25 hour
Profit: build here

Scenario 3: incentive/disincentive
US labor: $20 hour - $10 hour incentive = $10 hour
Foreign labor: $1 hour + $14 hour tarriff = $15 hour
Profit: build here

You don't NEED incentives here to make a profit here, with disincentives in place.

If COURSE there are higher prices - where do you think the 'higher standard of living' comes from, magic dust?

"Let's cut wages here $20/hour to $1/hour to match the world's poor, AND raise our standard of living at the same time!"

But with higher prices, people have higher incomes, higher saving, etc.

Of course on a short-term basis it's nice to buy cheap stuff made by cheap overseas labor. How is that long-term?

Globalization is good when we pull others up, not so much when they pull us down.