Free trade

[Greenman]

Has it helped the US at all? I know little of economics, but free trade seems to be what's killing the middle class. It's been great for the 1%, and it's driven corporate profits through the roof, but other than making cheap plastic crap readily available to the average consumer, I don't see any real benefit.

Would we really be in worse shape with protectionist policy's in place? Tell me why I'm wrong and why I never see this discussed.

 

[Caravaggio]

Has it helped the US at all? ......Would we really be in worse shape with protectionist policy's in place? Tell me why I'm wrong and why I never see this discussed.

Pure forms of "free trade" and its opposite, "state-run command economics" rarely exist. Most nations operate a blend of the two. The world is divided into trading blocks which favour those within a treaty block while using tariffs, or tax breaks of some sort, to protect themselves against those outside the block. Powerful nations will always try to screw weaker emerging economies. Britain's role in the two 'Opium Wars' of the mid nineteenth century provides a grim example. The then powerful Brits forced the Chinese to 'accept' the importation of opium. Great for the UK, a social disaster for the 'coolies'.

Lots of people who are 'pro' unfettered free trade often quote bits of Friedrich Von Hayek (Road to Serfdom) or Adam Smith (Wealth of Nations) with tears in their eyes. If they bothered to read the full text of those books they would see that the arguments are much more nuanced than they imagine.

 

[sm625]

Has it helped the US at all?

lol where do you get off thinking the US has anything resembling free trade? You cannot have free trade while you have minimum wage laws in one country but not another. The minimum wage laws force labor to move to areas where the wage laws are not in place. The capital follows the labor. All of this minimum wage crap has to go before you can even begin to discuss" free trade".

 

[piasabird]

I think Free Trade is a figment of the imagination. To me what free trade means is that everyone in the USA has to follow the free trade rules and that other countries can do whatever they want, pollute as much as they want and dump as much product below the price to gain a trade advantage as much as they want.

If you would look at what Saudi Arabia does when they arbitrarily raise and lower their crude oil prices, this is a good example of free trade. They use trade to wage war the way we use bombs to blow up a country's infrastructure.

Look at china and how they just artificially reset their currency rates? This is also a form of economic advantage.

Then there are countries, USA included that offer companies financial assistance, credits, or special tax breaks. This is a violation of free trade. It is similar to how South Korea helped their RAM manufacturers out to try to establish lower prices so they can control the RAM market. They were taken to international court but it took forever to get anything done. In this sense the EU seems more likely to levy fines and fees against companies like Microsoft for their abuse of free trade and monopolistic power.

In essence free trade just does not work. How can a communist country like China even be considered to have any free trade?

Instead we should use our trade policy like an equalizing weapon. If a country has unfair trade practices or is producing an excess amount of pollution or uses slave labor or has Death labor camps, we should halt all trade with them till they choose to come up to our standards. We should also quit letting companies have the ability to have business deductions on their taxes because this is also against free trade policies.

We also need to do to the Computer industry what we did to the automobile industry and make companies manufacture Motherboards, CPU's, RAM, Drives in the United States or put tariffs on their products. Right now if we had a war with China we could be severely disadvantaged because we no longer mass produce these products in the USA.

 

[potzocalli]

Free trade should not be confused with manufacturing. Free trade is the import/export of products between countries with specially low or no taxes or tariffs.
With free trade one country included in the agreement can now export apples to the US with special import duties (or none at all) but of course the exporter has to comply with whatever rules apply such as no pesticides or to filter the produce with ultraviolet rays to kill pests.
The other issue discussed is manufacturing capacity where the toy company stops making its $10 doll un the USA because it is much cheaper to make it in china. Instead of costing $5 the doll now costs $3 which will increase the profit margin of the toy company but the average comsumer might not receive a benefit.
In the end, a smart person in China will learn how to make the dolls and the make a company which produces dolls and exports them at a very good price to anyone who cares to buy them (Alibaba model).

Now free trade has benefits and consequences. Apple producers will be affected because of overseas competition but the consumer should be able to buy (allegedly) better apples at a better price and maybe even offseason because the other country has different harvest periods. In the end highest cost producer goes off business unless he has some outstanding quality that opens market share for him such as better quality, specialty product, brand name, copyrighted feature no one else has.

 

[Greenman]

lol where do you get off thinking the US has anything resembling free trade? You cannot have free trade while you have minimum wage laws in one country but not another. The minimum wage laws force labor to move to areas where the wage laws are not in place. The capital follows the labor. All of this minimum wage crap has to go before you can even begin to discuss" free trade".

This is just what I was talking about. First world labor can't compete against third world labor. Why would we want them too? I don't want people living in poverty so I can have an 8000 square foot house. Everyone deserves to earn a living.

 

[sm625]

This is just what I was talking about. First world labor can't compete against third world labor. Why would we want them too? I don't want people living in poverty so I can have an 8000 square foot house. Everyone deserves to earn a living.

Yes but in order to remove this imbalance, do you think that our minimum wage laws should be scrapped, or do you think that every other country in the world should *attempt* to impose similar minimum wage laws?

Would we really be in worse shape with protectionist policy's in place? Tell me why I'm wrong and why I never see this discussed.

If we implemented protectionist laws we would be in worse shape. It would throw us into a depression due to the resulting evisceration of trade. But in the long run we would be better off. You need protectionist tariffs to offset the wage discrepancy, if you want to have minimum wage. But obviously the best solution is to simply not have a minimum wage in which case you do not need tariffs to offset any wage imbalances. It is folly to attempt to micromanage the global market by attempting to balance wages and tariffs. It would be much simpler to have a simple tax on consumption. This could be done without the need for a massive nexus of power and corruption in Washington DC.

The reason this stuff isnt discussed because it leads to the realization that there is no way to control the global market through minimum wages and tariffs without appearing totally fascistic and advocating for an omnipotent global government.

 

[piasabird]

Did you even read the examples of the problems with free trade I supplied or do you live in an alternate reality where trade has no consequences. For instance many food products imported from China were literally poisoned with toxic chemicals and children's toys were painted with lead paint.

 

[Caravaggio]

If we implemented protectionist laws we would be in worse shape. It would throw us into a depression due to the resulting evisceration of trade. But in the long run we would be better off. You need protectionist tariffs to offset the wage discrepancy...

You are right to point out the interconnection between wage laws and protectionist tariffs but there are over-arching strategic factors which all governments must consider.

Take steel as an example (good article in Wall Street Journal, 15-3-2015).
Since January 2014 Chinese steel exports have increased by 63%. Chinese steel makers are mostly state controlled. This surge in quality steel supply is crippling US and EU steel producers. Hot-rolled US coil has suffered an 18% drop in price. Good news if you want to buy some but a problem for producers in high wage economies who see their profits cut to nothing.

Now, in a world of perpetual peace and harmony, such as these boards, this would not matter a jot. But in our real world of actual and imminent conflicts, no nation dare let its defence industry become dependent solely on imports or 'dumped' sub-cost steels.

"Dear China, please could we have some more of your steel plate, we want to build another aircraft carrier because your actions in the South China Sea are making us nervous".

Because the above sentence is obviously unutterable, tariffs are imposed and local essential industries are thus protected, whatever the wage-rate differentials might be.

 

[1prophet]

Yes but in order to remove this imbalance, do you think that our minimum wage laws should be scrapped, or do you think that every other country in the world should *attempt* to impose similar minimum wage laws?



If we implemented protectionist laws we would be in worse shape. It would throw us into a depression due to the resulting evisceration of trade. But in the long run we would be better off. You need protectionist tariffs to offset the wage discrepancy, if you want to have minimum wage. But obviously the best solution is to simply not have a minimum wage in which case you do not need tariffs to offset any wage imbalances. It is folly to attempt to micromanage the global market by attempting to balance wages and tariffs. It would be much simpler to have a simple tax on consumption. This could be done without the need for a massive nexus of power and corruption in Washington DC.

The reason this stuff isnt discussed because it leads to the realization that there is no way to control the global market through minimum wages and tariffs without appearing totally fascistic and advocating for an omnipotent global government.

Why stop at minimum wage laws, why not get rid of labor, environmental, OSHA type laws too.

Then you can compete with these guys and if you are quick enough not only succeed but get to go home in one piece.

https://www.youtube.com/watch?v=oMOBqRVDOYQ

https://www.youtube.com/watch?v=yF8jUDzz5bE

 

[3chordcharlie]

lol where do you get off thinking the US has anything resembling free trade? You cannot have free trade while you have minimum wage laws in one country but not another. The minimum wage laws force labor to move to areas where the wage laws are not in place. The capital follows the labor. All of this minimum wage crap has to go before you can even begin to discuss" free trade".

In terms of the middle class and promoting a higher median standard of living, you have it partly right.

You cannot have 'free trade' between structurally un-equal markets without major consequence. The destruction of the middle class in America is almost entirely the result of 'free trade' with extremely low wage markets. Changes in domestic tax law have played a lesser but significant role.

 

[x26]

Has it helped the US at all? I know little of economics, but free trade seems to be what's killing the middle class. It's been great for the 1%, and it's driven corporate profits through the roof, but other than making cheap plastic crap readily available to the average consumer, I don't see any real benefit.

Would we really be in worse shape with protectionist policy's in place? Tell me why I'm wrong and why I never see this discussed.

There is nothing "Free" about Free Trade.

 

[Mai72]

IMO, it depends. Free trade has been great to Americans who have a stable career, and who make decent money. Take my brother for example. He's a mailman. He makes about $60k a year. His job is secure. It's the same with most government employees. Items that are produced and sold at a low cost in China benefit people with secure employment.

Now, if you worked in a factory for the majority of your life and then all of a sudden they decide to go to China. You are probably going to have issues with free trade.