Long term effects of things like NAFTA, TPP, etc.

[MrDudeMan]

I'm not taking a political stance in this thread and I'm not advocating one system over another. I'd like to understand more about the long term effects of international trade deals and whether or not they will ultimately help or harm our economy. I'd also like to be clear that I'm not well-versed on this topic, so don't read what I'm writing as if it's intended to seem any other way.

Let's talk about NAFTA first. Do you think it was a good idea? Why or why not? I understand, at least conceptually, how free trade could change things and cause a substantially different production and manufacturing climate in all of the involved countries. What's not clear to me is if the US actually benefited from that arrangement in the long run. Indeed, it costs more to employ an American than a Mexican, on average, so our businesses win in that regard. However, does the US as a whole actually benefit?

The reason I'm asking is because it seems like the answer might be no, but I can't put my finger on why I feel that way. I understand how automation comes into play and why it's both inevitable and ultimately beneficial, at least in my opinion. I'm trying to ask about the whole economic climate of the US and whether or not keeping things in-house would have been a long term win in spite of any potential disadvantages of such a system. Unless I'm mistaken, it seems like the whole thing only makes sense if you're able to employ people in other countries for less money due to their substandard living conditions and/or local economies. Simply as a thought experiment, would the demand for higher wages in currently cheaper labor markets in foreign countries be more effective as a boost to the US economy than artificially increased manufacturing costs (tariffs)? In such a scenario, the jobs might come back to the US naturally instead of by force.

TPP is similar, but it seems more obvious to me that we would have been given the raw end of the deal. Maybe the exact opposite is true. Admittedly, I don't know enough about it, but it's hard to know what's real and what isn't these days because everyone is so hell-bent on putting down the other guy that they never talk through the actual situation.

 

[Murloc]

hard to say, trade in general allows the most efficient result to come out and it's good for global growth.

But the people who get richer are the chinese middle class, not the lower class of the first world.

Where I live there's been a massive growth of cross-border commuters, basically it's like if 1/4 of the workers in Texas was made up by mexicans who cross the border every day.
Massive salary dumping ensued, with architects and junior software engineers getting paid half as much as supermarket cashiers who have a collective bargaining contract inherited from the past and benefit from being part of national companies who pay everyone the same and don't make differences for the small region I live in (which is the only one bordering a country so poor).

Also a lot of manufacturing in western europe moved to eastern europe, e.g. Slovakia, this is a mexico-like situation. Eastern europeans are obviously happy about growth, but people without skills in countries that weren't able to invest in the knowledge economy and become modern like Italy are left out in the cold.

I guess it depends on your perspective and whether your region is competitive on the world stage.

In the long run it's better to trade more for sure, assuming that poorer countries grow and everyone ends up with the same standards and trade will become totally free (idealistic view).

As seen with the US though, safety standards can have differences between first world countries too.
Europe will never accept US hormone meat and the US won't budge on this issue and prefer to retaliate.
And the US keep kinder eggs banned.

 

[Mai72]

All I know is when Trump killed TPP China was celebrating. TPP was being used as a leverage between China and the other Asian countries that were trading with America. Now that it's dead, China will come in to fill our void.

 

[Londo_Jowo]

Really, all the current trade agreements with Asian countries are null and void due the Trump not moving forward with the TPP????

 

[1prophet]

Free trade is like Right to Work,

a catchphrase that sounds good on the surface but has been used to bypass all the TAXES, rules, regulations, unions and standards that get in the way of profits,

It is sold to the developed world masses by telling them how they will get cheap goods and services because those manufacturing jobs are meant for some third world person who will be happy to have a job even under deplorable conditions not fit for a dog, while we in the first world need to get educated in the high tech information age jobs that will give us greater prosperity and freedom.

What these neo liberals don't tell you is that how they see the people as commodities to be used and discarded based on their income producing value for the globalists and all free trade does is eliminate the restrictions and laws on local labor by exploiting countries that have poor to nonexistent labor, environmental, safety, etc. rules that many in developed countries take for granted.

Eventually as we have seen cheaper is better mentality moves up the ranks and no job below upper management is safe anymore no matter how much education you have,

since it promotes a selfish environment that encourages the most capable to care about themselves first and foremost while the rest are left to fight for the crumbs.

 

[feralkid]

Pretty much Trump is ceding Asian markets to China.

TPP wasn't a win-win for everyone, but dumping it is a yuge win for 'Gina, and a big setback for child labor laws, intellectual property protection, etc..

 

[Fanatical Meat]

A counter point:

Jobs Created and Destroyed
The Trans-Pacific Partnership, pushed hard by the Obama administration, was essentially an attempt to create a single market for the U.S. and 11 countries that border the Pacific Ocean, including Canada, Mexico, and Chile. The idea was to make goods flow more freely and cheaply between all partners — who together represented one third of global trading.

More particularly, the TPP's largest goal was to maintain U.S. trade dominance in Asia, bringing the various trading partners under America's wing as a way to ward off China's growing economic influence, said MSNBC business correspondent Ali Velshi.
The idea was that if everyone brought down taxes on exported goods, U.S. companies would pay less for imports — while benefiting from cheaper labor overseas.

According to research by the Peterson Institute, the deal would have increased U.S. exports by $123 billion. Using back-of-the-envelope math, Obama's White House had estimated an increase of 650,000 jobs.

Proponents said the net effect of this would lead to overall economic improvement and stimulate the economy and thus jobs and better wages for all, even blue collar workers.
A Trade Deal Without Trade Benefits
But when it comes to deals like these, including NAFTA, another trade deal also on Trump's chopping block, "It just hasn't worked. That's the problem," said Velshi.

The issue is that although the government is helping creating wealth for these companies, there's no mandate that they spend it on hiring or wages.

"Companies love free trade," said Velshi. "Companies get to share profits with shareholders, the government gets the taxes, but workers don't get their fair share."

"This is all diplomacy. There is no benefit," said Derek Scissors, a China specialist at the conservative American Enterprise Institute. "The idea was diplomatic rather than economic."
Moreover, as the deal went along and corporations began influencing it behind the scenes, it became a multinational corporate grab-bag, said Evan Greer, campaign director of Fight for the Future, a non-profit advocacy group that came out strong against the TPP.

"The TPP's 5,000+ pages actually had very little to do with trade. Instead, corporations tried to turn it into a wish list for policies that they knew would never pass through Congress,"

http://www.msn.com/en-us/news/polit...d-why-it-matters-to-you/ar-AAm9ggR?li=BBnb7Kz

 

[EduCat]

So did we beat China today or did they beat us?

 

[Fanatical Meat]

So did we beat China today or did they beat us?

Too hard to call. I do feel a bunch of us won, some of us will pay either more or won't see big price decreases and some of us lost. Read my link about good stuff to think about.

 

[MrDudeMan]

These responses have helped clarify the situation quite a bit. Thanks.

hard to say, trade in general allows the most efficient result to come out and it's good for global growth.

But the people who get richer are the chinese middle class, not the lower class of the first world.

Where I live there's been a massive growth of cross-border commuters, basically it's like if 1/4 of the workers in Texas was made up by mexicans who cross the border every day.
Massive salary dumping ensued, with architects and junior software engineers getting paid half as much as supermarket cashiers who have a collective bargaining contract inherited from the past and benefit from being part of national companies who pay everyone the same and don't make differences for the small region I live in (which is the only one bordering a country so poor).

Also a lot of manufacturing in western europe moved to eastern europe, e.g. Slovakia, this is a mexico-like situation. Eastern europeans are obviously happy about growth, but people without skills in countries that weren't able to invest in the knowledge economy and become modern like Italy are left out in the cold.

I guess it depends on your perspective and whether your region is competitive on the world stage.

In the long run it's better to trade more for sure, assuming that poorer countries grow and everyone ends up with the same standards and trade will become totally free (idealistic view).

As seen with the US though, safety standards can have differences between first world countries too.
Europe will never accept US hormone meat and the US won't budge on this issue and prefer to retaliate.
And the US keep kinder eggs banned.

Where do you live? The situation you described does, in fact, sound very similar to many US states.

Really, all the current trade agreements with Asian countries are null and void due the Trump not moving forward with the TPP????

I don't know if null and void is the right way to describe it, but certainly the dynamic has completely changed, right? If you were joining a club with internal balance that was predicated on two big players keeping each other in check only to have one of them drop out, wouldn't that potentially cause a big issue for you?

Free trade is like Right to Work,

a catchphrase that sounds good on the surface but has been used to bypass all the TAXES, rules, regulations, unions and standards that get in the way of profits,

It is sold to the developed world masses by telling them how they will get cheap goods and services because those manufacturing jobs are meant for some third world person who will be happy to have a job even under deplorable conditions not fit for a dog, while we in the first world need to get educated in the high tech information age jobs that will give us greater prosperity and freedom.

What these neo liberals don't tell you is that how they see the people as commodities to be used and discarded based on their income producing value for the globalists and all free trade does is eliminate the restrictions and laws on local labor by exploiting countries that have poor to nonexistent labor, environmental, safety, etc. rules that many in developed countries take for granted.

Eventually as we have seen cheaper is better mentality moves up the ranks and no job below upper management is safe anymore no matter how much education you have,

since it promotes a selfish environment that encourages the most capable to care about themselves first and foremost while the rest are left to fight for the crumbs.

So, in essence, free trade is good for the people who can demand higher wages until businesses figure out how to get people in other places to do the same work for less money. Then the business wins and most likely all of the workers in both countries lose for one reason or another. I realize I'm paraphrasing your post, but that sounds like what I was trying to say in my OP as well. It seems that free trade is never going to yield the promise of prosperity that helps legitimize it.

Pretty much Trump is ceding Asian markets to China.

TPP wasn't a win-win for everyone, but dumping it is a yuge win for 'Gina, and a big setback for child labor laws, intellectual property protection, etc..

I don't mean to sound ignorant, but China seems to only have a foothold on the world trading platform because of how much it abuses its citizens. I'm having a hard time understanding why a significant number of people are mad about Trump giving TPP the axe. It sounds like a logical thing to have done.

 

[desura]

My main problem with free trade is how so much of it bypasses environmental and labor standards. Like, we should be having debates on the appropriate environmental price we are willing to pay for goods, with tangible results being apparent. Instead, with globalization, this debate is punted.

Which is why I find so much of the culture wars so irritating.

 

[Vic]

China has been selling off Treasuries since the election, but those bounced today after Trump's announcement.

 

[MrSquished]

I don't mean to sound ignorant, but China seems to only have a foothold on the world trading platform because of how much it abuses its citizens. I'm having a hard time understanding why a significant number of people are mad about Trump giving TPP the axe. It sounds like a logical thing to have done.

You don't mean to sound ignorant? China wasn't a signatory to the TPP so what are you blathering on about China this China that

 

[werepossum]

In general, consumers benefit short term from free trade by getting cheaper goods. In the long run, good manufacturing jobs are lost. An even bigger concern is that the nations benefitting from the ensuing trade imbalance use that excess to buy things that don't show up in trade balance, such as property and stock.

Long after your cheap consumer goods are obsolete, broken or otherwise discarded, the rich foreigners still own their American property and stock. You do the math.

 

[sdifox]

It would be interesting if Trump slaps a 30% tariff on imported service.

 

[Puffnstuff]

Ross Perot warned us about NAFTA before it was enacted and we've lived to tell about it. We need legislation that prevents dumping of any kind, there are several different kinds, that will deter domestic companies from offshoring production in the name of profit. This is one area where I agree with Democrats and their exit tax strategy.

 

[Fanatical Meat]

In general, consumers benefit short term from free trade by getting cheaper goods. In the long run, good manufacturing jobs are lost. An even bigger concern is that the nations benefitting from the ensuing trade imbalance use that excess to buy things that don't show up in trade balance, such as property and stock.

Long after your cheap consumer goods are obsolete, broken or otherwise discarded, the rich foreigners still own their American property and stock. You do the math.

I agree with this addition of big trade seems to produce a bunch of money, however the majority of that money goes to very few businesses and people it never moves, it never gets spent, it rarely generates better pay or more jobs.
I'll gladly pay more for electronic crap that I don't have to own or just own it longer. We turn over notebooks, TVs, smart phones far too often. As I said in another thread if an iPhone becomes $150 more apple can take in smaller profits, carriers can sell it closer to its inventory cost and us consumers can simply own them longer instead of being obsessed with the new model that is 2.1 mm thinner and its batter last 3% more.
Another example, I had an old faucet start to leak. The original was made in 1960, its replacement was from HD and pretty affordable it looks nice but its literally half the weight of the smaller older one. The replacement is plastic with a metal coating, there is no way this will last 50 years I am sure I'll be replacing this faucet again in the near future. finding a replacement faucet that was basic looking and made with quality parts was close to impossible to do, no walk in place stocked any.

 

[Hayabusa Rider]

Ultimately it's impossible to know.

Anyone who says they do may want to think about what was said on another complicated topic

"If you think you understand quantum mechanics, you don't understand quantum mechanics"

We love to punish people far more than reward them, because it's easier and more satisfying for too many to see someone "get theirs".
Instead of jumping off into massive tariffs we ought to do some creative thinking about how to keep and increase good jobs here.

 

[MooseNSquirrel]

Impossible might be a strong word. Most studies have shown positive effects, but fault governments for not dealing with the negative ones.

More importantly, we know the people taking these types of decisions did not take into consideration any long term effects. Expect more of this.

 

[IronWing]

Protectionism works but for the wrong people. On this issue, Trump is correct. TPP is dead. As far as rectifying the current trade regime, Trump will have to work with Congress and I don't expect they'll be inclined to throw the right people under the bus. Though current populist sentiment may cause those knees to start wobbling.

 

[fskimospy]

I'm not taking a political stance in this thread and I'm not advocating one system over another. I'd like to understand more about the long term effects of international trade deals and whether or not they will ultimately help or harm our economy. I'd also like to be clear that I'm not well-versed on this topic, so don't read what I'm writing as if it's intended to seem any other way.

Let's talk about NAFTA first. Do you think it was a good idea? Why or why not? I understand, at least conceptually, how free trade could change things and cause a substantially different production and manufacturing climate in all of the involved countries. What's not clear to me is if the US actually benefited from that arrangement in the long run. Indeed, it costs more to employ an American than a Mexican, on average, so our businesses win in that regard. However, does the US as a whole actually benefit?

The reason I'm asking is because it seems like the answer might be no, but I can't put my finger on why I feel that way. I understand how automation comes into play and why it's both inevitable and ultimately beneficial, at least in my opinion. I'm trying to ask about the whole economic climate of the US and whether or not keeping things in-house would have been a long term win in spite of any potential disadvantages of such a system. Unless I'm mistaken, it seems like the whole thing only makes sense if you're able to employ people in other countries for less money due to their substandard living conditions and/or local economies. Simply as a thought experiment, would the demand for higher wages in currently cheaper labor markets in foreign countries be more effective as a boost to the US economy than artificially increased manufacturing costs (tariffs)? In such a scenario, the jobs might come back to the US naturally instead of by force.

TPP is similar, but it seems more obvious to me that we would have been given the raw end of the deal. Maybe the exact opposite is true. Admittedly, I don't know enough about it, but it's hard to know what's real and what isn't these days because everyone is so hell-bent on putting down the other guy that they never talk through the actual situation.

The answer is that free trade benefits all countries involved and there is a significant and positive long term wealth effect from free trade all around. It's basically as close as you ever get in economics to a free lunch, and the economics literature on this subject is overwhelming in its support. Think about it this way, free trade is the natural state of things. If you're creating barriers to trade you're basically telling other countries that you know they can make what you want better or more cheaply than you can but you'd rather pay more money or have a worse product instead so that your friend gets a cut of the deal. That is the definition of inefficiency and it's something we should avoid if possible.

Free trade is also one of the primary drivers behind the largest reduction of extreme poverty in world history and that's nothing to sneeze at.

It is true that the gains from free trade are often distributed unevenly though. The thing is this isn't a reason to stop free trade, this is a political failure. It is entirely possible for our country to pocket the gains from free trade, make whole the 'losers' in the bargain, and still have money left over. Because our political system is paralyzed and captured by nonsensical myths though, this spreading of the gains doesn't happen. This is frequently what people think of when they oppose free trade but they are shooting at the wrong target. Go after the people who want to ensure our political system doesn't spread the gains of trade, don't stop trade.

 

[Sunburn74]

Most economists find that NAFTA overall has been neutral in terms of overall job creation/loss. Some industries suffered, some gained in terms of net jobs. Overall things in terms of net jobs available stayed about the same. And competition with mexico pales in terms of competition with china.

Its a nice punching bag when you're trying to drum up populist support but the fact of the matter is eventually even the cheap labor in mexico is increasingly being replaced with robots.

 

[VRAMdemon]

Opposition to free trade is a populist position, not really a "liberal" or "conservative" thing.

Clinton was very likely lying, and a Clinton administration would have probably insisted on some superficial changes and signed it. The death of TPP will cost Americans a lot of money, and will increase China's relative power in the Pacific and Far East. Nonetheless, it wins votes, because protectionism appeals to people's immediate gratification while free trade, while good for everyone on the whole, is conceptually hard to understand and the benefits are very spread out.

I've got no problem in principle with Trump skillfully renegotiating certain aspects of international trade so that we can restore some of the trade imbalance with other countries. But just wading into deep waters and trying to reshape the way we've done business for decades without much forethought is potentially disastrous.

Whether it's China that is in a position to pick up the pieces is unknown. China has its own challenges ahead. But one thing that's increasingly clear is that America under Trump seems to be giving up its position as a global power broker. That will inevitably leave a power vacuum. Whether that's filled by one nation like China, or perhaps many like China, Russia, Japan, and Germany, that turn of events will have consequences.

 

[IronWing]

Opposition to free trade is a populist position, not really a "liberal" or "conservative" thing.

Clinton was very likely lying, and a Clinton administration would have probably insisted on some superficial changes and signed it. The death of TPP will cost Americans a great many jobs and a lot of money, and will increase China's relative power in the Pacific and Far East. Nonetheless, it wins votes, because protectionism appeals to people's immediate gratification while free trade, while good for everyone on the whole, is conceptually hard to understand and the benefits are very spread out.

I've got no problem in principle with Trump skillfully renegotiating certain aspects of international trade so that we can restore some of the trade imbalance with other countries. But just wading into deep waters and trying to reshape the way we've done business for decades without much forethought is potentially disastrous.

Whether it's China that is in a position to pick up the pieces is unknown. China has its own challenges ahead. But one thing that's increasingly clear is that America under Trump seems to be giving up its position as a global power broker. That will inevitably leave a power vacuum. Whether that's filled by one nation like China, or perhaps many like China, Russia, Japan, and Germany, that turn of events will have consequences.

I respectfully disagree with the bolded. I think the benefits of free trade have been hyper-concentrated and accrue almost exclusively to the wealthiest segment of society. If broad-based benefits to free trade exist, it should be demonstrable to the public and free trade wouldn't be a populist issue.

 

[VRAMdemon]

I respectfully disagree with the bolded. I think the benefits of free trade have been hyper-concentrated and accrue almost exclusively to the wealthiest segment of society. If broad-based benefits to free trade exist, it should be demonstrable to the public and free trade wouldn't be a populist issue.

Fair enough...I used the term populist, because 2 candidate's and they're followers (Trump & Sanders)who you could coin "populist" were against it. It remains to be seen if protectionism will benefit the public. We are wading into somewhat uncharted waters here.