View Poll Results: Free Trade or Protectionism?

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  • Free Trade

    29 61.70%
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Thread: "Free Trade" OR "Protectionism"

  1. #61
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    Re: "Free Trade" OR "Protectionism"

    Anyone who says they support free trade, but only if other countries adhere to American labor standards, doesn't actually support free trade at all.

    To highlight the absurdity of this demand, let's consider a hypothetical situation: Suppose we discovered a previously-unknown island nation which was fabulously wealthy. In this country, the GDP per capita is $500,000 and people work an average of 10 hours per week. When they see our backwards American civilization, they take pity on us...they refuse to trade with us until we fix our inhumane work conditions (40 hours a week is just cruel), and pay our workers a living wage (at least $200,000 per year). Would their self-righteous finger-wagging benefit us in any way whatsoever? Of course not. We just wouldn't be able to trade with them at all, and it would do absolutely nothing to bring our standard of living up to match theirs.
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    Re: "Free Trade" OR "Protectionism"

    Quote Originally Posted by Tigger View Post
    I work in a regulated industry. If this company goes out of business, we're ALL in a lot of trouble.... when's the last time you saw an electric utility company go out of business?
    2001? Am I to understand that your solution is to turn every sector of the economy into one partially run by the federal government like the utilities?

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    Re: "Free Trade" OR "Protectionism"

    Quote Originally Posted by cpwill View Post
    2001? Am I to understand that your solution is to turn every sector of the economy into one partially run by the federal government like the utilities?
    I don't even think there's been one that recently.

    My solution is to remove the government from the equation entirely. The government regulates the utility industries it does not run them; and my comment on that was only in response to my particular employment situation. Obviously government did nothing to help the 1700 people that were run out the door here last year.

    My solution requires a full-scale change in the American lifestyle, which would not be popular with the masses in any form. It actually requires people to start living within their means and to return to worrying about Right and Wrong more than what is in their wallet's best interest.

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    Re: "Free Trade" OR "Protectionism"

    Quote Originally Posted by Tigger View Post
    I don't even think there's been one that recently.
    California's Largest Utility Files for Bankruptcy

    My solution is to remove the government from the equation entirely
    Yes. that's called "Free Trade".

    My solution requires a full-scale change in the American lifestyle, which would not be popular with the masses in any form. It actually requires people to start living within their means and to return to worrying about Right and Wrong more than what is in their wallet's best interest.
    True enough about the popularity of that. We like our free candy.

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    Re: "Free Trade" OR "Protectionism"

    In response to teaser47401:

    To begin with, kudos on a great post. It is not a terribly common event to get such a well-thought out and articulate post on here, so it is a joy when it does occur. That said, there are a few issues with your underlying concepts which I will address below.

    Quote Originally Posted by teaser47401
    Traditional protectionists, like America’s founding fathers, needed no other rational for imposing tariffs than that they benefited American companies. … We Neo-protectionists … believe that such tariffs, once agreed on in principle, may be implemented in a way which will benefit not only Americans, but the world as whole as we remove the incentives for exploitive business practices from American markets.
    Your basic premise differs from “traditional” protectionism only in respect to the scope of the alleged benefits of such actions. Protectionism only results in a decrease in wealth and well-being of all individuals; both those being “protected” and those at the end of the stick. The inability for some industries, businesses, and individuals in America to compete with those of other nations is the direct result of protectionism and related policies. Free trade results in a gradual equalization of wealth and standard-of-living for everyone on the face of the Earth. Only a complete removal of protectionist policies worldwide will allow the rampant poverty and waste to end.

    Quote Originally Posted by teaser47401
    Even as America put unheard of limits on domestic industry for the purpose of protecting workers, consumers, and the American market, from the excesses of laissez-faire capitalism, free international trade was considered sacrosanct.
    There is a whole laundry list of issues with this statement which needs to be considered. To begin with, the idea that international trade can be free while domestic trade is restricted (or vice versa) is fallacious. Any theory which applies to one will apply equally as well to the other because the lines drawn between “domestic” trade and “foreign” trade are arbitrary and fuzzy. For one simple example, should a car made from foreign parts and assembled in America be considered a foreign or domestic product? The expansion of the division of labor across national boundaries has sufficiently grayed this area to the point where the amateurish debate about “foreign” and “domestic” goods should not even be coming up.

    Secondly, the claim of alleged “excesses of laissez-faire capitalism” is nothing but an excuse for advancing a command economy. There can be no “excesses” from a policy which does not exist. Laissez faire is, for all intents and purposes, a lack of policy. Restrictions, tariffs, quotas, price floors/ceilings, patents/copyrights, subsidies, taxes, and the remaining plethora of market manipulations by governments around the world ensure the non-existence of laissez faire markets. I find the U.S. auto market somewhat analogous: The U.S. government requires an inordinate amount of safety and other equipment and modifications to vehicles sold within the U.S. which greatly increases the weight and decreases the efficiency of the vehicles. Then, they turn around and complain that U.S. cars get very low fuel efficiency and pass legislation requiring higher gas mileage. When reviewed objectively, we see that the low fuel mileage is a direct result of government mandates rather than a failure of “laissez faire capitalism” or corporate greed.

    Third, the claim that “free international trade was considered sacrosanct” is laughable considering the enormous amount of trade restrictions placed on international trade. I don’t believe I need any additional evidence for this one to fail.

    Quote Originally Posted by teaser47401
    Free Trade became an axiom of economic science rather than a result. …
    We argue that laissez-faire capitalism is no more appropriate for international trade than it is for domestic trade.
    A few fallacies here. The idea of free trade is easily deduced from the various axioms, but it not axiomatic itself. Perhaps this is simply quibbling as it has no real impact on the rest of the post, but I thought I would point this out for you.

    You make the assumption that laissez faire capitalism is not appropriate for domestic trade, but neither make the case for why this is to be considered true nor attempt to define what “domestic” trade even is. I will certainly agree with you that one policy for “domestic” trade is equally applicable to “foreign” trade since the terms themselves only represent how we define the economy rather than how the market forces define the economy. Since we are in agreement on the equality of applicability, I will make no differentiation of trade in my argument.

    Quote Originally Posted by teaser47401
    We point out that the Comparative Advantage theory which is the economic basis for free trade policy is itself based on two assumptions which are no longer true. The first assumption is that capital is immobile. … [The second] is the assumption of full employment.
    The major flaw in your argument is your construction of comparative advantage. A policy of free trade based on the assumption of immobile capital would be highly hypocritical. Free trade assumes the allowance of unhindered movement of all economic forces. Certainly, there are many aspects of production which are rigid due to forces of nature, but this does not seem to be in contention. Further the level of employment has no bearing on comparative advantage. I’d like to explore these two in direct comparison to your comments.

    Quote Originally Posted by teaser47401
    The comparative advantage theory assumes that if a country does not have an advantage in producing a particular good or service, that country will take its capital and invest in another industry where it can be competitive.
    You are applying political considerations to an economic theory. Comparative advantage explains why it is in the best interests of one entity to trade peacefully with other entities. It explains why the division of labor is a greater boon to society than any possible regulation or program by government and why war is always anti-social and counterproductive.

    Suppose there are only two nations in the world and only two goods as well. Nation A has an absolute advantage in both goods: it can produce 100 of good X or 50 of good Y in a single year. Nation B has an absolute disadvantage: it can only produce 75 of good X or 25 of good Y in the same period. (Please note that this theory applies to all entities and I only use the term “nation” to continue your dialogue.)

    The theory of comparative advantage does not suggest that nation B should invest in nation A, it suggests that B should determine which goods it can produce [i]at a lower opportunity cost[/u] than its competitors. Therefore, nation A might be able to produce more of good X at a more effective rate than that of nation B which would result in nation A focusing on producing and specializing in good X while nation B produces and specializes in good Y.

    The obvious problem with attempting to set policy and theory to nation-states is the broad generalization which is forced upon the efforts. This is precisely why it is no more effective (or realistic) to state that the Smith family is better at producing corn when there are many different skills within the Smith household, than it is to say that America is better at producing coal when there are millions of products which are produced within the political boundaries of America (not to mention the efficiency of producing coal is not uniformly distributed geographically or by population within the nation itself).

    (Continued...)

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    Re: "Free Trade" OR "Protectionism"

    Quote Originally Posted by teaser47401
    Money, free of national boundaries, seeks absolute advantage regardless of nationalistic concerns. … and while that stored labor (money) may move freely across international boarders, a country’s population cannot.
    Again, you are applying political policy to economic theory. Workers are somewhat immobile due, primarily, to political restrictions rather than economic law. Economic law suggests that coal producers will logically location themselves at an efficient distance from both the natural resources and the consumers. Economic law (and comparative advantage) only views political boundaries as additional encumbrances to trade. Furthermore, it recognizes that trade is ultimately conducted by individuals only. Therefore, all trade should be considered “foreign” trade.

    What this means is that from the standpoint of comparative advantage, it makes little difference if a person lives across the street or across the globe; one person will have a competitive edge over another based on the various environmental and individual factors. The reason why the workforce tends to be immobile is due to political restrictions placed on the freedom of movement by individuals. The very basis of power for governments is their ability to restrict the status and movement of individuals. But this has nothing to do with economic theory; political restriction does not invalidate economic law.

    Quote Originally Posted by teaser47401
    Advances in Science, Agriculture and Engineering have made it unnecessary for the entire population to work in order to fill the material needs of mankind. Comparative Advantage and in fact economic theory in general, is based on the assumption that more is better.
    You are misunderstanding the concepts here. Yes, demand is “unbounded”. However, regardless of how advanced technology becomes, all demand will never be satisfied. As society has advanced, the ability to meet basic demands has become relatively simple. For many people around the world, the prospect of obtaining enough food and water for basic survival is not even a question. As lower order demands are met, humans are able to focus their attention on higher demands. I want a big house, a nice car, fancy clothes, luxurious vacations, et cetera. These higher order demands can never be satisfied. The amount of money in the world is not the limiting factor; the reason demand will never be satisfied is due to a scarcity of resources.

    Because resources are scarce, businesses must not only determine what consumers want, but they must determine how much of it they want and how much they are willing to pay for it. So your claim that “[t]he problem is no longer one of resource allocation” is absolutely wrong. Every single bubble, bust, and boom is the result of improper resource allocation. Consider the housing crash. Builders and investors assumed that people demanded more and more housing (which they probably did), but failed to consider the other things people also desired. Prices are a rough approximation of how highly people demand certain goods.

    So getting back to your claim, economics is not based on the idea that “more is better” so much as the idea that demand is never satiated. There is a big difference. It is easy to confuse this endless desire for comfort with greed and materialism since those goods which derive comfort are generally physical and cost money. Which leads us to your next claim:

    Quote Originally Posted by teaser47401
    The problem is no longer one of resource allocation. It is one of distribution and capitalism has no mechanism for distributing goods and services to those with nothing to barter.
    I think you mean “nothing to trade” since capitalism is a system based on a medium of exchange as opposed to a barter system based on goods in kind. No biggie.

    There is an unfortunate (though understandable) desire to divide the economy into various classes. While it is certainly helpful during certain thought experiments to separate production from distribution, there is no economic difference between the two and they are indissoluble. Again, let us consider a simple hypothetical example.

    While the availability of adequate food and water in America is, as a whole, plentiful and cheap, this is not the case in much of Africa. Why is this so? The level of unemployment in Africa ought to be more than enough to offset the unavailability of food and yet they continue to have food shortages. Nature has seen it fit to make much of the land in Africa not terribly suitable to agriculture. This means that they (again, as a whole) must concentrate on other areas in which they might have an advantage. Ignoring the unfortunate lack of adequate property rights and other political considerations for the moment, the sheer numbers of unemployed workers is the most immediate and obvious competitive advantage.

    So let’s go back to the automotive industry. Roughly guessing, American auto workers probably make around $25-40 per hour depending on their job and experience. That could feed an entire village in Africa! If Ford were to move its assembly plants to Africa, it could conceivably reduce the cost of a vehicle by half. This would have a number of effects. First and foremost, it would dramatically increase the well-being of Africans. The plant workers would have more money to spend on goods which would drive the local economies. Secondly, it would free up an enormous amount of money for American consumers who purchase new cars. This would allow them to focus on other personal wants and needs of a more leisurely and luxurious nature, thus spurring innovation and expansion in these new industries. The displaced American workers could easily be relocated to the African plants in managerial capacities and/or assimilated into other industries.

    Quote Originally Posted by teaser47401
    Capitalism will insure the best and the brightest are rewarded, but capitalism has no need for the rest of the population. The gap between the rich and the poor will continue to widen as the middle class is pushed up or down the economic ladder, with the vast majority being pushed down.
    Capitalism has a “need” for every person on the planet. I see the poor and undeveloped areas of the world as a potential treasure trove of wealth. The reasons why there is such an enormous gap in wealth throughout the world is due to political restriction. The issues are fascist in nature, not economic. If the artificial political barriers placed around geographic locations were to fall, the entire world would experience an enormous explosion of wealth and well-being.

    Quote Originally Posted by teaser47401
    Eventually the unemployed populace of our nation will demand the government provide for their needs. America will become a welfare nation paid for by the few who give the unemployed just enough to stave off revolution. The result will be socialist America with its populace dependant on its government to meet their basic needs.
    This is already the reality for America. Less than half of Americans contribute even a penny to income taxes and the continual issuance of nanny-state doctrine from Washington proves the overall consensus of Americans. They are lazy, scared, and stupid. America is home to the most well-armed slaves in the entire world. While the fascist rulers continue to distract the populace with the farce of choosing their own destiny, they sit back and allow the slaves to clamor for more chains to be lavished on their neighbors while their neighbors do the same. The result is one of the most oppressed nations in the world being filled with idiot who pretend they are free. Such a sad outcome.

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    Re: "Free Trade" OR "Protectionism"


    We're not trading with them now!

    Quote Originally Posted by Kandahar View Post
    Anyone who says they support free trade, but only if other countries adhere to American labor standards, doesn't actually support free trade at all.

    To highlight the absurdity of this demand, let's consider a hypothetical situation: Suppose we discovered a previously-unknown island nation which was fabulously wealthy. In this country, the GDP per capita is $500,000 and people work an average of 10 hours per week. When they see our backwards American civilization, they take pity on us...they refuse to trade with us until we fix our inhumane work conditions (40 hours a week is just cruel), and pay our workers a living wage (at least $200,000 per year). Would their self-righteous finger-wagging benefit us in any way whatsoever? Of course not. We just wouldn't be able to trade with them at all, and it would do absolutely nothing to bring our standard of living up to match theirs.

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    Re: "Free Trade" OR "Protectionism"

    Quote Originally Posted by ttwtt78640 View Post
    You can look at the flip side too. If a pair of Chinese shoes costs $20, and the U.S. shoes cost $100, then you can either go barefoot for a year and "save up" or buy Chinese shoes and be happy. This is the Walmart argument, in a nut shell. Sure, a few more U.S. jobs would be guaranteed by blocking global competition, but at what cost to ALL U.S. consumers?
    Poor people put things in layaway, use Fingerhut catalogs, buy at second hand stores, buy b-grade shoes, go to closeout stores, go to second hand stores. Poor people have been doing this as for as long as these things have existed. Many of those US consumers work in factories and as such have money to go buy many American made products. I do not know about but every 20 dollar pair of shoes I have ever bought are wears out a lot faster than 80 dollar shoes.20 dollar shoes wear out so much easier than 80 dollar should you could have bought a 80 dollar pair of shoes that will last a whole lot longer than 20 dollar shoes. So I do not buy 20 dollar shoes anymore.

    That $80 extra that you spent buying those "patriotic", made in USA, shoes is $80 that you will not spend on other goods and services, and for very, very little gain in U.S. employment.
    Buying outsourced products is very little gain for US employment. So its a help one American company or a dozen or so Chinese companies.Buying American products doesn't help the Chinese Strengthen it's military.
    Last edited by jamesrage; 07-03-12 at 05:57 PM.
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    Re: "Free Trade" OR "Protectionism"

    Quote Originally Posted by Kandahar View Post
    Anyone who says they support free trade, but only if other countries adhere to American labor standards, doesn't actually support free trade at all.

    To highlight the absurdity of this demand, let's consider a hypothetical situation: Suppose we discovered a previously-unknown island nation which was fabulously wealthy. In this country, the GDP per capita is $500,000 and people work an average of 10 hours per week. When they see our backwards American civilization, they take pity on us...they refuse to trade with us until we fix our inhumane work conditions (40 hours a week is just cruel), and pay our workers a living wage (at least $200,000 per year). Would their self-righteous finger-wagging benefit us in any way whatsoever? Of course not. We just wouldn't be able to trade with them at all, and it would do absolutely nothing to bring our standard of living up to match theirs.
    Yeah...how many bombs does that island have?
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    Re: "Free Trade" OR "Protectionism"

    Quote Originally Posted by Ikari View Post
    Yeah...how many bombs does that island have?
    So your solution is to bomb other countries in order to improve their working conditions? Umm. That MIGHT be a little counterproductive.

    If it was as easy as just passing a law guaranteeing everyone a good salary and good working conditions, virtually every country in the world would have already done so. Do you think it would help our wages if we just arbitrarily raised the minimum wage to $200,000 per year? If not, then perhaps you can see why developing countries don't just pass a law mandating that everyone earns a "living wage" (i.e. what some American who has never been to their country thinks they should earn.)

    To improve the wages and working conditions in other countries, trade MORE with them, not less. Mandating unreasonable conditions as a prerequisite for trade will only ensure that we trade less with them.
    Last edited by Kandahar; 07-03-12 at 06:21 PM.
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