View Poll Results: Should there be Tariffs?

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  • YES! Bring back jobs to America!

    19 38.00%
  • No! Free Trade! Its good for the US in the long run

    23 46.00%
  • Tariff Companies in MOST cases!

    4 8.00%
  • Tariff Companies in a very select few cases

    3 6.00%
  • OTHER / I dont know

    1 2.00%
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Thread: Does America Need Tariffs on US Corporations?

  1. #111
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    Re: Does America Need Tariffs on US Corporations?

    Quote Originally Posted by phattonez View Post
    If it was worthwhile then why wouldn't foreign investors just bring the industries here themselves? And just because we've had tarriffs and industries have done well does not mean that the tarriffs were worthwhile. Who's to say it wasn't mere coincidence that agriculture and manufacturing expanded. Maybe they would have done that if left alone. Furthermore, how do we quantify the negative effects that this has on other industries (and consumers as well)?
    Because it is an infant industry. You are trying to side step the entire argument. The industry has not reached its full potential. I am not rejecting the benefits of comparative advantage, I am saying that barriers are not allowing that industry to develop.

    Ricksfolly has a good point, since this policy is much harder to do in practice, but I do not think the basic principle I am getting at is wrong.

  2. #112
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    Re: Does America Need Tariffs on US Corporations?

    Quote Originally Posted by ricksfolly View Post
    Ok, but who decides what, when, and how much? You may have to create another government bureau.

    ricksfolly
    Hasn't it historically just been done by congress?

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  3. #113
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    Re: Does America Need Tariffs on US Corporations?

    Quote Originally Posted by drz-400 View Post
    Because it is an infant industry. You are trying to side step the entire argument. The industry has not reached its full potential. I am not rejecting the benefits of comparative advantage, I am saying that barriers are not allowing that industry to develop.
    Could I ask you to read the "Petition of candlestickmakers" by Frédéric Bastiat? It's short and very "illuminating" on this subject.

    Bastiat's famous Candlestick makers' Petition

    Who shall ascend the hill of the Lord? And who shall stand in his holy place? He who has clean hands and a pure heart, who does not lift up his soul to what is false, and does not swear deceitfully. Psalm 24
    "True law is right reason in agreement with nature . . . Whoever is disobedient is fleeing from himself and denying his human nature [and] will suffer the worst penalties . . ." - Cicero

  4. #114
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    Re: Does America Need Tariffs on US Corporations?

    Quote Originally Posted by phattonez View Post
    Could I ask you to read the "Petition of candlestickmakers" by Frédéric Bastiat? It's short and very "illuminating" on this subject.

    Bastiat's famous Candlestick makers' Petition
    I am not denying comparative advantage, I am not saying we should use protectionism to increase employment, I am not saying we should use protectionism to make competition more fair, I am not saying we should protect the industry indefinetly.

    I am saying, if a firms average cost decreases with its size (economies of scale), the firm has large barriers to entry, and the industry can become competitive at a global scale if we allow it to create economies of scale, a temporary tariff can allow a industry currently producing under its potential to reach its potential, and thus shift our PPF outward. This would be beneficial to the economy.
    Last edited by drz-400; 09-22-10 at 09:30 PM.

  5. #115
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    Re: Does America Need Tariffs on US Corporations?

    It would be beneficial independent of whether or not the tarriff is put into place. If it is a worthwhile venture, then someone with a lot of capital (such as someone who runs the same industry that you want to develop in another country) would invest it here. If they're not doing it, then it probably isn't worth developing here. Once the tarriff is put into place, that industry benefits while all other industries and consumers suffer. But is it worth the payoff? Consider the fact that once the tarriff is removed that production will tend toward where the market dictates it should be. So if it's not developing on its own (meaning that it's probably not worthwhile), and if after the tarriff is removed production will simply revert to where it should be, then I don't see the benefit in these protectionist policies.

    Who shall ascend the hill of the Lord? And who shall stand in his holy place? He who has clean hands and a pure heart, who does not lift up his soul to what is false, and does not swear deceitfully. Psalm 24
    "True law is right reason in agreement with nature . . . Whoever is disobedient is fleeing from himself and denying his human nature [and] will suffer the worst penalties . . ." - Cicero

  6. #116
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    Re: Does America Need Tariffs on US Corporations?

    Since I like finding quotes since other people have stated these concepts much clearer than I can:

    Quote Originally Posted by Robert P. Murphy
    The infant industry proposals notwithstanding, the free market contains a mechanism by which firms can suffer short-run losses so long as they are compensated by eventual long-run profits. That mechanism is simply a loan. Plenty of new firms, especially sole proprietorships, don't make money in their first few years of operation. But so long as the present value of the firm's expected future cash flows is positive, the firm's owners should be able to borrow money to finance the first few years as they develop experience, name brand trust, etc.

    If a firm or group of firms can't achieve funding from private investors to go ahead with their projects because the present values of their ventures are negative, then that is the market's way of saying that their schemes would squander valuable resources in the short run without sufficiently compensating gains in the long run. The advocate of a tariff to promote an infant industry is thus saying that he or she knows better how to determine intertemporal tradeoffs than the average person in his decisions to borrow or lend money at different rates of interest.
    Some Subtler Arguments for Tariffs - Robert P. Murphy - Mises Daily

    Who shall ascend the hill of the Lord? And who shall stand in his holy place? He who has clean hands and a pure heart, who does not lift up his soul to what is false, and does not swear deceitfully. Psalm 24
    "True law is right reason in agreement with nature . . . Whoever is disobedient is fleeing from himself and denying his human nature [and] will suffer the worst penalties . . ." - Cicero

  7. #117
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    Re: Does America Need Tariffs on US Corporations?

    Quote Originally Posted by phattonez View Post
    Since I like finding quotes since other people have stated these concepts much clearer than I can:



    Some Subtler Arguments for Tariffs - Robert P. Murphy - Mises Daily
    I am not so sure this would always be the case and I am not claiming the I am smarter than the market participants, but I can come up with a few example contra to that argument.

    For example, when a large barrier of entry exists, maybe a large sunk cost, then this risk might deter any more investment if one does invest and the short run costs (due to economies of scale, r&d, etc) were high.

    Also, if other foriegn governments are promoting growth in a specific, high productivity industry for example, we might loose our competitive advantage in that industry. Comparative advantage would still apply, and we would still find goods (low wage goods) to export, but we would not get comparative advantage in the high productivity industry we would have otherwise had. The industry is no longer operating at its potential.

  8. #118
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    Re: Does America Need Tariffs on US Corporations?

    Even if other countries use protectionism, it doesn't matter because their other industries necessarily become weaker.

    And the barrier of entry isn't a concern if the long run gains outweigh the short-term costs. The market would perform it if it saw a potential profit.

    Who shall ascend the hill of the Lord? And who shall stand in his holy place? He who has clean hands and a pure heart, who does not lift up his soul to what is false, and does not swear deceitfully. Psalm 24
    "True law is right reason in agreement with nature . . . Whoever is disobedient is fleeing from himself and denying his human nature [and] will suffer the worst penalties . . ." - Cicero

  9. #119
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    Re: Does America Need Tariffs on US Corporations?

    Quote Originally Posted by phattonez View Post
    Even if other countries use protectionism, it doesn't matter because their other industries necessarily become weaker.

    And the barrier of entry isn't a concern if the long run gains outweigh the short-term costs. The market would perform it if it saw a potential profit.
    This does not address my points at all. You are trying to side-step the whole argument again.

    If other countries use protectionism to promote growth in a certain high productivity industry, in those industries it will gain a competitive advantage, and we will loose the comparative advantage we would have had otherwise. In turn we would get comparative advantage in lower wage goods, but now that high productivity industry is operating below its potential. Not saying we need to protect the already matured (maybe past mature) auto industry, but I think there is some evidence of this happening (when comparing with japan).

    The barrier of entry is a concern if it is large (large short term costs) if sunk costs exist. Despite the fact that there is a potential for profit, the large up front costs that were made to get the market going could deter further investment. People prefer avoiding losses, as opposed to acquiring gains.
    Last edited by drz-400; 09-23-10 at 03:21 PM.

  10. #120
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    Re: Does America Need Tariffs on US Corporations?

    Quote Originally Posted by drz-400 View Post
    If other countries use protectionism to promote growth in a certain high productivity industry, in those industries it will gain a competitive advantage, and we will loose the comparative advantage we would have had otherwise.
    Agreed, but not entirely as I will explain below.

    In turn we would get comparative advantage in lower wage goods, but now that high productivity industry is operating below its potential. Not saying we need to protect the already matured (maybe past mature) auto industry, but I think there is some evidence of this happening (when comparing with japan).
    I wasn't being non-responsive before, you just didn't understand the point that I was making. So what if the country has protectionism? Eventually the protectionism has to end and production will shift to where it is most beneficial. Perhaps the best example that I can point you to would be what if the industry were subsidized? It would be a permanent problem and would force the country to find other industries to develop because it could not compete with the subsidized insutry. The free trade country will then have to shift to other industries. Okay, accepted. But is this a bad thing? People will still be making money and they will have great cheap goods from that other country. Consumers would seem to win out big time. How about the subsidizing country? Well the people there will have to pay for that industry, so they will experience a big loss everywhere else.

    So which situation seems better, the country with artificially cheap goods and now just has to find other productive things to do, or the country that subsidizes a certain industry by taking from everyone else who produces? Seems clear to me.

    The barrier of entry is a concern if it is large (large short term costs) if sunk costs exist. Despite the fact that there is a potential for profit, the large up front costs that were made to get the market going could deter further investment. People prefer avoiding losses, as opposed to acquiring gains.
    What you're saying is basically trying to deny the possibility that people would ever take a big loss and invest in something for a reward in the future. If that is true, then how did we ever start building billion dollar hotels? I mean, look at those sunk costs associated with such a venture and the huge amount of capital you would have to gain to start such a project. Yet it is done, and they keep getting built. Barrier to entry would only be a problem in an economy that had no idea how to use loans or attract capital.

    Who shall ascend the hill of the Lord? And who shall stand in his holy place? He who has clean hands and a pure heart, who does not lift up his soul to what is false, and does not swear deceitfully. Psalm 24
    "True law is right reason in agreement with nature . . . Whoever is disobedient is fleeing from himself and denying his human nature [and] will suffer the worst penalties . . ." - Cicero

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