Thread: Is Free Trade Really Free?

Originally Posted by Quinn

I'm sorry, I'm not interested. I have a Libertarian friend here on this site, if I have any pressing questions about modern day Libertarianism, I'll direct them toward him.

Ok, that is fine. I disagree with your choice of only talking to one Libertarian exclusively, for libertarians do not always agree on everything and may use different arguments, but that is your choice, not mine.

& no offense intended, I'm just not interested. I'm exercising my freedom not to engage in discussions which I feel lead nowhere.

None taken. But with all due respect, if you always assume discussions wont go anywhere, they probably wont.

Although feel free to point out any mistakes in spelling, grammar, reasoning, etc. I make. I appreciate.

Despite my sarcastic last statement, I honestly was sincere in asking you to point out logical fallacies I may stumble into. But that will not be necessary, and I will not egg you on to debate me, so enjoy whatever else you may do with your time (so long as it does not involve writing a book on free trade).

No, thank you.

Originally Posted by Liberalis

Ok, I see what you mean now. That is a fair criticism (albeit exaggerated) because it has some truth to it, but the conclusion is off (in my opinion and the opinion of free traders).

If it is cheaper to import foreign goods, there may still be some who produce the same goods, but likely less as you say (potentially much less). This is all assuming that the goods are of the same quality (if they are cheaper because they suck, plenty of people will still buy the more expensive goods, as I am sure you would agree).

I would disagree. You may have some buyers for domestic goods based on quality (if they are indeed any better) or even for just patriotic feel-good reasons.

I use modern China and Taiwan as an example in this respect. Most of our consumer goods come from these countries and are of low quality, yet most people still buy them and even if given a choice between a cheap import and a more expensive domestic good, people will still usually buy the cheaper import because they dont have a sizable budget.

The reason fewer people produce the goods is because they simply are not as efficient as the foreign country is at supplying them. Often this has to do with higher costs of production in developing countries (including higher wages, etc).

Not true. Cost of production is usually lower in developing countries, hence why many US corporations outsource production to these countries.

As for the idea that the economy as a whole will be hurt:
Say the fur coat industry is under heavy protection, and free trade becomes the new policy. That industry suffers the worst case scenario, and it cannot compete whatsoever in the foreign markets. It goes bankrupt, laying off 1 million workers. Those workers lose their jobs, obviously a negative. The business owners also lose their jobs and will be forced to go somewhere else. However, they will probably end up ok and will likely get decent paying jobs in another industry. So the main concern is the domestic economy and those workers.

If you're talking about one industry (and an industry producing luxury goods at that), then yes it wont have a long-term negative impact.

But when you're talking about undercutting large portions of the economy, it's very different. Sticking with the example of food, a large amount of many developing countries' population were and in some cases still are farmers. With an influx of cheap food from overseas, it is now more expensive to grow food domestically and purchasing food grown domestically is more expensive. Thus you now have a massive segment of the population who now have no way to make a living and have no training to get other work. Additionally, there really arent any other places to work. There is often very little heavy industry established and what there is wont absorb a double digit percentage of the unemployed population, especially if they are essentially unskilled.

So you now have a massive segment of the population that cannot make a living, they dont have the skills to make them valuable to other industries nor do they have the resources to gain new skills through schooling, and there aren't enough industries that require unskilled labor around to absorb this influx of new labor.

What you end up having is outside companies coming in and soaking up this labor by paying them dirt wages and keeping that country on a lower plane of economic development because the money coming into the country is going to the top of society, not the bottom.

Originally Posted by Hoplite

I would disagree. You may have some buyers for domestic goods based on quality (if they are indeed any better) or even for just patriotic feel-good reasons.

I use modern China and Taiwan as an example in this respect. Most of our consumer goods come from these countries and are of low quality, yet most people still buy them and even if given a choice between a cheap import and a more expensive domestic good, people will still usually buy the cheaper import because they dont have a sizable budget.

I am not sure we are actually in disagreement over this. I agree with all of the above. I would add that wealthy people would be more likely to buy higher quality products if they are domestically produced, so there will always be that market.

Not true. Cost of production is usually lower in developing countries, hence why many US corporations outsource production to these countries.

I made a typo, sorry. I meant developed countries.

But when you're talking about undercutting large portions of the economy, it's very different.

It isn't undercutting the economy at all. It is simply allowing the economy to operate at a higher efficiency. In my example I only used two industries to prove a point (the fur coat and the shoes). But it really doesn't matter. The effects will be the same. But I do want to clarify one point. I would not immediately end all protectionism at once. That is the mistake of ignoring the short term. Tariff rates would have to be gradually lowered to give companies a chance to try and boost their competitiveness or slowly go out of business so there isn't massive unemployment as workers find different work and production is restructured.

Sticking with the example of food, a large amount of many developing countries' population were and in some cases still are farmers. With an influx of cheap food from overseas, it is now more expensive to grow food domestically and purchasing food grown domestically is more expensive. Thus you now have a massive segment of the population who now have no way to make a living and have no training to get other work. Additionally, there really arent any other places to work. There is often very little heavy industry established and what there is wont absorb a double digit percentage of the unemployed population, especially if they are essentially unskilled.

I think it is important to note that those African countries that have the most protectionism in the food industry have the highest starvation rates.
The developing world has an abundance of unskilled, cheap labor. This unskilled labor is very valuable in manufacturing. To say they are useless is not true, but they have less opportunities because protectionism prevents them from getting jobs they otherwise could have gotten. Food produced in Africa should be incredibly competitive on the market.

The primary reason for less competitive food markets from Africa is government. Africa has huge potential for agriculture, yet its people are starving. This makes no sense. The reason is because of government run marketing boards. These marketing boards have a monopsony on farm goods, meaning they are the only buyers farmers can legally sell to. That already is a lack of free trade within the country. These bureaucracies, acting as the sole buyer, set the price they buy at lower than it would be if farmers could sell to anyone else, meaning that farmers are getting low return on their crops and are basically highly taxed. The marketing boards then sell to the world market at a higher price. The result is plummeting food production. Why work in the field to get only 2/3 the market price of your good? There is more hunger because there is not enough food. Africa, despite its resources, has a food shortage because of this. Farmers are forced to remain at subsistence level because they are forced to sell to the local marketing board at unsustainable prices. They will be poor, and their kids probably wont go to school as a result. Now African countries rely on imports for food, which really is unbelievable when you think about the resources they have. All of this is because of a price fixing government bureaucracy. Remove that and you will get massive increases in production. If we engage in free trade with Africa, they can expand production even more, providing food for a larger world market. Protectionism will only cut them off from the world and reduce their market. The problem is lack of free markets and lack of democracy in Africa. I usually stray away from using Africa as an example because of the hundreds of other factors that cause economic growth problems, but you brought up developing nations and I had to point this out.

What you end up having is outside companies coming in and soaking up this labor by paying them dirt wages and keeping that country on a lower plane of economic development because the money coming into the country is going to the top of society, not the bottom.

And without those foreign companies their wages would be higher? I don't think so. The reason African labor works for these companies disproportionately is because they find it in there better interest to work for them. Marketing boards probably contribute to this. They can get a better wage with the companies than with the marketing boards.

Originally Posted by Liberalis

I am not sure we are actually in disagreement over this. I agree with all of the above. I would add that wealthy people would be more likely to buy higher quality products if they are domestically produced, so there will always be that market.

I'm contending people will usually pick price over quality if given the option, especially in today's economy.

The wealthy wont always "buy local" and generally dont know enough about what they're buying to make an informed decision and buy higher quality products produced locally. Again that's making the assumption that locally produced products are any better. You cant balance a market on wealthy people, at least not a very big one. There's a reason that goods marketed for the wealthy are made in limited quantities; there isnt a big demand for them.

It isn't undercutting the economy at all.

Importing foreign goods that sell for cheaper than the cost of production for the goods domestically is undercutting that market. If that market is a significant part of the economy, like food, then you are undercutting the economy.

It is simply allowing the economy to operate at a higher efficiency. In my example I only used two industries to prove a point (the fur coat and the shoes). But it really doesn't matter. The effects will be the same. But I do want to clarify one point. I would not immediately end all protectionism at once. That is the mistake of ignoring the short term. Tariff rates would have to be gradually lowered to give companies a chance to try and boost their competitiveness or slowly go out of business so there isn't massive unemployment as workers find different work and production is restructured.

How is it efficient to put large sectors of your economy out of work?

I think it is important to note that those African countries that have the most protectionism in the food industry have the highest starvation rates.
The developing world has an abundance of unskilled, cheap labor. This unskilled labor is very valuable in manufacturing. To say they are useless is not true, but they have less opportunities because protectionism prevents them from getting jobs they otherwise could have gotten.

I'm going to refrain from commenting on the protectionism aspect other than to say correlation does not equal causation.

Such labor is valuable in manufacturing, except they have nothing to manufacture. Consumer goods can be imported cheaper than they can be produced domestically, so few manufacturing jobs are present.

Food produced in Africa should be incredibly competitive on the market.

Except it isnt because they cant compete with government subsidized food from places like the US.

The primary reason for less competitive food markets from Africa is government. Africa has huge potential for agriculture, yet its people are starving. This makes no sense. The reason is because of government run marketing boards. These marketing boards have a monopsony on farm goods, meaning they are legally the only buyer allowed. That already is a lack of free trade within the country. These bureacracies, acting as the sole buyer, set the price. They set the price lower than it would be, meaning that farmers are getting low penalized and basically highly taxed. They then sell to the world market at a higher price. The result is plummeting food production. Why work in the field to get only 2/3 the market price of your good? There is more hunger because there is not enough food. Africa amazingly has a food shortage because of this. Farmers are forced to remain at subsistence because they are forced to sell to the local marketing board. They will be poor, and their kids probably wont go to school as a result. Now African countries rely on imports for food, which really is unbelievable when you think about the resources they have. All of this is because of a price fixing government bureaucracy. Remove that and you will get massive increases in production. If we engage in free trade with Africa, they can expand production even more, providing food for a larger world market. Protectionism will only cut them off from the world and reduce their market. The problem is lack of free markets and lack of democracy in Africa. I usually stray away from using Africa as an example because of the hundreds of other factors that cause economic growth problems.

Which African countries specifically are you implicating in this, because not all function the same way and not all have the organization to function this way.

Originally Posted by Liberalis

I am not talking about fair trade. I am talking about free trade. NAFTA and the WTO are in no way instruments or institutions that ever embodied the philosophy of free trade. Argue they caused problems all you want, I would agree with you. But they aren't free trade. That is just the reality.

We will not call it free trade, call it trade with such low tariff's that it encourages the import of goods into the United States, because of the lack of substantial tariffs, or nonreciprocal trade. Caused by NAFTA and China's entry into the WTO, and I will agree with you, it surely is not free trade.

I have no idea what you mean by inflated valuations, but really that is irrelevant. You are arguing that free trade caused a loss of jobs in this current recession because of NAFTA and WTO. But the US currently does not engage in free trade, and those institutions are examples of protectionism and mercantilism. So none of that has to do with the effects of free trade.

Trade with such low tariff's that it encourages the import of goods into the United States, because of the lack of substantial tariffs, or nonreciprocal trade, caused a loss of income from the bottom 80% of Americans. An approximate value of about 740 billion. The loss of high paying jobs to low wage markets, and the jobs they created were gone. Rapid increases in home valuations were based upon what the market would bear .. inflated (end of cycle). Lower income levels could no longer sustain the high valuations. The housing/speculative bubble created problems for banks from defaulted loans and to much building. I believe this to be more accurate then resource allocation and malinvestment, as there is at least empirical evidence to support speculative bubbles. Not saying it isn't a factor, but income supports valuations. An inflated valuation is and end of cycle bust.

Free trade is not the policy of our current government. The right to property does not mean the right to move to China. Property includes everything from houses to computers to food to toys. Having property rights means being able to exchange that property for something else if you so please. You are correct that trade free of tariffs is not a right. The constitution allows for tariffs. But tariffs then were used for revenue, not protectionism.

Trade with such low tariff's that it encourages the import of goods into the United States, because of the lack of substantial tariffs, or nonreciprocal trade (thanks copy and paste), is the policy of our government. Lack of tariffs is not a right, and tariffs have been used for protectionism. I enjoy reading about the protectionism prior to the Civil War, it's interesting seeing motivations for protectionism. Wiki below

Protectionism - Wikipedia, the free encyclopedia

That was a rhetorical question meant to undermine your use of the fallacy "appeal to tradition". Just because we have done something in the past does not mean that is the way it should be done.

I want to agree, with you here. I was initially receptive to trade with such low tariff's that it encourages the import of goods into the United States, because of the lack of substantial tariffs, or nonreciprocal trade. Since it has damaged our economy so badly I won't support it. All the western countries are begging for a new Bretton Woods because they recognize, the damage.

When I said government did not subsidize inefficient industries, I was talking about free trade. If goods are cheaper, citizens have more money left over to spend on other goods. The industries they spend this money on will need to hire more workers. For a time, there will be a period of unemployment as workers and employers connect. But in the long run there should be no net unemployment caused by the removal of protectionist barriers.

I really recognize the benefits of cheaper goods, and the citizens who benefit having more cash. I disagree that financial capital will be invested for a correction of unemployment, from the removal of barriers. Any good investor will invest in the best opportunity for profit. That is not in America, as better opportunities exist overseas.

Do you mean costs or prices? Because costs imply costs of production, and that somehow higher costs of production encourage business expansion makes little sense. Prices reflect how much people value certain items over others. Costs determine how efficient one can make such items. If you are saying that tariffs raise costs of certain goods, allowing the domestic companies to produce those goods, you are correct. Competition is reduced by artificially high prices, allowing an inefficient use of resources to take place. But if those resources were freed up, there would likely be more production because efficient producers would be able to produce more than inefficient producers.

Tariffs place an additional cost on imports, which will effect their price at the point of sale. Competing plants in the US will not create exports it will allow for the creation of jobs, on goods intended for sale in the US. From experience I know my company kept capital investments down, to invest in brand new capital overseas (China). So not only do you have a difference in wages, more productive machines exist in China. So efficiency could be improved in the US, its just very selective, with the preference for low wage markets.

As for the first statement, you need to prove why free trade will decrease revenues or increase the cost of running government. As for the second, I don't know what you are trying to say.

If you make $50 hr as opposed to $10 hr, you will pay more taxes. Multiply some variable of an additional 6-7 million unemployed, and add another 8.5 million underemployed, and add the replacement jobs at lower wages (used to make $20 now working fulltime at $10). Decreased revenues. We will skip the Bush tax cuts for now but it is contributing to deficits.

Government has increased outlays for social services, food stamps, welfare, unemployment checks ..., due to the increase in qualifiers for such programs.

Again, that is circular reasoning. You are saying free trade is allowed across state lines because states believed it was in their interest that free trade should be allowed across state lines. Why is it in their interests, and why is it not in the interests of the US in the global sphere?

Interstate (US) and (International)-different animals, not every idea works the same for different situations.
It could be in the long term interests of the US if it would work.

Private life example. You own 3 small businesses, and decide to start a 4th. You invest in it for ten years, and it is losing money, money you have to take from your other 3 businesses. It is bleeding you dry. Do you continue to feed the failing business? 10 years ought to be able to show some sign of success.
Maybe you slow investment, maybe you close it.

I have no idea what you mean by valuations. Do you mean demand? Either way, this is irrelevant to the topic of free trade.

Trade with such low tariff's that it encourages the import of goods into the United States, because of the lack of substantial tariffs, or nonreciprocal trade, has everything to do with valuations. It effects the money supply that supports real estate valuations.

Is that inequality caused by free trade among the states? Poverty is caused by a decline in real wages or the decrease in the quality of production. I discussed free trade's effect on wages in the post directly below the one I am currently replying to.

I would say free trade amongst states causes income inequality in the states for a myriad of reasons.

The factors of production are land, labor, capital, and human capital. The efficiency of a business will depend on the quality of each factor, and how cheaply each factor can be obtained. If labor is very productive and of high quality, and with a high price (meaning high wages) the price is likely worth it. But if labor is very unproductive, but still for some reason commands the same high price, it will not be worth the price and will result in inefficiency. Wage rates are a part of efficiency. If wages are higher than the labor productivity, you have efficiency problems. If labor costs less, the extra money could be used in other areas to expand efficiency. I had trouble understanding your third and fourth sentences.

I never really thought high wage rates as efficiency problems, but I do get the applied savings being applied for other things ... profit, investment ...
My last blurb was merely a reference to preferred capital goods investment overseas.

Originally Posted by Hoplite

I'm contending people will usually pick price over quality if given the option, especially in today's economy.

I agree. But not always. And if it so happens that domestically higher quality, albeit expensive, goods exist, some people will likely still buy them if they can afford it.

The wealthy wont always "buy local" and generally dont know enough about what they're buying to make an informed decision and buy higher quality products produced locally. Again that's making the assumption that locally produced products are any better. You cant balance a market on wealthy people, at least not a very big one. There's a reason that goods marketed for the wealthy are made in limited quantities; there isnt a big demand for them.

Again, I don't disagree. And I was purposefully making that assumption to show that in some cases a small market may still exist because some goods can be marketed solely to the wealthy. I never said it would be large, or even significant, and I repeatedly said the market would get smaller with free trade if they couldn't produce the same quality goods at cheaper prices. Honestly, we are in agreement here.

Importing foreign goods that sell for cheaper than the cost of production for the goods domestically is undercutting that market. If that market is a significant part of the economy, like food, then you are undercutting the economy.

If the only reason a certain market is a large part of the economy is because it is protected by government, then it shouldn't be a large part of the economy. It is sucking up valuable resources at the expense of everyone else. The market was undercut when tariffs were introduced. Resources were sucked away from efficient industries to subsidize efficient ones. I used fur coats and shoes as an example, in which shoes were the more efficient industry. If a tariff was placed on fur coats when one did not exist so the market could grow, it would come at the cost of the shoe market. With more expensive coats, people would have less money to spend on the shoes. The shoe producers would have to lay off workers because the demand for shoes would decrease. Consumers would have less money to spend. Yes, a new industry is created with new jobs. But that industry only exists because it is subsidized, it is less efficient, and both consumers and the efficient industries that would have gotten the money lose out. Reallocating resources to their more efficient uses is not undercutting the market. The natural state of the market is free trade and exchange. How can you say that removing barriers to trade undercuts the market? All it is undercutting is the government's idea of what the market should be. It is undercutting the politics that goes into determining what industries are subsidized. It undercuts the moral hazard that encourages protected industries to lobby for higher tariffs rather than innovate, wasting resources and making them even more efficient. It undercuts the ability of politicians to gain votes by promising subsidies and protectionism at the expense of the consumer and efficient, domestic, exporting producers. That is what is being undercut, not the market.

How is it efficient to put large sectors of your economy out of work?

You are looking only at the short term, and you are looking only at the effect of one group. You have to look at both the short term and long term and the effects on all groups. Yes, if a tariff is immediately removed, the protected industry will most likely fail, go out of business, and its employees will lose their jobs. But you are making it seem like they will never get jobs again. The lost industry is not replaced by a black hole of economic inactivity. Production should actually increase, for because consumers have more money to spend, the efficient producers that do well without protections will get the money. They will increase employment. They will expand production, and that increase in production will further lower prices. But because radically changing protectionist policies will have substantial effects on employment and capital structure, it is vital that it comes with advanced warning and is done gradually. Ultimately, the workers laid off will find jobs again. Consumers will all have more money to spend, and real wages will increase. Efficient producers receive more resources which they will use more efficiently, allowing them to expand their production. Because they use resources more efficiently, there will be greater economic growth and a further rise of living standards.

I'm going to refrain from commenting on the protectionism aspect other than to say correlation does not equal causation.

You are correct. It does not. I will add though that because they cannot import cheaper food, they starve because of the inability to pay for food.

Such labor is valuable in manufacturing, except they have nothing to manufacture. Consumer goods can be imported cheaper than they can be produced domestically, so few manufacturing jobs are present.

That is true, at least for Africa. But developing Asia managed to succeed, so it shouldn't be impossible. To be honest, I haven't studied Africa too much. I only know a little about the government's farming policies. Foreign direct investment in Africa could be very beneficial (foreign companies setting up factories in Africa to access the labor) because it would give money for the African people as well as provide growth and production. Ultimately, this may lead to the ability for Africa to start its own companies. But the problem I think is again with African Governments. FDI is not very high in Africa because rulers can just nationalize foreign companies that exist there. The investment is lost.

Except it isnt because they cant compete with government subsidized food from places like the US.

Exactly. Subsidies, another form of protectionism by the US government, hurt foreign importers who may be more efficient and protect our less efficient farmers. I think farm subsidies should be ended.

Which African countries specifically are you implicating in this, because not all function the same way and not all have the organization to function this way.

Sorry, you are correct I was too general. I recently took a class that discussed the topic, so I was just going from the memory I had of it. I found that Zimbabwe and Nigeria have marketing boards, I haven't really looked into which others. But to my understanding, it has been a common practice throughout the continent.

Originally Posted by michael h

We will not call it free trade, call it trade with such low tariff's that it encourages the import of goods into the United States, because of the lack of substantial tariffs, or nonreciprocal trade. Caused by NAFTA and China's entry into the WTO, and I will agree with you, it surely is not free trade.

Ok, I guess I can agree with that. Except for one point. There are significant tariff reductions. But the benefit from those tariff reductions are jeopardized by the agreement’s snap-back provisions. Those permit pre-NAFTA tariff levels to be restored against imported items which cause or threaten serious injury to domestic industry. In other words, if an industry can't compete, tariffs will be raised under NAFTA. This article is an excellent reading on NAFTA and the WTO, a strong critique of them from the free trade side:
Why Managed Trade Is Not Free Trade | The Freeman | Ideas On Liberty

Trade with such low tariff's that it encourages the import of goods into the United States, because of the lack of substantial tariffs, or nonreciprocal trade, caused a loss of income from the bottom 80% of Americans. An approximate value of about 740 billion. The loss of high paying jobs to low wage markets, and the jobs they created were gone. Rapid increases in home valuations were based upon what the market would bear .. inflated (end of cycle). Lower income levels could no longer sustain the high valuations. The housing/speculative bubble created problems for banks from defaulted loans and to much building. I believe this to be more accurate then resource allocation and malinvestment, as there is at least empirical evidence to support speculative bubbles. Not saying it isn't a factor, but income supports valuations. An inflated valuation is and end of cycle bust.

Free trade allows people to buy goods cheaper, as you admit and agree with, so it raises real wages. Where are you getting those statistics? I still don't know what you mean by the specific term "inflated valuations." Do you mean people value something higher than they justifiably should? I also don't really follow your line of reasoning. I think you are missing a few steps. You went from saying trade is freer and therefore income is decreased without saying why. That whole paragraph confuses me. I don't know if it is because the wording is funny, or if it is because the argument is not logically connected fully because you assume I know more about your position than I do. I honestly have never heard the theory that the business cycle is caused by free trade.

Lack of tariffs is not a right, and tariffs have been used for protectionism. I enjoy reading about the protectionism prior to the Civil War, it's interesting seeing motivations for protectionism. Wiki below

Protectionism - Wikipedia, the free encyclopedia

I know. I said lack of tariffs is not a right in the quote you were responding to. You should also look into the Smoot-Hawley tariff prior to the Great Depression. What can you say about that?

I really recognize the benefits of cheaper goods, and the citizens who benefit having more cash. I disagree that financial capital will be invested for a correction of unemployment, from the removal of barriers. Any good investor will invest in the best opportunity for profit. That is not in America, as better opportunities exist overseas.

Not in all industries. Keep in mind that foreign nations invest money in the US as well, and foreign consumers will buy US exports. Don't only look at the US side of the equation. Other countries will be sending money our way. You are assuming that investors in a free trade environment will always invest outside of the US. That is not true. Better opportunities exist overseas, but there are plenty of opportunities domestically as well. Also do not forget that because free trade brings cheaper goods people will therefore have more money. The reason that is important is because that money can be spent on other goods, and where that money goes production will increase to meet the new demand. I don't think you can assume all investment and money will go overseas. Free trade does not mean the US will produce nothing and only buy from other countries. It only means we will produce more of what we are efficient at producing, and less of what we are inefficient at producing. That is the goal of free trade.

Tariffs place an additional cost on imports, which will effect their price at the point of sale. Competing plants in the US will not create exports it will allow for the creation of jobs, on goods intended for sale in the US. From experience I know my company kept capital investments down, to invest in brand new capital overseas (China). So not only do you have a difference in wages, more productive machines exist in China. So efficiency could be improved in the US, its just very selective, with the preference for low wage markets.

I don't follow that reasoning at all, maybe it is because the grammar is off. For example, the second sentence is very confusing. And if your company invested in capital overseas, it did not keep capital investments down. It just invested them somewhere else, so I am not sure what that meant other than stating you moved investments overseas. If both more productive machines and cheap labor exist in China, then if the US wants to compete in those industries it should be investing in new technologies and innovating. Instead, they seek to ensure that they provide customers the best deal not by improving the package they provide, but by getting the government to hamper the ability of their competitors to provide a better deal. To me that is the easy way out, ignoring reality at our expense.

If you make $50 hr as opposed to $10 hr, you will pay more taxes. Multiply some variable of an additional 6-7 million unemployed, and add another 8.5 million underemployed, and add the replacement jobs at lower wages (used to make $20 now working fulltime at $10). Decreased revenues.

Yes. We are in a recession and there are decreased tax revenues because more people are unemployed. That is basically what you said, but you didn't draw the specific connection to that and free trade.

Interstate (US) and (International)-different animals, not every idea works the same for different situations.
It could be in the long term interests of the US if it would work.

It does work. The economic case for free trade is essentially the case for voluntary exchange in general: no one freely enters into an exchange, whether as buyer or seller, unless he expects to emerge better off as a result of that exchange. Furthermore, the ability to exchange a single product one has produced for the many things one would like to consume makes possible the division of labor and the manifold expansion of production capacity that it permits. There is no economic reason why these gains do not apply equally to potential traders on different sides of national boundaries. (that is from the article). You still never say why trading across foreign boundaries is different than trading across state boundaries. In all of the cases, two individuals are trading with each other to get something they want. Political boundaries do not change the benefits of voluntary exchange.

Private life example. You own 3 small businesses, and decide to start a 4th. You invest in it for ten years, and it is losing money, money you have to take from your other 3 businesses. It is bleeding you dry. Do you continue to feed the failing business? 10 years ought to be able to show some sign of success. Maybe you slow investment, maybe you close it.

What does that have to do with trade across different political borders? What does that have to do with free trade at all?

Trade with such low tariff's that it encourages the import of goods into the United States, because of the lack of substantial tariffs, or nonreciprocal trade, has everything to do with valuations. It effects the money supply that supports real estate valuations.

By valuations do you mean demand?

I would say free trade amongst states causes income inequality in the states for a myriad of reasons.

Considering you have a myriad of reasons, I find it odd you did not mention a single one.

I never really thought high wage rates as efficiency problems, but I do get the applied savings being applied for other things ... profit, investment ...
My last blurb was merely a reference to preferred capital goods investment overseas.

Glad that was cleared up then. And thanks for clarifying the last blurb for me.

Originally Posted by Liberalis

I agree. But not always. And if it so happens that domestically higher quality, albeit expensive, goods exist, some people will likely still buy them if they can afford it.

Yes, some will, but not enough to support a large market.

Again, I don't disagree. And I was purposefully making that assumption to show that in some cases a small market may still exist because some goods can be marketed solely to the wealthy. I never said it would be large, or even significant, and I repeatedly said the market would get smaller with free trade if they couldn't produce the same quality goods at cheaper prices. Honestly, we are in agreement here.

I'm glad we're in agreement, but then we must also agree that since the market is so small, it doesnt have a large impact and must therefore be disregarded for the purposes of this exchange.

If the only reason a certain market is a large part of the economy is because it is protected by government, then it shouldn't be a large part of the economy.

Perhaps I am not making myself clear. In a developing nation, food is often the biggest market simply because no other markets have really developed yet. That isnt a product of government protection, it's a product of the natural circumstances. You seem to be assuming that many different kinds of markets are present.

You are looking only at the short term, and you are looking only at the effect of one group.

That short-term can become long-term if the conditions are right. Look at modern day Somalia. International fishing fleets have fished out most of the coastal waters that Somali fishermen used to make their living off of. Without the ability to practice the only marketable skill they have, many fishermen turned to piracy because it was a good way to make quick money. So you have a long-term problem developing from a short-term complication.

And I'm only looking at one group because that one group makes up the vast majority of that country. If 60% of your population are farmers (which is/was the case in some developing nations) and all of a sudden domestic farming is no longer a viable way to make a living, ~60% of your society is now going to be out of work.

You have to look at both the short term and long term and the effects on all groups. Yes, if a tariff is immediately removed, the protected industry will most likely fail, go out of business, and its employees will lose their jobs. But you are making it seem like they will never get jobs again. The lost industry is not replaced by a black hole of economic inactivity. Production should actually increase, for because consumers have more money to spend, the efficient producers that do well without protections will get the money. They will increase employment. They will expand production, and that increase in production will further lower prices. But because radically changing protectionist policies will have substantial effects on employment and capital structure, it is vital that it comes with advanced warning and is done gradually. Ultimately, the workers laid off will find jobs again. Consumers will all have more money to spend, and real wages will increase. Efficient producers receive more resources which they will use more efficiently, allowing them to expand their production. Because they use resources more efficiently, there will be greater economic growth and a further rise of living standards.

This works nicely in theory, but in practice when large segments of your society are out of work, your economy suffers because they are no longer earning money with which to buy things and keep the economy going. This is true in any economy, developed or not.

In a developing nation, you have people who may not be able to get other jobs because the job they had was something they've done for their whole lives. Their entire lives have been focused around this one occupation and they may not have other marketable skills and they dont have the resources to go to school or other training to get new skills the way we can in first world countries. If you've been a rice farmer for 30 years, you probably wont have the skills necessary to get another job if rice farming is no longer a viable way to make a living.

You are correct. It does not. I will add though that because they cannot import cheaper food, they starve because of the inability to pay for food.

And that inability to pay for food comes from a loss of livelihood brought on by free trade.

That is true, at least for Africa. But developing Asia managed to succeed, so it shouldn't be impossible. To be honest, I haven't studied Africa too much. I only know a little about the government's farming policies. Foreign direct investment in Africa could be very beneficial (foreign companies setting up factories in Africa to access the labor) because it would give money for the African people as well as provide growth and production. Ultimately, this may lead to the ability for Africa to start its own companies. But the problem I think is again with African Governments. FDI is not very high in Africa because rulers can just nationalize foreign companies that exist there. The investment is lost.

The Asian countries that are success stories also have certain things Africa, by and large, does not. Much of Africa is not suited for farming, much of Africa is too unstable to support a tourist economy, many African countries do not have natural resources on a large scale or they do not have the technology to develop those resources in a profitable way. There is a reason Africans were still hunter-gatherers at a time when the Europeans were colonizing new continents; Africa is not conducive to a modern economy because it does not have the raw ingredients for wide-spread long-term success. Geography is a cruel mistress.

That said, there are exceptions and the situation is changing, but by and large Africa does not have the kind of economy necessary to receive significant gain from free trade agreements.

Exactly. Subsidies, another form of protectionism by the US government, hurt foreign importers who may be more efficient and protect our less efficient farmers. I think farm subsidies should be ended.

I think we need to be careful before we decide to take the pruning shears to a program that was put in place to respond to a genuine need. I cant claim to have all the information or experience necessary to definitively make the call that it should go or stay, but I do think we need to be careful not to accidentally cut the branch off the tree that we're standing on.

Sorry, you are correct I was too general. I recently took a class that discussed the topic, so I was just going from the memory I had of it. I found that Zimbabwe and Nigeria have marketing boards, I haven't really looked into which others. But to my understanding, it has been a common practice throughout the continent.

It's cool, no one is perfect. We need to consider that Zimbabwe is currently experiencing hyperinflation. Nigeria has suffered many years of mis-management and a lack of proper infrastructure to grow its agricultural supply along with the population expansion. But, IIRC, Nigeria's agricultural sector still employs around 20% of the nation's workforce.

Originally Posted by Hoplite

Yes, some will, but not enough to support a large market.

Correct. I never said the market would be large.

I'm glad we're in agreement, but then we must also agree that since the market is so small, it doesnt have a large impact and must therefore be disregarded for the purposes of this exchange.

I agree, at least at this point now. I originally brought it up to discredit the idea that free trade will completely wipe out any remnants of a protected industry from the country. It may simply be reduced (however drastic the reduction may be).

Perhaps I am not making myself clear. In a developing nation, food is often the biggest market simply because no other markets have really developed yet. That isnt a product of government protection, it's a product of the natural circumstances. You seem to be assuming that many different kinds of markets are present.

I am not sure what I said that led you to think I was misunderstanding you. Of course food is not the sole market, but I agree that agriculture is the primary productive activity of African nations. I was stating that if an industry was unnaturally large solely because of protection, it was being sustained unjustifiably.

That short-term can become long-term if the conditions are right. Look at modern day Somalia. International fishing fleets have fished out most of the coastal waters that Somali fishermen used to make their living off of. Without the ability to practice the only marketable skill they have, many fishermen turned to piracy because it was a good way to make quick money. So you have a long-term problem developing from a short-term complication.

That is an excellent example, and it really got me thinking. But it is not free trade that is the problem. I did a little research on Somali piracy, and discovered 2 major reasons for their existence.
1. Foreign ships are illegally fishing in Somalian waters, stealing their seafood.
2. European ships are dumping toxic waste, including nuclear waste, in Somali waters. This has caused illness among the coastal population.
Somali piracy flows from the greater and continuing Western theft and abuse of Somali marine resources - TT's Lost in Tokyo

Point 2 obviously isn't about free trade, so we can discard it. (but I had no idea that was occurring, and I am now upset about the fact that the US media fails to report on that). Part one is what we need to look at. And that is not free trade either. Those waters belong to Somalia. Foreigners are taking the resources in those waters without Somali permission. This is theft, or some type of colonialism, not free trade. There is no voluntary exchange occurring in those waters. But I am glad you brought up Somali pirates. I honestly had no idea what their motives were, I just assumed they fell into the same general camp upset with American foreign policy in the Middle East.

And I'm only looking at one group because that one group makes up the vast majority of that country. If 60% of your population are farmers (which is/was the case in some developing nations) and all of a sudden domestic farming is no longer a viable way to make a living, ~60% of your society is now going to be out of work.

If those farmers are subsistence farmers, which many are, free trade/protectionism will have little effect on their products because they produce only for themselves. On my point I wasn't talking about African countries, I was speaking more generally. I think I get our confusion now. You were still talking about developing countries primarily, and I was not. In many African nations, domestic farming is not a great way to make a living because of protectionist policies in Europe and the US that bar free trade in agricultural products. If the US opened its markets to African agricultural exports, imagine how much that would help them. Those African nations with protectionism fare no better than those with more free trade, and in fact are worse off when it comes to feeding their people. The problem with Africa, I still hold, is government. If Africans were allowed to produce and sell on the global market and the domestic market without government interference, they would be fine.

This works nicely in theory, but in practice when large segments of your society are out of work, your economy suffers because they are no longer earning money with which to buy things and keep the economy going. This is true in any economy, developed or not.

Again, in the short term that would be the case. In practice in the long run society will be far better off. But to mitigate the effects of ending protectionism, one would simply do it gradually so short term consequences are minimalized.

In a developing nation, you have people who may not be able to get other jobs because the job they had was something they've done for their whole lives. Their entire lives have been focused around this one occupation and they may not have other marketable skills and they dont have the resources to go to school or other training to get new skills the way we can in first world countries. If you've been a rice farmer for 30 years, you probably wont have the skills necessary to get another job if rice farming is no longer a viable way to make a living.

That is definitely correct. And because the US is engaging in protectionism against Africa, we are contributing to that very problem. And again, they will always have skills as uskilled labor, as oxymoronic as that sounds.

And that inability to pay for food comes from a loss of livelihood brought on by free trade.

I would argue it comes primarily from the marketing boards. But keep in mind protectionism raises the price of food in African countries that pursue it. That creates an inability to pay for food.

The Asian countries that are success stories also have certain things Africa, by and large, does not. Much of Africa is not suited for farming, much of Africa is too unstable to support a tourist economy, many African countries do not have natural resources on a large scale or they do not have the technology to develop those resources in a profitable way. There is a reason Africans were still hunter-gatherers at a time when the Europeans were colonizing new continents; Africa is not conducive to a modern economy because it does not have the raw ingredients for wide-spread long-term success. Geography is a cruel mistress.

So the answer to a lack of resources is to prevent foreign resources from coming in? That is essentially the argument against free trade. And Africa does have resources. They have land and labor. Those are two big factors of production.

That said, there are exceptions and the situation is changing, but by and large Africa does not have the kind of economy necessary to receive significant gain from free trade agreements.

I think this is a key point of disagreement. But with that said, would you say free trade would be beneficial to the US?

I think we need to be careful before we decide to take the pruning shears to a program that was put in place to respond to a genuine need. I cant claim to have all the information or experience necessary to definitively make the call that it should go or stay, but I do think we need to be careful not to accidentally cut the branch off the tree that we're standing on.

You are absolutely right. We must be careful and deliberate. I can't claim to have all the information either. But from what I know, agricultural subsidies do more harm than good, for our own population and that of the developing world. But what genuine need are you referring to that the programs were a response to?

It's cool, no one is perfect. We need to consider that Zimbabwe is currently experiencing hyperinflation. Nigeria has suffered many years of mis-management and a lack of proper infrastructure to grow its agricultural supply along with the population expansion. But, IIRC, Nigeria's agricultural sector still employs around 20% of the nation's workforce.

That is what I mean with Africa. There are so many unusual factors at play that it is hard to isolate any one cause for a correlation. Zimbabwe is a total mess. I would argue the reason for African agriculture problems is because of a government that intervenes far too much. Until the political systems of Africa improve, and Africa moves to more free market approaches, I doubt anything will get much better. We can't directly change African policy. They must do it themselves. I doubt that African countries will change their trade policies as long as the political climate is the same. Why engage in free trade abroad if it is not even allowed at home?

Needless to say, I think we can both agree that Africa is a complicated mess on nearly all levels.

Originally Posted by Liberalis

Correct. I never said the market would be large.


I agree, at least at this point now. I originally brought it up to discredit the idea that free trade will completely wipe out any remnants of a protected industry from the country. It may simply be reduced (however drastic the reduction may be).

It's gross effect will be negligible, you cant feed a country based off a fractional industry, therefore I think it wise to consider it non-existant.

I am not sure what I said that led you to think I was misunderstanding you. Of course food is not the sole market, but I agree that agriculture is the primary productive activity of African nations. I was stating that if an industry was unnaturally large solely because of protection, it was being sustained unjustifiably.

Alright, it seemed like you were insinuating that agriculture was large in developing countries because it had been protected unduly.

That is an excellent example, and it really got me thinking. But it is not free trade that is the problem. I did a little research on Somali piracy, and discovered 2 major reasons for their existence.
1. Foreign ships are illegally fishing in Somalian waters, stealing their seafood.
2. European ships are dumping toxic waste, including nuclear waste, in Somali waters. This has caused illness among the coastal population.

Point 2 obviously isn't about free trade, so we can discard it. (but I had no idea that was occurring, and I am now upset about the fact that the US media fails to report on that). Part one is what we need to look at. And that is not free trade either. Those waters belong to Somalia. Foreigners are taking the resources in those waters without Somali permission. This is theft, or some type of colonialism, not free trade. There is no voluntary exchange occurring in those waters. But I am glad you brought up Somali pirates. I honestly had no idea what their motives were, I just assumed they fell into the same general camp upset with American foreign policy in the Middle East.

This isnt an indictment against free trade, I'm merely highlighting what happens when you strip the livelihood from a large percentage of a nation's population and those people have few other marketable skills or there is no economy or too small an economy to assimilate them. If you put a large portion of a country out of work by ruining their livelihood, either by cutting the domestic market's tendons with cheap imports or destroying their resources, you will get a short-term economic drop and that can lead to some serious long-term problems.

If those farmers are subsistence farmers, which many are, free trade/protectionism will have little effect on their products because they produce only for themselves.

Even subsistence farmers still trade or sell some of what they produce for things they cant make themselves. If you destroy their markets, you cut off access to things they cant make themselves.

On my point I wasn't talking about African countries, I was speaking more generally. I think I get our confusion now. You were still talking about developing countries primarily, and I was not. In many African nations, domestic farming is not a great way to make a living because of protectionist policies in Europe and the US that bar free trade in agricultural products. If the US opened its markets to African agricultural exports, imagine how much that would help them. Those African nations with protectionism fare no better than those with more free trade, and in fact are worse off when it comes to feeding their people. The problem with Africa, I still hold, is government. If Africans were allowed to produce and sell on the global market and the domestic market without government interference, they would be fine.

Africans, by and large, are already allowed to sell on the international market and in some cases (coca, teas, sugar, etc etc) do quite well. That is because most of these crops are not kept artificially cheap because of government subsidies.

The US can sell wheat at incredibly low prices because of subsidies. As a result, if you are looking to buy wheat, are you going to buy wheat from somewhere without subsidies and pay fair market value or are you going to go for US wheat which is dramatically cheaper? You sabotage international markets subsidized goods because NO ONE can compete with them.

So perhaps we need to modify free trade agreements to either not include goods that are subsidized or somehow factor that into trade agreements.

Again, in the short term that would be the case. In practice in the long run society will be far better off. But to mitigate the effects of ending protectionism, one would simply do it gradually so short term consequences are minimalized.

Where is the money going to come from in a developing nation to lift that society out of it's decline? What you have then is first world companies coming in, paying dirt wages, and isolating wealth at the top of that society while helping maintain poverty. You end up supporting brutal governments and wealthy businessmen in that country. Yes, you do get jobs out of the deal, but they dont pay enough to get people out of poverty. The companies that move in then have a stranglehold on the country because they bring in so much money, they can threaten to move out if their requests go un-met. We have seen this countless times across the entire world and it NEVER works out to the benefit of the workers.

That is definitely correct. And because the US is engaging in protectionism against Africa, we are contributing to that very problem. And again, they will always have skills as uskilled labor, as oxymoronic as that sounds.

There is a limited demand for unskilled labor. In the US, we've managed to "McDonaldize" much of our workforce; we've reduced many jobs down to the bare responsibilities so workers have less power and can be replaced easily. But that requires a skilled workforce and large infrastructure in place, neither of which is present in many African countries.

I would argue it comes primarily from the marketing boards. But keep in mind protectionism raises the price of food in African countries that pursue it. That creates an inability to pay for food.

You cant protect what isnt there.

So the answer to a lack of resources is to prevent foreign resources from coming in? That is essentially the argument against free trade. And Africa does have resources. They have land and labor. Those are two big factors of production.

Foreign resources are fine, provided they dont undercut your economy or subjugate your entire country. They have arid land and mostly unskilled labor. Land and labor are great, but if a foreign investor has to sink millions into a place to get it to the point where he can even START sinking millions more into the area to make money, no one is going to want a piece of that.

I think this is a key point of disagreement. But with that said, would you say free trade would be beneficial to the US?

Oh definitely. But there are more countries in the world than the US and I dont think our prosperity should be obtained off the misery of others.

You are absolutely right. We must be careful and deliberate. I can't claim to have all the information either. But from what I know, agricultural subsidies do more harm than good, for our own population and that of the developing world. But what genuine need are you referring to that the programs were a response to?

Around World War I, the idea of agricultural subsidies were developed to take the "free" out of the free market for agricultural goods because the US was concerned that price fluxes would make farmers unable to maintain farms. No farms = no food. Agricultural subsidies were a way to insulate farmers from going broke and not being able to produce food. To a certain extent, that is still a concern. If we leave our agricultural markets completely to the mercy of the free market, we do risk problems that we see with fuel currently; price fluxing as a result of manipulation and speculation. Agricultural subsidies, to a certain extent, protect from that.

That is what I mean with Africa. There are so many unusual factors at play that it is hard to isolate any one cause for a correlation. Zimbabwe is a total mess. I would argue the reason for African agriculture problems is because of a government that intervenes far too much. Until the political systems of Africa improve, and Africa moves to more free market approaches, I doubt anything will get much better. We can't directly change African policy. They must do it themselves. I doubt that African countries will change their trade policies as long as the political climate is the same. Why engage in free trade abroad if it is not even allowed at home?

Much of Africa is VERY free market friendly, that isnt the problem.

Needless to say, I think we can both agree that Africa is a complicated mess on nearly all levels.

It is, but nothing that cant be fixed.

The intent of NAFTA was to reduce tarriffs to zero for the US, Canada and Mexico over a 10 year period. It was also supposed to get rid of non tarriff trade barriers between the 3 nations.

My Canadian customers are still paying quite a tarriff on the goods I send them. I pay nothing on the goods they send me. And it been over 10 years since it was instituted.

The entire Nafta deal was done secretly behind closed doors. Any disagreements between parties are handled secretly. That says enough for me. Not like this shit is a matter of national security.

While technology in manufacturing has certainly displaced workers, the main consumer goods you find in walmart, most from china, employs humans, the chinese.

The folks that were against NAFTA, said it would lower our standards of living and displace our workers, and as it turns out, they were correct. But anyone with a living brain cell should have known this. But business is more powerful than the common man, and they generally get what they lobby for.

For decades the US allowed our trading partners to tarriff our exports, while they also protected their own industry. We did this because this nation had such a great economy and could afford it. Those days are long gone. Yet we act like we can still be generous, when in fact we cannot.

What we have today is a tarriff system that allows for cheap labor nations to sell their products here, along with multinationals who also make their products in places like China, and sell those here as well. Yet our goods are tarriffed, as those developing nations want to protect their industry, like we used to do. It is a loss for average folks and a gain by the elites. And make no mistake about it, this fair trade deal was created to enrich a certain class of people, and it has been quite good in doing so. But there are losers in this equation, and the losers are average Americans.

The scenerio has changed. After WW2 we protected our workers, as the plan was to enrich the workers, while still allowing wealth to be created by the elites. This created the post WW2 boom for the average guy, and created such higher standards of living for Americans. Yet, that has changed, and the results are visible from where I live. This lunacy known as free trade is exactly opposite of what gov't policy used to do. It is the proof that money is once again a primary factor in determining economic policy. It is also proof that the greed of a few has substantial negetive consequences for MOST of America.

Originally Posted by Liberalis

Ok, I guess I can agree with that. Except for one point. There are significant tariff reductions. But the benefit from those tariff reductions are jeopardized by the agreement’s snap-back provisions. Those permit pre-NAFTA tariff levels to be restored against imported items which cause or threaten serious injury to domestic industry. In other words, if an industry can't compete, tariffs will be raised under NAFTA. This article is an excellent reading on NAFTA and the WTO, a strong critique of them from the free trade side:
Why Managed Trade Is Not Free Trade | The Freeman | Ideas On Liberty

We shall call Free Trade, free trade with the understanding of underlying, lower tariff rates.

Snap back provisions are only so good as the desire to use them. I am a minority in the desire to see "free trade" eliminated until such time as we have a new Bretton Woods. Policy makers may want a new Bretton Woods, but have no desire to use snap back policies in the interim. I believe elimination of free trade, would make it desirable for low wage economies to come to the table. They are currently happy with the status quo.

Free trade allows people to buy goods cheaper, as you admit and agree with, so it raises real wages. Where are you getting those statistics? I still don't know what you mean by the specific term "inflated valuations." Do you mean people value something higher than they justifiably should? I also don't really follow your line of reasoning. I think you are missing a few steps. You went from saying trade is freer and therefore income is decreased without saying why. That whole paragraph confuses me. I don't know if it is because the wording is funny, or if it is because the argument is not logically connected fully because you assume I know more about your position than I do. I honestly have never heard the theory that the business cycle is caused by free trade.

A inflated valuation is a valuation that the market will not bear, and must adjust downward to market forces, usually at the end of a cycle.
This would be a good time to bring some data to the discussion, to support my views of unemployment. Simplistically a $25 hr job, replaced by a $10 hr job does not raise real wages, as Detroit might attest to. Unemployment rate link:

http://research.stlouisfed.org/fred2/data/UNRATE.txt

2000-01-01 4.0
2000-02-01 4.1
2000-03-01 4.0
2000-04-01 3.8
2000-05-01 4.0
2000-06-01 4.0
2000-07-01 4.0
2000-08-01 4.1
2000-09-01 3.9
2000-10-01 3.9
2000-11-01 3.9
2000-12-01 3.9
2001-01-01 4.2
2001-02-01 4.2
2001-03-01 4.3
2001-04-01 4.4
2001-05-01 4.3
2001-06-01 4.5
2001-07-01 4.6
2001-08-01 4.9
2001-09-01 5.0
2001-10-01 5.3
2001-11-01 5.5
2001-12-01 5.7
2002-01-01 5.7
2002-02-01 5.7
2002-03-01 5.7
2002-04-01 5.9
2002-05-01 5.8
2002-06-01 5.8
2002-07-01 5.8
2002-08-01 5.7
2002-09-01 5.7
2002-10-01 5.7
2002-11-01 5.9
2002-12-01 6.0
2003-01-01 5.8
2003-02-01 5.9
2003-03-01 5.9
2003-04-01 6.0
2003-05-01 6.1
2003-06-01 6.3
2003-07-01 6.2
2003-08-01 6.1
2003-09-01 6.1
2003-10-01 6.0
2003-11-01 5.8
2003-12-01 5.7
2004-01-01 5.7
2004-02-01 5.6
2004-03-01 5.8
2004-04-01 5.6
2004-05-01 5.6
2004-06-01 5.6
2004-07-01 5.5
2004-08-01 5.4
2004-09-01 5.4
2004-10-01 5.5
2004-11-01 5.4
2004-12-01 5.4
2005-01-01 5.3
2005-02-01 5.4
2005-03-01 5.2
2005-04-01 5.2
2005-05-01 5.1
2005-06-01 5.0
2005-07-01 5.0
2005-08-01 4.9
2005-09-01 5.0
2005-10-01 5.0
2005-11-01 5.0
2005-12-01 4.9


China enters the WTO in 2000. Give a year for business start ups, and you see the uptick in unemployment starting in 2001. This is about the same time my company had a start up in China. Next housing starts: This is where housing starts cover for the movement of jobs, or as I call it a bridge to the bubble.

US Housing Starts Chart

Starting in Jan 2002, housing starts rise to a peak in 2005 and end in mid 2006. This job creation is based on credit and effects liquidity, which will eventually lead to banking. Simply put ... what would the unemployment rate have been without the credit used to build housing? The bridge to the bust hides this data.

Now to the borrowers who defaulted.

Who Rules America: Wealth, Income, and Power
Attention to chart 6:
From 1982 to 2006, income distribution of the lower 80% of Americans decreased about 10%, while the top 1% increased about 8.5 %. All this means is the ability to pay mortgages and support housing valuations decreased. If you have and additional 6-7 million unemployed, how many defaulted on mortgages?

If those original lost jobs created additional work for your local machine shop, food vendors, quick stops, auto mechanics, plumbers, carpenters, electricians, endless list, what was the effect on their profits?

What happens when a factory closes in any city or town. Lost jobs, lost profits for all businesses in the area. High paying jobs are not replaced, with high paying jobs. They are replaced with low paying service jobs.

Also if you are working for less, cheaper goods are not a increase in real wage.

20 million people working for $12 hr instead of $20 hr, have not benefited in real wage from cheaper goods. Others who have not lost higher paying jobs do benefit. Those who have lost jobs do not have a net benefit.

I know. I said lack of tariffs is not a right in the quote you were responding to. You should also look into the Smoot-Hawley tariff prior to the Great Depression. What can you say about that?

I was replying to the quote from below. It was the finishing statement of your quote. That tariffs were used for protectionism, not just for revenue. That is why I posted the Wiki link.

Smoot-Hawley did not work well for imports or exports.

But tariffs then were used for revenue, not protectionism.

Not in all industries. Keep in mind that foreign nations invest money in the US as well, and foreign consumers will buy US exports. Don't only look at the US side of the equation. Other countries will be sending money our way. You are assuming that investors in a free trade environment will always invest outside of the US. That is not true. Better opportunities exist overseas, but there are plenty of opportunities domestically as well. Also do not forget that because free trade brings cheaper goods people will therefore have more money. The reason that is important is because that money can be spent on other goods, and where that money goes production will increase to meet the new demand. I don't think you can assume all investment and money will go overseas. Free trade does not mean the US will produce nothing and only buy from other countries. It only means we will produce more of what we are efficient at producing, and less of what we are inefficient at producing. That is the goal of free trade.

I am more concerned with the reciprocity of trade agreements. While there is foreign investment, it has come from the downward pressure on wages, due to unemployment, making it a more attractive environment for investment. This growth, has not offset the movement of high paying jobs, to low wage markets, nor is a $20hr job, replaced by a $10hr job reciprocal. Also there is a negative balance in jobs. The wage efficiency of free trade is not important to me when there is no reciprocity. That as a goal of free trade does not benefit my country and actually harms it.

I don't follow that reasoning at all, maybe it is because the grammar is off. For example, the second sentence is very confusing. And if your company invested in capital overseas, it did not keep capital investments down. It just invested them somewhere else, so I am not sure what that meant other than stating you moved investments overseas. If both more productive machines and cheap labor exist in China, then if the US wants to compete in those industries it should be investing in new technologies and innovating. Instead, they seek to ensure that they provide customers the best deal not by improving the package they provide, but by getting the government to hamper the ability of their competitors to provide a better deal. To me that is the easy way out, ignoring reality at our expense.

I mean to state that a lack of capital investment in the US was intentional, to save the financial capital for overseas investment. Capital goods that could have been invested in the US and were not, would have made productivity improvements contributing to efficiency. The market of cheaper labor holds capital goods investment in the US down. Companies make this choice, not the US government, and do so for the interest of bottom line, not nationalism.

Yes. We are in a recession and there are decreased tax revenues because more people are unemployed. That is basically what you said, but you didn't draw the specific connection to that and free trade.

above.

It does work. The economic case for free trade is essentially the case for voluntary exchange in general: no one freely enters into an exchange, whether as buyer or seller, unless he expects to emerge better off as a result of that exchange. Furthermore, the ability to exchange a single product one has produced for the many things one would like to consume makes possible the division of labor and the manifold expansion of production capacity that it permits. There is no economic reason why these gains do not apply equally to potential traders on different sides of national boundaries. (that is from the article). You still never say why trading across foreign boundaries is different than trading across state boundaries. In all of the cases, two individuals are trading with each other to get something they want. Political boundaries do not change the benefits of voluntary exchange.

Nationalism, has much to do with it. That's why initial income of the states was drawn from tariffs.
The principals of free trade only take the interests of the buyer and the seller, and seek to support argument that the interests of labor are represented, by the results of free trade, but do not need to be, due to property rights.

An article on globalization's effect on American wages:

Globalization and American Wages: Today and Tomorrow

What does that have to do with trade across different political borders? What does that have to do with free trade at all?

Free Trade (tariffs), has been going on for since NAFTA, and it has negative consequences, that leadership said reciprocity would cover but did not. People cannot eat or live off a failed promise of reciprocity. That's been a long time to show positive benefits, yet instead we seem to have social services, government bail outs of private institutions, stimulus packages, and a huge deficit. All evidence to me that, that even low tariffs on trade does not work for America. I don't even recall the trade imbalance with China ... trillions maybe? 11 years of China's entry in the WTO, and they have a raging economy and America has what?

By valuations do you mean demand?

Not a true market valuation, that can be supported by income. You buy a home for 350,000, a year later its valued at 275,000, because of market conditions, maybe a glut, or many foreclosures on the market.

Considering you have a myriad of reasons, I find it odd you did not mention a single one.

I thought we had a pretty broad debate going already. I'll toss 1 out there. Transportation costs to market.

Link to the dollar valuation of lost income for the bottom 80%

http://www.alternet.org/rights/151108
/why_the_democratic_party_has_abandoned_the_middle_ class_in_favor_of_the_rich/?page=entire

This chart show the movement of incomes.
inequalitygraph.pdf