Free Trade
Posted by coaldigger 5 years, 10 months ago to Government
Donald J. Trump Tweeted:
"Canada charges the U.S. a 270% tariff on Dairy Products! They didn’t tell you that, did they? Not fair to our farmers!"
I am sure he will be subjected to many "lessons in economics" by all the experts that point out that tariffs are just a tax on your own people. I agree with the principle but strongly disagree with trade agreements with individual or groups of nations that set up such barriers. The US is the prime market for almost every good and service. The government has no role in setting prices but it is almost impossible to ignore the unfair management of markets by others. I would be 100% in favor of having 0% tariff on everything imported from any country that imposed no tariff on US goods and in favor of 1000% on goods from any country that imposed tariffs on US goods. Handicapping might be a way of making golf more entertaining at the club on Saturday morning, but notice that when they play for money, everyone is 'scratch".
"Canada charges the U.S. a 270% tariff on Dairy Products! They didn’t tell you that, did they? Not fair to our farmers!"
I am sure he will be subjected to many "lessons in economics" by all the experts that point out that tariffs are just a tax on your own people. I agree with the principle but strongly disagree with trade agreements with individual or groups of nations that set up such barriers. The US is the prime market for almost every good and service. The government has no role in setting prices but it is almost impossible to ignore the unfair management of markets by others. I would be 100% in favor of having 0% tariff on everything imported from any country that imposed no tariff on US goods and in favor of 1000% on goods from any country that imposed tariffs on US goods. Handicapping might be a way of making golf more entertaining at the club on Saturday morning, but notice that when they play for money, everyone is 'scratch".
some published work suggests that if a nation unilaterally eliminates tariffs on imports it will be to its net benefit regardless of what the source nation does.
But that isn't the case. If the imported goods, subsidized by the source nation, displace the production of local goods, the people producing those goods will need to find new work. If that work is of lesser compensation, then the benefits of the lower prices may be more than outweighed.
If some of the workers become unemployed and the society subsidizes them in some way that also adds costs. Plus, of course, tariffs are a tax. It might be better to tax foreign goods than locally produced ones.
You cannot simply analyze the benefit of subsidized imports without reflecting on how the economy will change in reaction.
What will happen if a nation unilaterally abolishes the tariff on certain goods currently imported?
Answer:
- Revenue to government goes down.
- The price of those goods goes down.
- Unemployment goes up as imports replace national production.
- Other industries have lower costs, competition drives down prices, sales
are higher, production increase.
- Consumers have more money to spend, the industries with lower costs especially benefit.
- There is higher demand for labor in those and other industries.
That is the logic as I see it, but that is the easy part.
Now, put numbers on those effects and quantify the time delays.
Question 2:
When would you not do that kind of analysis?
(On abolishing or imposing import tariffs)
a) When you know the answer, or think you do.
b) When there are issues of ideals and policy, perhaps an Objectivist (!) or libertarian government considers that tariffs are so bad, and they give too much power to the politicians, that chopping is to be done without asking a team of economists.
c) Or maybe some pure political reason such as giving in to a support base of workers in an ailing industry that, maybe, could be rescued by an import tariff.
Well, personally I do have leanings to b). But, as they say, we must apply pragmatic decisions in the 'real world', so the Donald may be right, or not.
I'm not a big fan of tariffs, bu the argument that the consumers win is simplistic. The consumers win as long as they maintain their current income with cheaper goods.
Consider the workers who are now unemployed or getting lower pay.
Before, government power had led to pay and employment higher than the market alone would have provided, the costs coming from the public at large. If this is retribution, shed no tears.
The usual approach is to give in to a pressure group and impose a tariff. Then as buyers suffer, subsidies, tax credits and so on are given as compensation to those who also have pull. Complications, subsidies and public sector careers grow. Unwinding it all may have downsides, so government says wait for us to negotiate a round of reductions.
Maybe a new tariff strengthens a bargaining hand.
It is the big corporations that approach governments with proposals that if they are given some subsidy or other advantage, jobs are created, actually, taken from some other place.
Moocher management finds it easier to get a tariff or subsidy than say enough to union demands. Politicians are happy to oblige. Labor gets more pay, management cuts R&D and has no need to match competitors' productivity.
It is right to feel for the unemployed, tho' as a principle I prefer Judge Narragansett's- no law shall restrain freedom of trade.
Once that power is allowed there is no end to rake-offs and cronyism.
Act for the unemployed by requiring- Right to work.
To conclude:
combine free market ideals with pragmatism- say to a nation with tariffs that you do not have to buy our stuff, but we are not going to punish ourselves by imposing counter-measures by childish tit-for-tat.
Here we are in the Gulch devoted to the ideas of Ayn Rand and her Objectivism with recommendation of a philosophy antithetically opposed to Objectivism. I can see how so many here can view tariffs and duties as somehow economically acceptable.
'Pragmatism' as a philosophy means short term expediency, how politicians make decisions.
As I used the word with a small 'p', it means think it thru. I should find a better word.
Suppose it weren't a subsidy. Suppose one nation or trading partner had access to some resource or technology not practical in the other place? If you still say tax it, what if it were with the same country as the competitor? It seems like this is a policy of gov't using force to keep people from creating new value and trading it with one another. I know you're not for that, so why does it matter if it's a some natural resource or a subsidy?
My higher cost of production is like a tariff to him and so buys fewer of my donuts. It doesn't matter whether the higher cost is due to taxing or due to higher production costs. Free trade does not mean so called fair trade. One decides what is worth more, the money or the goods or services.
Same nonsense with balance of trade. If reduced to the simplest situation, do you expect that when you buy something from say the next town you should have the money back from those of that town by buying something from you.
Free trade means only that you can exchange or not without being coerced in the exchange.
Correct. That is, coerced into buying a specific product as well as coerced into not buying a specific product.
My government penalises me with high customs and duty fees for importing products (not available or for twice the cost in Canada) from the U.S.
I don't differentiate between an individual's geographic location who works to provide a product or service at a price I can afford. It is the government who makes the problems. What about a community that borders two countries. In accordance to government legislation and regulation, they are not free to trade with one another without government interference even though the only thing separating them is an arbitrary political border derived from bureaucracy.
Free citizens: I think not.
They are accumulating capital, which they can then use to buy land, factories, mines, and other resources.
With purchase comes control.
Now I'm sure some of you will say that those who buy land, factories, mines, etc. in this country, risk losing everything to nationalization in the event of war. But before we can even get to that point, remember this: a country that cannot on its own build tanks, jeeps, trucks, ships, planes, missiles, etc., and fully clothe, feed, equip and deploy its troops, is a country organized to lose wars.
If it was necessary to survive and we didn't have steel we would have to build better tanks, jeeps and trucks out of other materials. During WW II, we had no reliable source of natural rubber so we invented synthetic rubber. When OPEC caught us with our pants down and squeezed us on oil we found new oil and methods of extracting it. America was once, and still is in some ways the most productive and innovative nation/society that has ever existed. The secret to our survival is to understand why that happened and to nurture it.
Can any society long live with an aggregate current-account deficit?
They are accumulating capital, which they can then use to buy land, factories, mines, and other resources."
I consider buying products and investing in business to be good things. They'll be more successful in low-tax countries where they can buy even more and invest even more.
Yes, I would think twice before abolishing a tariff where that could happen.
To be considered- if foreign nationals (or governments) own much land and
factories in your country, what influence do they actually have? Are the land
and factories still not subject to your laws? So who depends on, and who dictates to who?
The actual problem is "economic policy" (i.e. gov't powers to use force). Maybe a secondary problem is the gov't's levers of power being controlled by those who own a lot of property. The solution is not to use gov't force to steer property ownership into the hands of those who will use the levers of power to steer the economy benignly. The actual problem is gov't power over the economy. If that doesn't exist, we leave people alone to own whatever they can acquire in honest trades.
The lawn guy who supports his family charges $50 for doing the yard. The kid down the street charges $10 for the yard because he is subsidized by his parents. Is that unfair trade?
Would it make sense for the lawn guy not to buy anything at all from the Dad down the street even if the goods or services were a value, because the lawn guy wants to punish Dad with a "tariff" in response to Dad's unfair trade practices in subsidizing Junior's lawn business?
Let's say that Chile wants to develop its own rocket launches and puts a tariff on US aerospace products. As President, you repond with a 1000% tariff on Chilean products. Now, I as an American, go without grapes in the winter and the Chilean farmer's life sucks for lack of exports to the USA. Where is the gain?
We agree that the Chilean tariff on US aerospace is wrongful. Where is the profit in going them one worse?
Hmm, whatever happened to those robust US electronics and textile industries? I knew they were laying around here somewhere...
IMHO the Japanese virtually wrote the book on "How To Screw Your Trading Partners" with special chapters dedicated to screwing the USA, parts of which have been studied and implemented by other nations. Today the tome has been added to considerably by the Chinese and taken to a whole new level. I agree with Trump in saying the major fault lies with our own government and it's time we got things fixed.
Recall the third debate in 2016 Trump had with Clinton. He was taking bragging rights to his new building in Las Vegas and the Evil Hag cackled "made with Chinese steel" in the background. Trump missed the opportunity to ask why it was possible to produce and ship steel from the other side of the planet at a price more competitive than an American mill virtually down the block. For me, it was a deja vu moment. In 1986 I was having a business lunch on an upper floor in a rather tall building in Pittsburgh, Pa. and was standing by the window admiring the view when a VP of research from Alcoa Aluminum came up next me to do the same. He pointed at a bridge crossing the river below (I believe it was the Ohio) and said "Here we are in steel town USA and that bridge is made of Japanese steel". Oh well...
Edit: I still remember their motto: "We make cans, not can'ts!"
I fully support free economic systems, but your best leverage over your neighbor's economy is your trade policy. To simply say "well, we don't care what you do to undermine our economy and production, we're going to buy your cheap goods!" is long-term economic suicide. It's why I think Most-Favored Nation trade status should never have been extended to China - and should be revoked at the first possible opportunity.
I would also point out that the initial funding for the US Federal Government was set up by the Founding Fathers to be based on tariffs - not on personal or corporate income taxes. Why would you wish to extend a freedom from taxation to non-Citizens while taxing your own? That was precisely why the Boston Tea Party occurred: because the colonists were being forced to pay taxes even others of their own nation weren't subject to!
Ultimately, very few wars are won by ideology. Most are won by resource acquisition and use. WW II is a classic example. Germany's military campaign didn't really begin to suffer until the British began bombing their centers of production. Russia only held out as long as it did because the UK was running materials and supplies to them in the middle years of the war (after Hitler declared war on Russia). Japan's entire war strategy depended on them capturing and holding vital resource production centers in East Asia and once those were gone, they quickly folded. The US had neither superior infantry weapons nor tanks for the duration of the war, and superior aircraft only near the end. But what they didn't have in technical superiority they made up for in numbers.
One can also look at Napoleon's march on Russia. Napoleon was an unrivaled general for his time, but his greatest defeat was not because of superior manpower, but losses to his army from starvation and disease.
In short, I support tariffs on nations which do not have free markets - which is pretty much all of them. Give me a capitalist nation (the only one which is even close is Australia or perhaps Singapore - certainly not Canada) and you can make the argument to remove tariffs. For all others, I say run up the import tariffs until they change their own governments and economies and free them.
But, you see tariffs as they as promoted. Try viewing from actual results, if not first principles.
The claim is that they spread wealth, this is often true, the total wealth is reduced in the country using them by taking from taxpayers and all buyers and giving to those in the industry protected. This is desirable to a socialist, unacceptable to an Objectivist, a fence sitter could say- maybe there are some benefits so 'show me'.
The ethical/moral position is clear, do not hurt your own nation to punish another for having policies which are bad for them. If they put an umpteen percent tariff on your butter, take no action it is mainly their loss, you lose a bit from that but you will lose again from a tariff on their timber.
Exceptions when- there are physical threats to your citizens or guns aimed at you, and as part of some negotiation strategy tho' I doubt that will work.
While this may be true, the argument you present omits the reality on the other side of the coin: that the producers in the exporting nation are being artificially propped up and subsidized by their nations' governmental programs (ie taxes on their own people) rather than operating based on true market-based advantages such as superior technology or production techniques. The tariffs are actually being applied against the trading nation's government as a counterweight to that government's market interference.
"The ethical/moral position is clear, do not hurt your own nation to punish another for having policies which are bad for them."
Your position here would be sound except for the evaluation that one is harming one's own nation by refusing to do unfettered business with a self-destructive nation. In trade, the focus should always be on the long-term prosperity of both partners. You do no good to either side in the long term by supporting self-destructive policies. (This same principle applies to drug addicts and other individual behaviors.) Businesses expend tremendous energy (i.e. profit) trying to adapt to changing circumstances. In many cases, the uncertainty of those changing circumstances precludes business at all - as we saw from the previous President's economic policies. The best environment for business is where the rules are set and businesses can rely on them to be what they are for years at a time. The focus should be on longevity within a trade agreement, not the one-off blips.
"Exceptions when- there are physical threats to your citizens or guns aimed at you, and as part of some negotiation strategy tho' I doubt that will work."
While we would certainly be wise to note the physical threats from competing nations, I would suggest that the causality is reversed. The application of physical force is usually a result of economic instability - not the other way around. People (and nations) rarely attempt to apply physical force to others when they are in a strong economical position because they have the most to lose. Sun Tzu touches upon several aspects of this in his work The Art of War. If one wants contemporary examples, one can look at North Korea or Iran, the Axis nations during WW II, or a variety of others.
Worse, the action assumes a right to act - virtue signalling - moral posturing, justified by moral or religious or racial superiority that you know what is best for them and have some right to impose what you want.
In trade, the focus should always be on the long-term prosperity of both partners.
See 'the oath'. (Atlas Shrugged, Ayn Rand)
There is no obligation or responsibility to serve your trading partners. You may as an individual, not a government, give them something to help them, they will take it. Governments, like people, decay under long term secure charity.
You can assure jobs for them, but not work from them. You can guarantee food delivery, but not their agricultural production.
People (and nations) rarely attempt to apply physical force to others when they are in a strong economical position because they have the most to lose.
Nations that are economically weak are that way because they limit their citizens productivity by force. Those you named are great examples.
There is a fundamental rule of human nature- if you have something, someone will take it from you if you let them. Strong or weak, nations and people will take what they can, unless, there is the ethical basis of individual rights, property rights, see above.
The correct policy is- give nothing, take nothing, impose no penalties when they make it hard to buy your stuff (schoolyard he-hit-me-first), apply self-discipline in lecturing, only engage in voluntary trade value-for-value.
Well said!
If - as you claim - it is not my responsibility to care about what happens to other people or other governments, then this becomes irrelevant, does it not? Whether or not I affect someone else matters not at all if I am only looking out for my own short-term benefit.
The whole argument is that I do care. I care about my own benefit and recognize that those who do the same can be jointly engaged so that both of us benefit even more in aggregate than we would separately. That is the entire basis for trade. I have no wish to live a subsistence life of farming my own products and living solely off my own meager efforts. I'm not that great a farmer. I want to specialize and become relatively more productive in one area so that I can take advantage of someone else's specialized production in another and we can both be better off.
I would also further offer that we must take great care to separate temporary inconvenience from actual long-term harm. We can not look only at one side of the ledger sheet: that of temporarily being unable to obtain certain goods at a given price instead of a higher one from another supplier. The other side matters because you are encouraging free and open, mutually-beneficial trade at a later juncture and for a greater duration - which results in both sides (both partners) being better off. The question is whether one sacrifices a long-term business relationship (over the course of which both parties might benefit to great degree by measured, continuous trade) for the sake of a single deal - while encouraging the very dissolution of that profitable arrangement. The subsidized economy can collapse at any moment (and must eventually). Only the truly self-sufficient can operate in perpetuity.
Who really benefits from the nation which subsidizes its production? Government looters and their corporate cronies. Who pays? Their own citizens in the form of redirected taxes. Tariffs on such countries simply say "we refuse to be a part of your government looting you through our actions."
Is it moral signalling? Absolutely! And we should absolutely be engaged in promoting the highest morals in everyone we deal with. We should absolutely be living according to our beliefs and our actions should sound as loudly as clarion trumpets! Those who claim that moral signalling is a negative are those who have no morals of their own they wish to advertise. They seek only to pull down, not to build.
A question: accepting this, are we not in effect encouraging bad behavior by enabling it if we do not refuse to participate? I submit that Galt refused to be a part of the machine, and so should we. The main criticism of Dagny throughout the book was her continued naivete that if she worked from within the system that she could help fix it. As we can not truly insulate ourselves by retreating to Atlantis, all we can do is to establish barriers to those who seek to try to live to take advantage of others. Tariffs in my mind are one such effective barrier.
"There is no obligation or responsibility to serve your trading partners."
See my previous remarks. You can not have trade without serving the needs of one's trading partner and being recompensed for that service. I would caution against the mistake of confusing trade with altruism.
The people here who advocate "0% or 1000%" are not consistent advocates of capitalism.
What did it get us? The Europeans, instead of participating in a real free market, increased tariffs whenever a U.S. product threatened to become more popular with their consumers than their domestic brand (U.S. autos and trucks carry a 25% tariff). Canada put huge tariffs on American lumber (why, I'm not sure, given their abundance of those resources), dairy products, to prevent a merciless assault by those Minnesota descendants of vikings on the Canadian dairy farmers market, and thousands of other U.S. goods (over 8,000 at last count). Even before Trump's announcement of possible tariffs on aluminum and steel, Canada was already considering raising tariff rates and expanding the number of good subject to tariff. Canada has enormous transportation costs, even for its domestic products, which means without an open U.S. market, tariff free, it would have serious difficulty competing in the global market. There have been warnings by Canadian economists that raising tariffs could jeopardize NAFTA, even during the Obama administration.
Mexico has been a little less abusive, preferring to institute a "dynamic" tariff system, with no tariff over 5-10% so long as the American product is not less expensive than the Mexican one, with exceptions. Alcohol,tobacco products, prepared foods, and sodas carry a tariff at up to 160%. Industrial chemicals have a heavy tariff burden of 50% or more, and China has taken Mexico to the World Trade Organization more than once for abuse of this practice.
Trump's tariff talk is an attempt to rattle cages and get people talking seriously about how to improve global markets and induce real free trade. China seems to be the only one to be willing to have a sincere trade dialogue.
I'm amazed at how many things President Trump does get woven into a narrative where they are part of complicated machinations to achieve the opposite of what he's actually doing.
Yes. In those situations I mentally imagine myself walking away and doing all the immediate steps so I don't have a psychological hangup. I know exactly how the walk-away will unfold. It's not about being blustery or anything like that. It's to avoid getting a fever to get a deal done. I've seen people get an eagerness, not even for a particular deal, but just for it to be at a conclusion. But I think "when in doubt don't." There will always be another deal.. another project, business to partner with, job, car, piece of real estate, or whatever.
Note that this has nothing to do with the bizarre machinations that people attribute to President Trump. I suspect he knows more about doing deals, not just walking away but also how to address objections close the deal, than I do. This is completely different from doing something like tripping the deficit or supporting increased spending and government powers to get some unstated future goal to do the opposite.
I am currently negotiating a deal that while not essential would be quite nice for my company. The contract negotiator wanted something I wasn't willing to concede. I was firm, if they don't accept our position we are, in fact, walking away. However I don't really want to do so. We'll see, signs are that they'll withdraw their request.
I agree it can't be with a threatening heart. You honestly want a deal that works for everyone. There will always be another deal for both parties, so there's nothing mean-spirited about not doing it.
"while not essential "
That's the key. When it's essential, you... well actually essential to me, I get into trouble. I have no poker face whatsoever.
Of course, but that has nothing to do with complicated just-so stories that say the person is engineering Seldon crisises to get to the opposite of what he actually does. I don't know if it's special pleading or shifting the burden, but it's certainly a fallacy if I start with the idea that President Obama wanted to reduce drone strikes and taxes but he did the opposite because he was giving into interest groups that wanted them now to engineer a future crisis where they'll be drastically reduced. That's just making stuff up.
The tariff action was also necessary to make North Korea recognize the President's promise to walk away from their negotiations is real. They already had learned he was serious when he responded to their angry bluster by calling off the summit. They very quickly backed off and made extra effort to get things back on track. Had he not followed up on his tariff promise, the door to evasive negotiating would have once again been open to them.
Both the tariff declaration and the credibility issue with respect to North Korea are intended to be a message to Iran. The U.S. is leaving the nuclear agreement, and will reimpose sanctions against Iran to reduce their revenue flow. They need to know they can depend that will happen.
Trump is building a consistent pattern of credibility with respect to foreign policy, aside from his bluster at opposition or over the top praise when someone does what he wants. Media statements that he is unpredictable and erratic shows that they apparently haven't been paying attention.
The comparison with Obama's drone strikes is off base, because he really did hope that increased use of those weapons would reduce the severity of radical Islamic violence. The result, had he been successful, would in fact have reduced the need to continue them. Obama also believed, as does anyone with socialist leanings, that increased taxes, properly imposed, will benefit society. I doubt he believed that hoped for GDP increase would lead to future reductions in taxes, so as you said, any such claims would be ludicrous.
Trumpet seems to be pushing them into repentance and if they don't then we won't be buying any of their goods.
Free trade with those that trade freely and no trade with those that won't...simple stupid isn't it?
They'd have to be creating a otherwise unattainable super duper product for me to swallow that one.
The point is, everyone spouts on about free trade but few if any are willing to trade freely and we are a little tired of it.
It is their country, they do not have to justify their stupidity to you.
So they have done that.
You can do the same, reciprocate by cutting your nose to spite your face. Punish your people just to demonstrate a mistaken sense of pride, some income redistribution towards a few moochers may be the real reason.
There may be a proper reason for doing it (apart from possibly setting a stance for negotiating). John Stuart Mill said tariffs can ' help infant industries'.
Does that ever work?
http://www.intellectualtakeout.org/ar...
Hell, if your going to put tariffs on another countries product then it should go toward our debt.
Why else would Sting appear at a Bob Dylan concert? Are they not "competitors"? Does not the sale of a Sting album deprive Bob Dylan of income? Never mind the zillionaires. I know punk musicians who play in bars who play with and not with each other.
The cut-throat dog-eat-dog buyer-beware model of capitalism was invented by its enemies. Yes, the market will pass you by. Yes, someone else may take all of your customers just as Amazon is burying Sears right now. But that is not the essential model. Those are secondary consequences, not primary requirements.
That is not competition and sure, if American business men were smart, not harmfully regulated or crony connected, they would create a product that is far superior and a "must have", regardless of the tariffs imposed upon the product, but we don't seem to be living in that world anymore.
The UN approved tariffs are meant to create equality of outcome, as I see it.