Fair Trade is Masochistic

Posted by  $  mshupe 3 months, 1 week ago to Economics
50 comments | Share | Flag

Fair trade, is in fact, an unjust, self-sacrificing policy, for it involves a government choosing to impose on its own citizens the same harms that are imposed by foreign governments on their citizens.
SOURCE URL: https://imfcinc.com/ifiblog/


Add Comment

FORMATTING HELP

All Comments Hide marked as read Mark all as read

  • Posted by CircuitGuy 3 months, 1 week ago
    "Given the benefits of free trade, the best policy any government can adopt is unilateral free trade (with other non-enemy governments), which means: free trade regardless of whether other governments also adopt freer trade."
    Yes. Let other countries elect master negotiators to figure out whom the people should trade with. Let their people enjoy all the benefits that supposedly come with that. Let American people make their own decisions.
    Reply | Mark as read | Best of... | Permalink  
  • Posted by term2 3 months ago
    My little company buys 70% of its parts from China and then assembles them in the USA. 25% tariffs on all chinese imports would increase materials costs by about 17%, and force us to raise prices to the customers who would stay with it by about 8%. Since chinese stuff is 1/3 the price of equivalent made-in-america stuff, we would STILL buy from china and our remaining customers would be paying the duty. Balance of trade with china would stay the same actually, or actually rise because of the newly china imposed reciprocal tariffs

    So, I just dont get it. It looks like the government gets a windfall tax increase paid for by our customers, our output falls due to higher prices along with employment of the people who assemble our stuff. The chinese economy stays pretty much the same since we keep buying from them, and US companies sell less to china since the prices of US goods is higher.

    So, I repeat. None of this makes sense. Government should just get out of the way.
    Reply | Mark as read | Best of... | Permalink  
    • Posted by DrZarkov99 3 months ago
      The problem we have is that our government has generally stayed out of the way, while other governments have been up to their armpits controlling the market. American goods generally have double or triple digit tariffs in other countries, cutting us off from their markets.

      Americans are the most creative, productive labor force in the world, and if we had been able to stay in a real competitive market, the Chinese goods you buy may have been even cheaper by now, if made by an American firm seeking to get ahead of competition.
      Reply | Mark as read | Parent | Best of... | Permalink  
      • Posted by term2 3 months ago
        I respectfully disagree. Almost totally:
        1). Chinese workers work harder and for less money than entitled and lazy American workers who refuse to accept they are outbid in the labor market

        2) our govt took us off the gold standard which allowed them to print money while temporarily hiding inflation. A gold standard would have prevented the continuation of an imbalance in trade like we have now by weakening the dollar and making Chinese prices relatively higher

        3). Tariffs are essentially domestic taxes which just slow down trade both ways

        4) tariffs will result in less economic activity in total
        Reply | Mark as read | Parent | Best of... | Permalink  
        • Posted by  $  DeangalvinFL 3 months ago
          Did you possibly misread the word "fair"?
          The fair trade crowd is trying to implement tariffs which is what you point out in 3 and 4 as being negative things.

          The fair trade crowd may have as a stated goal to ultimately lower tariffs but there means is to INCREASE governmental intervention and control into the interchanges between individual people. Thus, it is a bit masochistic. At least in the short run. If it achieved a long run lowering of tariffs and other barriers, then perhaps the ends will justify the means. We shall see.
          Reply | Mark as read | Parent | Best of... | Permalink  
          • Posted by term2 3 months ago
            I did misread the word fair.

            All I see with tariffs is that they arent designed to result in lower tariffs for everyone. They are designed to protect certain pet industries, and as a side benefit they bring in $$ to the governments that institute them.

            Once applied, I say that they are likely to be never removed. For example, if ALL countries had a 25% tariff on everything, the governments would be much happier than if there were 0% tariffs on everything. Plus, if all countries put on 25% tariff, the countries that wanted to be protectionist would go about placing supplemental tariffs on their pet products anyway.

            There is really no push for zero tariffs that can gain traction.
            Reply | Mark as read | Parent | Best of... | Permalink  
            • Posted by  $  DeangalvinFL 3 months ago
              Yes, that is what I am afraid of also.
              Retaliatory tariffs are all too likely to get implemented and then ignored as focus moves on to the next crisis.
              Reply | Mark as read | Parent | Best of... | Permalink  
              • Posted by term2 3 months ago
                I agree its disturbing. I am going to find a way to increase all our prices by about 15-18% in anticipation of whats going to happen. Once governments get their fingers on the extra money, they wont let go easily. Thats why there is no hue and cry about Trump putting the tariffs on- the establishment is thrilled about the $$ and letting Trump take the heat for shrinking the economy.
                Reply | Mark as read | Parent | Best of... | Permalink  
        • Posted by DrZarkov99 3 months ago
          Speaking with Indian consumers, as one example, they cite horrendously poor quality of Chinese goods as the reason they would rather have more reliable American products, even if they have to pay more. The Chinese workers may work for less pay and work longer hours, but they are poorly trained and have poor quality control.
          Reply | Mark as read | Parent | Best of... | Permalink  
          • Posted by term2 3 months ago
            I would disagree with this view the Indian people seem to have. I have bought in the neighborhood of half a million dollars of chinese parts, and have found their quality really quite excellent. If there is a problem, which isnt often, they quickly replace the product with minimal hassle.

            I have had business associates tell me to watch the quality on the stuff from china, but my experience over 7 years or so of buying is that they are just not correct on their impression.

            I would argue that if chinese quality was not good, walmart and other big companies would not deal with them.

            There are literally hundreds if not thousands of container ships operating between china and the USA, filled with chinese goods. That wouldnt be the case if quality issues like the people of India seem to be complaining about were so pronounced
            Reply | Mark as read | Parent | Best of... | Permalink  
            • Posted by DrZarkov99 3 months ago
              Quality depends on the item. I have a friend who operates much as you do, using Chinese components for his electric scooters. Their batteries are sound, as are their basic motors, but their motors are not weatherproofed, and their controllers suck. He weatherproofs and adds oil cooling, so what the Indian customers see is a Chinese scooter that has one speed and dies in the rain, unlike the American product.
              Reply | Mark as read | Parent | Best of... | Permalink  
              • Posted by term2 3 months ago
                Interesting. I would say that the chinese do operate from a relatively remote location from the USA, and they dont understand our market all the time, in particular what specific design features are needed here.

                But, when one specs what you want carefully (and I will admit that one has to do this consistently), they are really good at delivering. Its a bit scary in that the more they understand our markets, the bigger competitors they will be in the future.

                I think they are much more into customer service, less entitled, and certainly less lazy. I can contact them pretty much anytime, as they answer their emails pretty much all the time, and answer right away.

                I get circuit boards made to our spec, populated to our spec that they source locally in china, machine parts made to our spec, and electronic control units prety much made to their spec.
                Reply | Mark as read | Parent | Best of... | Permalink  
                • Posted by Lucky 3 months ago
                  I agree with the comment of term2 and add the following from my experience of Chinese culture. There is a good chance that you get what you ask for, but, you will not get what you do not ask for. Think for example, corrosion resistance.
                  It may be usual in the industry or for that kind of part, but you still have to put it in the spec.
                  Reply | Mark as read | Parent | Best of... | Permalink  
                  • Posted by term2 3 months ago
                    Absolutely correct. 100% my experience too. But then again we should be specific as to what we want when ordering from another person from a totally different culture. We have to specify what kind of anodizing we want on our aluminum parts or you are likely to get whatever they happen to select
                    Reply | Mark as read | Parent | Best of... | Permalink  
                • Posted by DrZarkov99 3 months ago
                  With all the static raised about Chinese theft of American intellectual property, their eagerness to respond induces us to share and teach them how to be our competitors. My scooter/motorcycle manufacturing friend has been careful not to share his reengineering of their motors and controllers, so as not to shoot himself in the foot.
                  Reply | Mark as read | Parent | Best of... | Permalink  
                  • Posted by term2 3 months ago
                    We do the same thing actually. Chinese are very good competitors and learn from what others do. I would think you would approve of that in general. It’s the way free enterprise works. You could argue about patent infringement, but we could stop that at our border as we do inside the USA

                    Chinese are fast learners and very competitive, also among themselves. Maybe THAT is what scares US. Mfrs
                    Reply | Mark as read | Parent | Best of... | Permalink  
                    • Posted by DrZarkov99 3 months ago
                      The situation isn't free competition. The Chinese government is very active to prevent foreign competition in their domestic market. How many of your sales of the finished product go to Chinese consumers?
                      Reply | Mark as read | Parent | Best of... | Permalink  
                      • Posted by CircuitGuy 3 months ago
                        "The Chinese government is very active to prevent foreign competition in their domestic market. "
                        If China stops it's people from buying foreign goods, and a second country that buys Chinese goods has no tariffs, which country's citizens are getting the (possibly unfair) benefit?
                        Reply | Mark as read | Parent | Best of... | Permalink  
                        • Posted by DrZarkov99 3 months ago
                          If, because of price disparities, nationally vital domestic industry is beaten out of existence, international blackmail can be the result. For example, highly restrictive mining regulations have shut down U.S. rare earth mineral mining operations, relying on Chinese sources for all of our rare earth needs for electronics. While it would be possible to reactivate known domestic mines, the delay could constitute a national defense crisis should China call a halt to supplying the U.S. with the rare earth supplies it needs for military electronics.

                          So long as the international diplomatic scene is benign, reliance on foreign suppliers isn't a problem, but if, for instance, the Chinese decide it's time to punish us for our refusal to recognize the entire offshore developed area as Chinese property, they could easily make life very uncomfortable for us. The fact that some of their own industries would struggle to find other buyers would be less important than teaching us that we best not defy their hegemony.

                          As with most elements of international economy, it isn't always about the money and bargains for the consumer.
                          Reply | Mark as read | Parent | Best of... | Permalink  
                          • Posted by CircuitGuy 3 months ago
                            "it isn't always about the money and bargains for the consumer."
                            I don't know. When it comes to gov't, I think it's all about getting out of the way so individuals can make money, bargains, or whatever they like.
                            Reply | Mark as read | Parent | Best of... | Permalink  
                      • Posted by term2 3 months ago
                        Chinese consumers freely buy from us suppliers, but under conditions set by their agent (Chinese government). My product is way too expensive for Chinese consumers

                        I say so what if they tariff my goods. I don’t have a right to sell to Chinese consumers if the govt they support discourages it. It’s their loss

                        As to our tariffs, I say our government is acting as my agent but without my approval and hurting my business I choose to buy parts from a Chinese supplier. If our government offered to tax a competitive product from China to “help” me I would refuse

                        I think it’s the business of the Chinese people to control its governments tariff policies, and the us should stay out of it
                        Reply | Mark as read | Parent | Best of... | Permalink  
                        • Posted by DrZarkov99 3 months ago
                          This sounds like "open borders" with regard to trade. Foreign producers should be allowed to dump and destroy American producers, and prohibit sales of American products in their country? We allowed the Japanese and Koreans to annihilate US electronics producers (China got into the game late, but they're catching up), so we should just continue the same self-destructive practices with regard to all American products?

                          I understand your position, because you rely on low cost Chinese components, and as an objectivist, all that counts is your self interest - no criticism warranted. However, Our government has sat on its hands for decades, watching one industry after another destroyed by patently distorted trade practices by other nations. Of course our own government hasn't been innocent in that destruction, creating crushing regulations to add to the problem.

                          We need to try to level the playing field and create a freer market internationally. Tariffs are only one element of trade that Trump is using to get our trading partners to recognize the pain they bring, with the intent of arguing in favor of a global reduction in artificial barriers. This tactic worked with the EU and Mexico, and Canada appears to be coming around. Sooner or later, China needs to recognize that without some serious revisions in its trade practices, it can't sustain the economic growth it desperately needs.
                          Reply | Mark as read | Parent | Best of... | Permalink  
                          • Posted by term2 3 months ago
                            Open borders are ok regarding most commercial goods. I don’t think things like weapons of mass destruction should qualify, nor patent protected items

                            I do think a gold standard is critical with no money printing allowed at least in our side. If we had a gold standard we couldn’t have massive trade imbalances without running out of gold. The prices of Chinese stuff would have risen in real terms long ago

                            If a country “dumps” aren’t we the winner? Take advantage of their cheap items

                            Trump can only ask for the others to be less protectionist under threat of tariffs. Tariffs might work to cut their sales only IF the relative pricing differences are of something like 20%.

                            But with China the price disparity is huge, like 3 to 1 on the stuff we buy. So tariffs wontvwork
                            Reply | Mark as read | Parent | Best of... | Permalink  
  • Posted by  $  WilliamShipley 3 months, 1 week ago
    If a U.S. Company produces the majority of its goods in China, is it "our producer" or is it "China's Producer".

    After WWII the U.S. had an amazing advantage over other countries because it had ramped up industrial production for the war and had pretty much the only undamaged industrial production in the world. We loved free trade, we could make stuff and everyone could buy it. By the 1960's the rest of the world started to recover and had newer, more efficient, factories. They protected their markets with barriers and took advantage of the lack of barriers to the U.S. markets.

    By the early 70's people were talking about a post-industrial information society where we would develop IP and the rest of the world would produce goods. We had moved beyond manufacturing just like we had moved beyond agriculture. Of course it's a fallicy, we never moved beyond agriculture, we just became so good at it that we can make more than enough food with fewer people. We didn't decide that we would let the rest of the world grow our food, but we did decide that it was OK to let them make our goods.

    And, of course, IP only lasts until they steal it

    The traditional concept that subsidizing foreign production benefits U.S. consumers only works so long as the U.S. consumers still have their jobs. If they no longer work at the steel mill but have to get a job at McDonalds then the lower priced foreign goods will not be cheaper in terms of their labor. We are becoming a nation of fast food and hedge funds.
    Reply | Mark as read | Best of... | Permalink  
    • Posted by  $  DeangalvinFL 3 months ago
      Subsidizing any production distorts the best use of resources. On average, most people are worse off from such interventions.

      However, in the short run, the beneficiaries of the subsidy can be made much better off. And in the long run we are all dead, as the saying goes.
      Reply | Mark as read | Parent | Best of... | Permalink  
  • Posted by  $  3 months, 1 week ago
    Could unilateral trade mean just get out of the way of your own producers? And I'm referring to importers of both capital and consumer goods as producers.
    Reply | Mark as read | Best of... | Permalink  
    • Posted by  $  Olduglycarl 3 months ago
      Yes, allow the market determine the price and value of goods.
      Reply | Mark as read | Parent | Best of... | Permalink  
      • Posted by  $  DeangalvinFL 3 months ago
        With the market being individual people choosing what price and value of goods they want to purchase. And what they want to make.

        Statists like to change the word market into what the government dictates may or should be produced and exchanged rather than individual choices.
        Reply | Mark as read | Parent | Best of... | Permalink  
        • Posted by  $  Olduglycarl 3 months ago
          The Marxist post modernist want nothing but pourage be made for us, nothing else except when we are good...they may let us eat cake.
          Reply | Mark as read | Parent | Best of... | Permalink  
          • Posted by  $  DeangalvinFL 3 months ago
            Lol, yes indeed. But first they will take away all of your healthy food and give it to someone else.
            Then we get to eat the gloriously wonderful pourage and tasty cakes when we are "good".
            Reply | Mark as read | Parent | Best of... | Permalink  
            • Posted by  $  Olduglycarl 3 months ago
              "They" get the healthy food that will be stolen from our creation of values; not that it will do them much good...they are already sick, diseased, and stupid.

              It'll be more like a "Game of Thongs".
              (yes I said: thongs)...they are sexually perverted you know.

              [now you might understand what "Throne" they sit upon.]...
              Reply | Mark as read | Parent | Best of... | Permalink  
  • Posted by  $  Dobrien 3 months ago
    The issues regarding National Security for quality
    Control of metals that are used in military equipment as well as other components is part of the issue , IMHO. A quality Reardon steel type is what we need for our military not a defective or knock off product for our planes and bridges.
    Protecting our steel industry from subsidized dumping and for those reasons may be in our self interest.
    I also believe Having a strong independent vibrant agriculture Industry is also in our self interest.

    I feel better about what President Trump is doing in regards to this countries future than I have over the last thirty years.
    Reply | Mark as read | Best of... | Permalink  
  • Posted by  $  blarman 3 months ago
    "Given the benefits of free trade, the best policy any government can adopt is unilateral free trade (with other non-enemy governments), which means: free trade regardless of whether other governments also adopt freer trade."

    Absolutely not! The author begins by excoriating the self-flagellation of altruism, then goes on to praise the altruistic nature of unilateral free trade! If the trading field is not level, one is by definition agreeing to be taken advantage of! What is more but they are condoning and even praising such action! What a load of rubbish!
    Reply | Mark as read | Best of... | Permalink  
    • Posted by  $  3 months ago
      I don't think you can interpret unilateral free trade to be the least bit altruistic, unless government getting out of the way is somehow altruistic. When other government subsidize their exports they are transferring wealth to the importers. When other government slap tariffs on their imports, they are taxing their consumers. In both cases they are sacrificing their taxpayers and consumers for the benefit of their cronies. The altruists are the ones who approve of this or at least sanction it by going along with it.
      Reply | Mark as read | Parent | Best of... | Permalink  
      • Posted by  $  blarman 3 months ago
        But that's part of the point: although the US government may be getting out of the way, the Chinese government sure isn't! Free trade has to be free on both sides. The nominal idea of "unilateral free trade" is nonsense. Trade must by definition be bilateral to be a product of freedom! Unilateral trade is a bi-product of slavery to some degree!

        "When other government slap tariffs on their imports, they are taxing their consumers."

        Agreed. As you point out "they are sacrificing their taxpayers and consumers for the benefit of their cronies." While its great just to think about the consumer, in this case it is the producer - specifically the Chinese producer - who is getting taken advantage of because the wealth is going to Chinese bureaucrats rather than the producers. If you are going to complain about altruism, you have to be concerned about it on both sides.
        Reply | Mark as read | Parent | Best of... | Permalink  
    • Posted by  $  DeangalvinFL 3 months ago
      You seem to imply that "unilateral free trade" would somehow force people to buy things that they don't want to. The emphasis should be on the individual. China doesn't trade with the USA as a whole. Rather millions and millions of transactions take place by individual people. Each person buying a pair of shoes is better off IF they are freely buying those shoes. If the Chinese government subsidies them so they are even cheaper then that is even MORE beneficial.

      I think you have the altruism side on the wrong side of the coin, so to speak.
      Reply | Mark as read | Parent | Best of... | Permalink  
      • Posted by  $  blarman 3 months ago
        "You seem to imply that "unilateral free trade" would somehow force people to buy things that they don't want to."

        Not at all. Who benefits from cheap Chinese goods? American consumers perhaps, but the bigger one is the Chinese government. Who suffers? The Chinese manufacturers and laborers. Why? Because their profits and wage rates are being held artificially low by the government and what would be going to those manufacturers and laborers is instead being rerouted to corrupt government officials.

        My dad was a consulting engineer (he speaks fluent Mandarin Chinese). He would find US manufacturers needing parts sourced and would take their designs to China to have them mass-produced. But the business he operated and ran was actually in the name of a Chinese national. Why? Because part of every business deal involved bribes, and US business law forbids the payment of such. So the business partner (as his only contribution) would pay the bribes to the local (and sometimes regional) officials in order to obtain the necessary government approvals for the jobs.

        You are correct in that no one is being forced to purchase the cheap goods. The point you overlook is that there are people being forced to manufacture those cheap goods and who do not commensurately benefit from their individual labors. The communist state is a slave state. Trade with them is support of that state.
        Reply | Mark as read | Parent | Best of... | Permalink  
        • Posted by  $  DeangalvinFL 3 months ago
          Good point, at least in part.
          A value judgement as to whether one should trade with a group/society that one finds abhorrent is a different question. Do you sacrifice the benefits of any trade for your own citizens in order to not associate with what is properly considered an enemy?

          Removing tariffs and trade restrictions would still leave such trade as unjust.
          Reply | Mark as read | Parent | Best of... | Permalink  
          • Posted by  $  blarman 3 months ago
            +1

            "Do you sacrifice the benefits of any trade for your own citizens in order to not associate with what is properly considered an enemy?"

            Ultimately, it comes down to a question of morals, I completely agree! Do you hold to the line that altruism is unacceptable or do you take a bit here or a bit there because it is monetarily profitable? That's a personal judgment call - or a policy one at a governmental level. What I point out is the moral hypocrisy on the part of the author to excoriate altruism in one paragraph and yet call for its exploitation in the next!

            "Removing tariffs and trade restrictions would still leave such trade as unjust."

            The situation will remain unjust until the Chinese government alters its state of affairs. The real question is "will the imposition of tariffs encourage the political change necessary to affect the Chinese government's policies." No one knows for sure. There is one other question, however: will the Chinese government continue to raid other nations' intellectual property until they are forced to change? That one is a resounding YES.
            Reply | Mark as read | Parent | Best of... | Permalink  
  • Posted by term2 3 months ago
    Put the gold standard back into existence. That prevents countries from manipulating currencies without bad things happening to them.

    Then get all tariffs and barriers repealed and let the free market deal with it.

    In the case of china, if there was a gold standard, the value of the chinese yuan would have risen relative to the dollar as out trade deficit with china automatically made it happen. Chinese prices rise in terms of US$, and our purchases shift back to the USA automatically.

    When Nixon abandoned the gold standard for the USA in 1971, HE started this mess. We printed money but the chinese helped us escape the inflation we should have had when we printed the dollars. Now, the inflation will come back as the chinese spend those dollars they have been hoarding right here in the USA.

    There is no free lunch that someone doesnt have to pay for.
    Reply | Mark as read | Best of... | Permalink  
  • Posted by  $  3 months ago
    You had me until the last paragraph. The burger slinging jobs replacing steel manufacturing jobs is old and tired and untrue. Cheap imported goods create new markets, and jobs, and investment.
    Reply | Mark as read | Best of... | Permalink  

FORMATTING HELP

  • Comment hidden. Undo