:. Economic Protectionism, Branched from Truths(ok'd by mod team)

The biggest beef I have people today is that, even centuries after Adam Smith's "The Wealth of Nations," many of the fundamental propositions of economics are still not accepted as truth.

The issues of protectionism is probably the biggest. Mercantilism was well in vogue in the 1700s, and had been for several centuries. It's still in vogue: it's just looking at trade deficits instead of the flow of gold to Spain. Throw in some rhetoric about "not treating your workers properly" and "falling wages" and you have all the political clout you need to stop a free trade agreement with Colombia, or yell at China about product safety and then threaten to force them to appreciate the Yuan (two unrelated issues, I might add).

Free trade is one of the few things most economists agree on. They don't agree on the minimum wage. They don't agree on income taxes. They don't even agree on the Great Depression. Most, however, do agree that free trade is economically beneficial.
Even some of the big names receiving attention for being "anti-trade" like Alan Blinder support free trade; Blinder, for instance, simply thinks that we are underestimating the transition costs related to outsourcing, since more jobs are outsourceable than we currently imagine.

Why is there such strong agreeement? Because trade is GOOD. It is, by nature, a wealth-producing activity. If I have turkey and you have bread, we should trade and each have sandwiches.
From that, it's just a logical leap to the fact that we should specialize production as well. If I can raise turkeys better than you, and you can make bread better than me, then I should raise turkeys and you should make bread, and then trade. We'll each have more sandwiches to eat, then.
The same logic applies on an international scale. Nations like Saudi Arabia have large supplies of oil that they can drill easily. They should sell oil to other nations. Nations like the United States have more technology and smarter workers, and should produce computer software. Nations like China have a massive labor supply willing to work for low wages. They should produce things that require a lot of labor, like toys.
Saudi Arabia, China, and the United States should then trade with each other, and we'll all be richer than if we tried to produce it ourselves.


The arguments against free trade for advanced nations like the United States mainly rest on the fact that large numbers of people are dislocated. The auto industry, for instance, simply cannot compete with Toyota. Many GM workers are now being laid off.
Free Trade hurts a lot of people

But the economic consequences for advanced nations are EXTREME. Forcing me to buy my automobile from Detroit instead of Tokyo means that I also cannot buy an IPod and television set, since the GM car is going to cost several thousand dollars more. Forcing me to buy toys and and shoes from American makers means that I am going to shell out a LOT of dollars, and I won't be able to enjoy my Starbucks everyday anymore.
This logic can also be extended to other areas of change. The introduction of computers meant that the typewriter industry was gutted. Banktellers have suffered from the introduction of ATMs. Switchboard operators suffered from the introduction of automated switchboards.
Shoud we REALLY make everyone else poorer so a few people can enjoy their current lifestyle?
Protectionism hurts a lot more people


That was the extent of the statement offered in the "truth" thread. It is almost self-evident, but not quite. It merely requires some directed thought.


I won't stop there, though, because there are many more nuances about trade policy.

For example, China treats its workers like crap and pollutes its enviornment. Many people take this to mean that the playing field isn't "fair" and therefore the US government should unilaterally level the playing field by putting tariffs.
This does not make sense in an economic sense (ignoring enivormental effects on other nations)
If you choose to spend 20 hours to produce bread while I spend only 10 hours raising turkeys, it does not change the fact that I still gain more from trading with you than if I don't trade with you. The fact that you have the preference to work more is only as unfair as the fact that I am better at raising turkeys and you are better at making bread; IE, it is not unfair at all, but rather an inherent advantage that you have.
Similiarly, does it matter to me that you ruin your land by growing your bread? To some extent, yes. I would prefer that you keep your land healthy so I can continue to enjoy your bread. And I would prefer that keep your air clean so you can stay alive, so I can enjoy your bread.
But, notice something: I want you to stay alive. I don't really care that you reduce your quality of life or treat yourself like crap, because it doesn't change the fact that it is still beneficial for me to trade with you. In the same way, if you absolutely REFUSE to keep your air clean, then there is nothing I can do to keep you alive longer; this does not change the fact that I should trade with you now, as I will still be richer.

In the same way, China crapping on its enviornment and treating its workers like crap to increase its production skill doesn't matter to the United States (to the extent that the enivormental damage doesn't affect anyone other than China. I know that this doesn't truly exist, but, in American circles, it is argued that China has an unfair advantage because their trash their own enviornment which lowers the health of its own citizens). It still makes us richer to trade with China than to not trade with China.




Some people also suggest that nations should restrict trade flows in order to encourage their own development. They argue that infant industries need to be protected from foreign competition in their formative years, and that, in the long run, we will benefit.
To an extent...they are somewhat right. Free trade makes everyone richer. As people get richer, they demand different goods: They care less about food and more about cars. So, as free trade expands, people that produce food will gain less than people that make cars. Make no mistake, both sets of people ARE richer, but the people making cars have better growth propsects for the future. At least, theoretically. You'll notice that, since the expansion of free trade, advanced nations that produce "high-end goods" have been growing slower than nations that produce "low-end goods." This is possibly due to the fact that we have enjoyed free trade for a while, while nations like China and India are only getting a taste.
In that sense, then, in the future, advanced nations should pick up growth soon.
That aside, let's assume it is true. Would it then make sense for a nation that has a small auto industry to put tariffs on its automoblies, so that the domestic auto industry can grow more?
Tariffs can no doubt be effective in that regard, but they are hardly ideal. The auto industry should, instead, be subsidized, or perhaps have taxes ignored for a few years. Rather than hurting the competition's competitveness, merely raising the domestic producers for a short while should produce better results for the people.
But, lets explore the issue further. The things any industry REALLY needs most are simple: they need educated workers, they need good government, they need good laws, and a financial sector that's effecient would work well, too. With such things, a nation should give itself a comparative advantage in producing higher-end goods. If you want to help your auto sector, you should raise your comparative advantage in auto-producing by looking at the fundamentals, like education. And those fundamentals support other sectors as well, whereas subsidies and tariffs merely HURT other sectors by taxing them.
There is nothing in free trade orthodoxy that says you shouldn't teach your kids, nor is there anything that says you should have bad government or kill all bankers. Rather, most people that support free trade say you SHOULD do all those things.
The answer to producing higher-quality goods is investing in your nation. It is not punishing your consumers by keeping out countries that are better producers than you.


Finally, many people seem to think that small nations are horribly ruined by globalized agreements like WTO. This is a fiction. Smaller nations are working very hard to SUPPORT organization like the WTO, as it is the only means they have of influencing the strongest governments at all. Small island nations that house servers for internet gambling, for instance, are currently bringing actions against the US in the WTO for restricting their operations. Nations that opposed agricultural subsidies are doing so in the WTO.
What is the response? The US says "screw you" and ignores the complaints, then whines about the WTO not supporting them. A similar problem emerged over lumber with Canada a few years back.
It is not smaller nations that hate free trade and trade institutions.
It is large nations that reject any surrender of sovereignty.



Free Trade.
Is.
Good.

GM's problems are their own, not free trade's. They'd probably be losing even if they were just competing with other American companies.

You raise alot of good points. Free-Trade is beneficial if it is truly free, the softwood lumber dispute and agricultural protectionism (especially in the EU) has hurt smaller countries.

The problem with completely free trade is that it assumes money is the ultimate moral authority. Whoever has the gold makes the rules. But that's simply not a system that works well.

It exploits the working class of "first world" nations by destroying their job security for the profit of others. And when they lose their incomes, most don't just have the opportunity to be retrained in another field, and there's no money to pay for it because that's what tariffs would accomplish. So ultimately average income declines, decreasing spending as a whole, and really provides no huge economic benefit in the long run, not to mention social disruption.

It also exploits the working class of "third world" nations, who become subject to the whims of large foreign corporations that have the government's permission to do whatever they please in the pursuit of wealth. It does increase the wealth of these nations, and probably does benefit them in a lot of ways, but the much of the money goes to their elite, and an even larger portion may leave their country altogether to make someone else richer. And sometimes these free trade agreements force these types of nations to accept things against their will.

And because these corporations can do whatever they please, this is really the reason that China and Mexico are the world's largest polluters, because they do whatever it takes to get more money. This doesn't benefit the world as whole, though, and could end up hurting a great deal of people in the long run with increased health problems and climate change, the victims of which will almost exclusively be the working classes.

I don't personally see a problem with free trade between economically developed nations, since it has much less of a negative social impact, but with the "third world" it's just a legal escape from ethics. Third world governments don't like them very much, considerate people in the first world generally don't care for them, but corporatists love them. Because as I said, those who have the gold make the rules.

So we should not trade with them so the third-world poor have no jobs instead of bad jobs.

:awesome:

one thing i would ask GV


doesn't china artificially deflate it's currency, if so, wouldn't it be in the interests of free trade to force them to appreciate it?

Who ever said they would have no jobs? It's usually kids who leave farming who go to work in those jobs.

And they can create their own economies, and more importantly, there's nothing preventing them from reasonable trade! Using that as an excuse for the economic &#^$ and pillage of undeveloped countries is absolutely heartless. Fairness works better than the bullying method, which by the way, is why the world hates America.

If they're leaving jobs they have for the new ones created by multinational corporations, their old ones must not be so hot. Therefore, the corporations are providing an opportunity for the poor in the third world. I'm not sure where bullying comes into play.

Trade agreements that prevent poor nations from enforcing their own laws without economic devestation for one...

The major point is that there's a lot more losers than winners from "free trade".

Example please? I imagine most of those laws are foolish anti-trade laws, and thus the nations deserve to suffer from companies leaving their country. But I don't know.

We get cheap goods and services. They get better jobs and their economy grows. What's not to like?

Oh, there is defintely an issue with rules and rules breaking. It's entirely done by nations that hate free trade, though. For some reason, anti-free trade and anti-globalization are wrapped with each other, when they are actually somewhat different concepts.
And, yes, free trade is "right" only if we want to be richer. I am unsure of why we wouldn't want to be richer. :unsure:

Free Trade hurts a lot of people.
Protectionism hurts more people because they are made poorer.
There is nothing in free trade orthodoxy that says we shouldn't be retraining workers. Heck, there isn't anything in free trade orthodoxy that says you can't have a 100% income tax if you really want one.
Free Trade merely says you should trade with other nations.

If the country is so perverse and corrupt that all the money goes to the leaders, all the money would go to the leaders anyways. North Korea has no free trade; all the money goes to the elites. South Korea has free trade; it's people are richer AND have a more equitable share of income.

And allowing corporations to run rough-shod over your people is a problem with politics. It is not a problem with economics. If the government is willing to allow corporations to whip the people, the government rules certainly would as well.

We ourselves benefit, regardless of what Mexico and China do to its people. The issue of climate change is dramatically different; that's them hurting US. I avoided talking about climate change, though, because many people on the Left say we shouldn't trade with them because they work their labor harder and treat their enivornment badly, and that this gives them an unfair advantage. In reality, it's merely a preference to work harder and have more material goods by their government.
Obviously, if the effects aren't constrained to just China, then we have a problem. In reality, they aren't, and problems like this are best solved through cooperation. That's an issue of globalization, though, not free trade.

India and China are bending over backwards for corporations. Third world countries like foreign corporations, especially when they give FDI (Foreign Direct Investment), which is, according to the evidence available, ALWAYS good for an economy.

They are also clamoring for globalization (meaning nations becoming interconnected and working together), as they have no other means if influencing richer nations.

The fact that they are keeping their currency low does not mean we shouldn't trade with them, as they would be keeping it down anyways. The biggest effect that keeping their currency low means that their buying power is dramatically lower than ours.
The people that are hurt worst by Chinese currency manipulation are the Chinese people.
And China IS slowly moving to a floating exchange rate. If all goes well, it shouldn't be a problem in 20 years

One fact Missing from Agriculture that you mentioned, in Agriculture it is highly pollution to fly your bred from the US and fly my Turkeys from the UK and we have sandwitched ((Btw analysis FTW)) Instead you can raise turkeys and bread and make your own sandwich there. You don't have to polute across the globe. This is the same in the EU, I remember hearing Britain exported 1.5 tonnes of Gingerbread to germany, and Germany exported 1.5 tonnes to britain. That is just a pintless waste of fuel, pointless emissions of CO2. That is why I am a supporter of domestic agriculture production and subsidising that sector to allow almost self-sufficiency in Agriculture. Therefore I object to the Eu and US dumping their surplus on other nations and those nations should impose tariffs on imports supporting their domestic industry. Of course when a nation can't produce enough they import (Japan For example) But japan supports their own production and bans imports of rice and some fish.

Transporation costs are associated with doing business. If it was very expensive to transport (and if we actually taxed people for their carbon emissions), then the trade wouldn't be done, regardless of free trade or not.

You mention gingerbread trade between the UK and Germany. I am not familiar with this market, but there are a few good guesses:
1. Firms that want gingerbread have better relations with someone overseas than a domestic firm. It is therefore less costly for that firm to import the gingerbread instead of buying it domestically.
2. British consumers like German gingerbread because it tastes different from British gingerbread, and vice versa.
3. At any given point in the year, either Germany or the UK is going to have a shortage of gingerbread, and the other is going to have a surplus. It only makes sense for one to buy gingerbread from the other at that point. And, yes, shortages and surpluses can occur over the course of a year.

That is for air freight, Air freight is mainly food, and ligh weight goods (Computer Chips) Everything else is done by Shipping. Shipping is perfectly fine, there are lower emissions than aeroplanes.

Well get good relations in Britain, The fact is this is a pointless flaw in the free market that emits thousands of Tonnes of CO2 a year which could all be saved by Using British produce.

Gingerbread all tastes basically The same, I am not against choice, but if you want to buy German gingerbread it should be more expensive that British Ginger bread as it is freighted in, by road or air.

I am sure Gingerbread can last a while if preserved properly. my point is in agriculture every nation should be encouraged to become self sufficient in goods and import things that can't be produced in your own nation, For example Bananas, Tea, Coffee. I fail to see why we import lots of Spanish Tamatoes, or German Applies. It may be because of seasons, however, if you want to buy out of season it should be more expensive. Just my opinion.

Well get good relations in Britain, The fact is this is a pointless flaw in the free market that emits thousands of Tonnes of CO2 a year which could all be saved by Using British produce.



Gingerbread all tastes basically The same, I am not against choice, but if you want to buy German gingerbread it should be more expensive that British Ginger bread as it is freighted in, by road or air.



I am sure Gingerbread can last a while if preserved properly. my point is in agriculture every nation should be encouraged to become self sufficient in goods and import things that can't be produced in your own nation, For example Bananas, Tea, Coffee. I fail to see why we import lots of Spanish Tamatoes, or German Applies. It may be because of seasons, however, if you want to buy out of season it should be more expensive. Just my opinion.

There isn't strong evidence that there is a flaw in the market. All I see is gingerbread being moved in between countries without any reason to why the gingerbread is being moved.
I'll assume the movement is logical before illogical