by Tyler Cowen
on March 18, 2016 at 2:25 pm
in Current Affairs, Data Source, Economics, Education, Medicine, Political Science
Opportunity! That is from Justin Wolfers.
How about an opportunity for growth through imports?
Exactly. The question is asked in such a way as to get the desired results. “Opportunity through exports”. Hell, even the dumbest Trumpian would say yes to that. It doesn’t imply that “trade” is viewed positively by those people, however.
Although I would be surprised if there ever was any time in human history where the majority of a population viewed imports, and by extension trade, positively. Such is human nature.
“Industry is the only true source of wealth, and there was no industry in Rome. By day the Ostia road was crowded with carts and muleteers, carrying to the great city the silks and spices of the East, the marble of Asia Minor, the timber of the Atlas, the grain of Africa and Egypt; and the carts brought out nothing but loads of dung. That was their return cargo.”
I’m sure a majority of the population of Rome viewed imports favorably, although the manner in which they were gotten was not so favorable.
Americans are somewhat close to “getting something for nothing” from China for the last several decades. Politicians have masterfully managed to convince some of them that they’re worse off today. Unfortunately, those are the ones who vote.
Romans had to view trade favorably. Rome (like any city) imported all of its food. However, Italy (apparently) didn’t produce any food surpluses. That meant that Rome had to obtain its grain from Egypt. The Romans were notably brutal in subjugating Egypt to maintain the steady flow of grain to feed Rome. See “Cura Annonae” in Wikipedia for the (considerably more complex) details.
Anyone interested in a what Americans really think about trade should read “Republicans, Democrats Generally Agree on Impact of Trade Agreements” (Pew Research). By a 46/17 margin Americans believe that trade destroys jobs. By a 46/11 margin Americans believe that trade lowers wages. By a 36/30 margin Americans believe that trade lowers prices. By a 34/31 margin Americans believe that trade slows the economy. As the title of the Pew Report shows, the partisan schism on trade is small (Democrats are slightly more favorable to trade than Republicans).
As always, a lot depends on what questions you ask. See “U.S. Polling Shows Strong Opposition to More of the Same U.S. Trade Deals from Independents, Republicans and Democrats Alike” for some remarkably negative trade polling data. Of course, the questions were structured to present both sides of the trade issue. Quote
“A June 2015 New York Times / CBS News poll revealed that 63 percent of the U.S. public believes that “trade restrictions are necessary to protect domestic industries” while only 30 percent think “free trade must be allowed, even if domestic industries are hurt by foreign competition.” Democrats, Republicans and independents all overwhelmingly supported protection of domestic businesses over “free trade” at any cost.
These results confirm years of polls showing majority, trans-partisan opposition to the status quo trade model. Indeed, a June 2015 NBC News poll found that 66 percent of the U.S. public says “protecting American industries and jobs by limiting imports from other countries” is more important than “allowing free trade so you can buy products at low prices no matter what country they come from.”2 One month earlier, a poll from Ipsos Public Affairs found that 84 percent of the U.S. public believes that “protecting American manufacturing jobs” is more important than “getting Americans access to more products” when trade agreements put U.S. jobs at risk.3 The findings are relevant for the TPP, which includes special protections for firms that offshore U.S. jobs to countries like TPP member Vietnam,4 where minimum wages average less than 60 cents an hour.
The same May 2015 Ipsos poll found that 73 percent of the U.S. public believes that Congress should oppose any “international trade agreement that does not specifically prohibit currency manipulation.”6 That would presumably include the TPP, as the Obama administration has repeatedly dismissed Congress’ bipartisan, bicameral demand for the TPP to include binding disciplines against currency manipulation.7 The poll revealed that 88 percent of the U.S. public considers it important “that any international trade agreements negotiated by the United States have specific rules preventing currency manipulation.”
In addition to indicating broad public opposition to the specific content of the TPP (e.g. its job offshoring incentives or lack of currency manipulation disciplines), recent polls also show that the U.S. public believes that the status quo trade model that the TPP would expand has been damaging to the middle class. A June 2015 NBC News / Wall Street Journal poll found that a plurality of the U.S. public believes that “free trade between the United States and foreign countries…has hurt the United States.”8 A May 2015 poll by the Pew Research Center confirmed that this is the dominant opinion:”
All interesint, however:
What about a question along the lines “do you think access to foreign markets for American exporters is worth the challenge of allowing access to American markets for imports”?
I think this is not a leading question. A leading question would highlight that American exporters get market access for high value goods and face more competition in low value goods (on average).
“do you think access to foreign markets for American exporters is worth the challenge of allowing access to American markets for imports”?
That would be a reasonable question if the U.S. didn’t run a huge trade deficit. How about
“do you think limited access to foreign markets for American exporters is worth the challenge of allowing unrestricted access to American markets for imports”?
See FRED series BOPGSTB for the numbers.
If that’s the situation, then American trade lawyers should be more aggressive in their use of the WTO. Indeed, the USA makes extensive use of this mechanism to pursue reciprocity in trade. In many sectors, high quality regulations serve as an important barrier to access to the American market for many prospective importers.
The size of the American trade decifict may be influenced by the factors you seem to be concerned about (not actually clear whether American non-tariff barriers are greater than in the other direction. But, the status of the US dollar as the reserve currency and the relatively high purchasing power of American consumers is probably more relevant than the extent of reciprocity in American trade relations. As it stands, Americans are trading paper (and increasingly bits and bytes) for products, and retain the ability to inflate away the difference as quickly or slowly as they like (limited by view that high inflation muddies the quality of price signals in the economy).
More proof, if any is needed, that the US educational system is a farce. In addition, in the land of the free and the home of the brave, a significant segment of the population believes that they can, in good conscience, limit my freedom to purchase what I want from where I want it. Such is the hypocrisy of special interests.
You are more than able to travel to any nation on earth and bring home any object you so desire in so far as it is not a banned substance. That’s why these attempts to analogize macro-level policies on the individual level are so uninformative. You don’t want to buy what you want from where you want it- you want it brought here so that you can purchase it here. That’s a very different issue. As a consumer you don’t really have any means to complain- your freedom isn’t being abridged simply your convenience.
Framing it in terms of freedom suggests that you want the freedom to do whatever you what regardless of whatever cost it may impose on others. However, freedom is often predicated on the assumption that it should not (especially on average) impose negative costs on others. There’s a middle ground between the two, that satisfies our inherent desire for freedom with the costs it may impose on others if taken too far.
That having been said, absent from the consideration seems to be the benefits that trade brings to a) exporters, b) consumers through cheaper products, and c) consumers through expanded choice. Peter seems to be taking the “consider only the costs” approach to the argument, rather the opposite of what free trade proponents tend to do.
Also, you can always order basically whatever you want online from other countries, for most consumer goods. For practical purposes, a Trump approach would make this more expensive through tariffs (and probably start a trade war and hence a global recession in so doing), not outright ban the goods.
“a significant segment of the population believes that they can, in good conscience, limit my freedom to purchase what I want from where I want it”
Pretty much every, perhaps truly every, country in the world controls trade and places limits on markets.
It would be an odd public school that emphasizes the theoretical and ahistorical “alternative” over universal practice.
I guess that’s what homeschooling is for.
Thanks Peter, interesting data.
Change the last part of that question from “a threat to the economy” to “a threat to your job or your friends & relatives’ jobs” and let’s see how those numbers look.
Or, “has foreign trade affected you (a) positively, (b) negatively, or (c) not at all.”
“a” for me, but people who feel they already are “b” are going to be politically motivated about it.
Both A and B at different times of my life. It’s often difficult to pinpoint as a lot of the trade is in jobs and not always companies and products. Often a foreign company may take over a US company and then import their citizens to work at the higher level positions while paying them in their home country / currency. Who knows if US income taxes are paid.Then with the balance of staff, export the jobs to other countries to save money. Then budgets are tweaked to get profits as close to zero as possible in the US to avoid US corporate tax rules. Far more complicated than just straight trade.
99% of survey participants will interpret the former wording as the latter wording.
To most people, “the economy” is “my job, my friends & relatives jobs, and my customers’ jobs [the latter only if you are in a customer-focused role].”
I’ll believe it when I see it. Questionnaire design is far from an exact science.
99% of people who have some vague grasp on what “the economy” means, perhaps. I’m pretty pro-free trade, but I think a lot of respondents are basically programmed by “free trade is good for growth” thinking (borderline propaganda, for the fact of not owning up to the costs and highlighting only the benefits), and don’t actually have much ability to reason about it either with respect to their personal networks or the economy on the aggregate. I don’t mean for that to be condescending at all, but I think it’s realistic.
Completely disagree. The unreflective default view among humans is that, in every exchange there is a winner and a loser. The idea of “mutually advantageous exchange” is, I submit, not intuitive, and only obvious upon reflection.
Agree with Brian. How many people blame politicians for voting for NAFTA? I’ve never heard of anyone saying it positively.
“The idea of “mutually advantageous exchange” is, I submit, not intuitive…”
So when Joe-Sixpack buys his Budweiser, a Big-Mac, or an Acer laptop — he instinctively feels either he or the seller is getting screwed ? Not likely in most genuinely voluntary exchanges.
‘The idea of “mutually advantageous exchange” is, I submit, not intuitive, and only obvious upon reflection.’
Or upon having really good sex (no, that is seriously meant).
How many people get to enjoy such an intuitive mutually advantageous exchange is not exactly available as a reliable data point, admittedly.
But plenty of people understand that point, I’m sure, while avoiding any generalizations about those who don’t.
Agreed. The logic of comparative advantage is not “intuitive” until you’ve studied it from many angles. In which case it’s not intuitive.
It would be tempting to suggest that it should be taught in high school. But then, might this be perceived as indoctrinating certain ideological perspectives? I think not – comparative advantage is very real and sensible as an outlook, but it most certainly lends itself towards one view of trade than the other. if taught, it should be packaged together with a realistic view of shorter-term costs associated with trade, imo.
An argument that nonzeo sum is more internalized than that:
“An opportunity for economic growth through increased U.S. exports”
“A threat to the economy from foreign imports.”
I would think, to balance it out, that the latter should be “A threat to economic growth from increased foreign imports.”
Very good answer.
Hmm, but our politics are kind of saying the opposite. Hillary and Trump are against TPP (Hillary did a 180 flip on it). Trump is likely the biggest anti-trade candidate in the Republican party since WW2. How to explain that?
Hillary did that flip while campaigning against Bernie Sanders in the Rust Belt. Draw what conclusions you may about (a) Democratic voters in the Rust Belt, and (b) Hillary’s general credibility.
Trump is only now breaking the 39% barrier of support in the Republican primaries, and is only winning because of the absolute crap campaign strategies of his opponents. Do not draw any conclusions from the Trump campaign about anything but the sorry state of today’s GOP.
Also, vanishingly few people know anything about the TPP. Many of those who do, are anti-copyright types who oppose it because of its IP protection provisions but are otherwise pro free-trade.
The popularity of the TPP among politicians and the general public says little about either party’s views of free trade in general.
Very good comment, jb.
I think you are wrong on Trump. I believe he is big on free trade as long as the trade is fair in many ways. When we import from a foreign country with no restrictions then we should be able to export to that country with no restrictions….But, the actual TPP and NAFTA are far from that. If a product is made in the US and the company decides to lay off the workers because they can import it from another country, that is one thing but, does the other country operate under the same regulations as they must do if it was made in the US? Are the employees treated fairly in the foreign country as they must be in the US? Is the foreign country government helping the foreign companies in some ways? You can go on and on but the facts remain the the real trade is goods for jobs and if that continues, demand in this country will slow, our GDP will decline or grow very slow (as it is) and per capita GDP will begin to decline. Recently we saw Carrier move their A/C manufacturing to Mexico. Now the A/c’s will be imported to the US with no trade restrictions but demand has decreased since 1400+ people have been laid off in Indianapolis plus a number of others who would have been kept employed by the purchasing power of the 1400 may also become out of work. If the same number of Mexican A/C’s are sold in the US as the prior year when they were made in the US, the effective GDP declines since imports are a subtraction of GDP.
This idea that we can only trade with countries that are “fair” is a big fallacy. We trade for our benefit. If someone else sells something cheaper, there is no way we can lose. Yes, jobs will be eliminated (they would anyway over time) but that is a minority compared to the huge amounts of people benefiting from the new product at lower price. Trump knows better but he is pushing this Democrat idea to gain votes from people who don’t understand this.
Do you believe it is impossible to improve our trade position – say, for instance, by preventing other countries from imposing tariffs on our goods?
If our negotiating position in all trade deals is “well we will give you free trade no matter what, because it is good,” how exactly do we negotiate away impediments imposed by other nations?
FYI, I guess I did not clarify as much as I thought. “Fair” is in the minds of the participants. Yes, we trade for our benefit and if I pay $1.00 for an item that is valued at $0.95 and it allows me to benefit, it is fair. Unfortunately, the fairness of many of the trade deals is at the expense of the workers and the benefit of the CEO who can max out on profits and personal income. Lower price and less employees is offsetting while the trading country has a net positive with additional jobs. That is an unfair transaction in my book, it its our own fault.
That’s me. I’m pro-free trade but would kill the TPP if it were up to me, and invite labour and consumer advocates to the next round. It is virtually certain to increase drug prices in Canada, for example.
I’m also troubled by the requirements for ISPs to maintain and share certain data on customers, which might (not quite clear how it would exactly play out) enable foreign spy agencies to have fairly broad access to loads of information about foreign nationals than under the existing regime, and moreover due to information sharing between agencies effectively do an end run around anti-domestic spying laws. According to the principle “if they can, they will…” – this is essentially the line being pushed by Electronic Frontier Foundation (USA) and Open Media (Canada), both of which I consider to be fairly non-hysterical advocates for internet-related privacy stuff.
Americans favor TPP, but less than those in other countries do http://www.pewresearch.org/fact-tank/2015/06/23/americans-favor-tpp-but-less-than-other-countries-do/
Americans agree on trade: Good for the country, but not great for jobs
Yes, Trump says the opposite and that’s why he has 30% chance of winning according to bets =)
They’re only attracting a plurality of support, at similar levels to the “threat” numbers in the chart.
I wonder what the breakout of results look like for voters in rust belt swing states like Pennsylvania, Ohio and Wisconsin.
If farmers in Nebraska and software developers in California love trade but Ohioans hate it, there might be political gains in opposing trade even if it’s what the majority of voters nationwide want.
After all, we still have sugar tariffs which hurt 99% of Americans but benefit a handful of important people in Florida…
The sugar tariffs also benefit a lot of corn farmers.
Yet another of the many wonderful ways the Electoral College improves the country.
You’d still see this happen without the electoral college. Most people benefit from trade, but on average the magnitude of the effect is stronger for the losers than the winners. When this happens, the people who are negatively effected are going to care a lot more about the issue than those who benefit. This means that the people who treat trade as a voting issue might lean “against” while the nation as a whole leans “for”. The result is that the politicians listen to the few instead of the many because it gets them more votes. This is called ” concentrated benefits and diffuse costs” and is the reason the Cuban embargo survived after the Cold War.
Say, gains go from $100k to 200k for one guy, and from 40k to 20k for the other guy. The point isn’t about the exact numbers, it’s that the lost 20k hurts a lot more than the gain of 100k for the first guy. Cheap stuff is nice though, and he can afford lots of cheap toys in his newly downsized living accomodations, where he can enjoy lots of free stuff on the net during extended bouts of unemployment, perhaps as a replacement for taking women on dates, which he can no longer afford (slight overdramatization).
Free trade is not easy.
The followup being: what fraction of Americans understand the causal relationship between “trade” and “outsourcing.” 20%? They probably do not view “dirt cheap TVs and dramatically lower Chinese poverty, in exchange for decaying rust belt towns” so favorably.
False dichotomy. The pertinent causal relationship is between regulations and outsourcing. Regulations stifle growth.
China has tons of regulations, but companies can get out of many of them by paying bribes.
I sometimes wonder how many regulations are essentially designed for essentially that purpose. More realistically, some well meaning people try to make good regulations, and less well meaning people support them because they see the opportunity to extract bribes.
I wouldn’t consider it peripheral as an issue, but I consider it to be strictly pathological (with certain types of exceptions, I assume, e.g., prostitution is illegal but tolerated in basically every city in the well-known form that certain barbers have a certain colour of light and this tells you where the prostitutes are. I think it’s also tolerated due ot the 118:100 male:female ratio.)
Correction: do NOT consider it to be pathological.
Were TVs and electronics build in the “rust belt” cities? No.
Rust belt cities suffer due to technological innovations which have increased productivity to the point where far fewer lazy fat Trumpians are needed to work in factories. Nothing to do with China. And they started declining…LONG…before China, or Japan. They started decaying in the 1960s as the manufacturing sector become more productive, and as other sectors of the economy begun to grow.
A completely false dichotomy.
I bet the Japanese would say it’s an opportunity too. But it wouldn’t tell you anything.
Note that support for foreign trade is NOT the same as support for free trade agreements. One could support the one (more opportunity for me to sell!) and not support the other (bad deals that transfer jobs out of the US!).
That’s why pareto efficiency is always violated.
As Chris notes above, this is not asking about free trade, it is asking about trade. Of course most Americans don’t want to completely cut off all trade with the outside world. It doesn’t tell us much about the level of protectionism (or lack of protectionism) they want.
It also phrases it with the positive (economic gains from exports) first.
Why would there be the sharp uptick after 2012?
Unemployment dropped. To a first approximation, the light green graph looks like “nervousness about the economy.”
If things are okay, you don’t care about trade, and it probably helps somewhere, y’know?
If things aren’t okay, you blame trade for your woes, somehow.
Does this mean Bryan Caplan’s Anti-foreign bias is weaker than he thought?
What about attempts to recognize which sectors are going to get hurt by free-trade deals and sweetening the pot for them? Maybe even direct transfer payments to encourage them some of them to move into other industries?
That’s probably really tough to work out. A direct wage subsidy might be better, so people get more income from their new jobs.
In economics, such things are often discussed theoretically, in expounding upon the clear and obvious “fact” that trade benefits everyone. In practice, the people who are hurt by trade are not politically mobilized and have few resources (or knowhow) to do so.
Yep. Economists argue for aggregate maximization in the ways we set the rules of the game, and hand wave something about how things can be redistributed afterwards. But they aren’t. And that wouldn’t necessarily be such a good world anyway.
What happened in 2013? The break in the data series is large enough to make me wonder if question wording changed.
When Bill Clinton was Pres, trade as popular. Under W trade got less and less popular; a trend that reversed when O took office.
Not sure why; maybe a coincidence. Striking though.
Here’s the Gallup page. Look below to the graph that breaks it down by party.
“From 2001 to 2011, spanning the entire presidency of George W. Bush and the first two years of Obama’s presidency, the percentage of Republicans seeing foreign trade as an opportunity was higher than that of Democrats — in several cases, by double-digit margins. In 2012 and 2013, Democrats grew sharply more positive about trade, even as Republican views languished in the 40% to low 50% range. Opinion among the two party groups converged in 2014, but this year, Republicans’ optimism about foreign trade is flat at 51%, while Democrats’ has increased slightly, to 61%.”
Same thing with anti-war protests and general anti-war sentiment.
I noticed this as well.
It looks like when Democrats are not in power they demagogue strongly against free trade in an attempt to enrage the base. Then once they get into power they understand that trade is essential to the functioning of a modern economy and they relax on the demagoguery, and their circle jerking base lets the topic subside.
Democrats, the worst people in the world in one chart. +1
“when Democrats are not in power they demagogue strongly against free trade in an attempt to enrage the base”
Patrick Buchanan and Donald Trump are Democrats?
George W. Bush imposed steel tariffs about one year into his presidency — almost certainly in order to shore up the Republican vote in swing states where the steel industry was big. Don’t let facts get in the way of partisan hackery, though.
American self-confidence reached a low point in George Bush’s final year (2008) and his since risen and peaked this year.
Also, there is a Gallup poll specifically for American confidence in government. It drops under Bush, but it’s been bad under Obama. Actually, the average is lower under Obama.
All the classic theory of the benefits of free trade assume that trade is balanced.
I have no problem with that and agree that balanced free trade is a very good thing..
The problem is that US trade is not balanced.
Rather, we run large structural deficits so the costs of trade outweigh the benefits.
So why do we run large trade deficits?
The current account balance must equal the domestic savings-investment gap and that is negative because of the structural federal deficits created by the Republican tax cuts.
Remember, when Reagan first created the structural federal deficit most economists claimed it would drive interest rate higher and crowd out the credit sensitive sectors of the economy. But they were wrong because they were looking at the US as a closed economy economy and ignored the possibility that the domestic savings-investment gap would be filled by foreign capital inflows. We still had crowding out but it just worked through the strong dollar rather than higher interest rates.
So since the 1980s the Republicans have continued to cut taxes that resulted in an enlarged domestic savings-investment gap attracting large inflows of foreign capital and the massive current account deficit
that devastated US manufacturing.
Undoubtedly, the decline of US manufacturing and manufacturing is a direct result of the Republican tax cuts creating a large savings investment gap and concurrent trade deficit.
The current debate about the benefits of free trade is just a bait and switch created by the republic propaganda machine.
The trade deficits are due to the global need for reserve currency.
“The problem is that US trade is not balanced.”
It certainly is balanced — and there is no trade deficit ever.
For example, the number of shoes purchased by Americans from China is precisely equal to the number of shoes sold by China to Americans– there is no inequality in that economic exchange, no deficit in that trade can exist. This is true for all goods and services.
If in turn China buys absolutely nothing produced by Americans, no problem or alleged “trade deficit” exists. China would only receive US Dollars for its goods sold to Americans, as its half of the trade/exchange. China could put those Dollars in a mattress or vault and never spend them (a great benefit to Americans)… or it could trade those Dollars to other nations/persons who do want to spend/invest them in American goods and services (which normally happens).
This is called ‘international trade’ among many dynamic parties– the accounting ledger ultimately balances perfectly.
The vague abstraction of a “Trade Deficit” is complete nonsense, whether among nations or you and your local butcher, baker and candlestick maker.
If Americans produced nothing that others wanted to buy or trade for — Americans would be either be poor… or a race of ultra efficient super-humans to whom the economic benefits of Division of Labor were unnecessary.
“America’s Growing Trade Deficit Is Selling The Nation Out From Under Us. Here’s A Way To Fix The Problem–And We Need To Do It Now.”
By Warren E. Buffett
… nothing in Buffet’s 2-Island metaphor contradicts my statements.
Buffet does draw false conclusions from his contrived tale. Surprisingly, Buffet also states upfront that he lacks credibility in this area.
If there is some point you wish to make — please state it clearly rather than hiding behind some obscure URL.
You’re absolutely right.
“All the classic theory of the benefits of free trade assume that trade is balanced.”
I stopped reading at this point. Sorry, but if this makes no sense, I doubt the rest of your post will make any sense either.
You’re conflating public sector deficits with trade deficits, mostly, although they happen to coincide these days.
I have a feeling this is a situation where the people who oppose trade REALLY oppose it, and the people who support trade are kinda meh about it. Or at least that would explain how you get the poll but at the same time get this election where trade is portrayed as the devil.
Agree. It fits the typical concentrated costs / diffuse benefits model. What you really want to know is something like what percent increase in the cost of the following goods would you be willing to accept if it meant X manufacturing jobs stay here. Then of course you still don’t get the right answer until you see people actually have to shell out the money instead of polling them.
Under true free trade, only a price increase is possible for imported commodities,
Under anti-free trade (fake free trade), lowered commodity prices are possible only by an artificial subsidy such as slave labor (partial slavery, typically) or some other theft of production input. There’s little (if any) price drop for imported commodities because even that anti-freedom ‘advantage’ is partially offset by poor productivity and increased transportation costs.
The parasitic class in the “developed” country prizes anti-free trade because it is a tool to enslave the productive class within that country.
So production costs vary from the US baseline because of slavery. Gotcha. A guy can learn a lot on the internet.
What fraction of Americans understand the causal relationship between “trade” and captive labor (Dhaka, Texas, etc), aka privatized regulation/regulatory privatization?
Trumpsters obviously do not.
flaw in gallup wrap-up: wrap-up mentions TPP, but actual poll question did not mention trade agreements. Core question according to the pdf:
“Do you see foreign trade more as – an opportunity
for economic growth through increased U.S. exports or a threat to the economy from foreign imports?”
The Incredible Bread Machine comes to mind and also occasionally apply that concept to wealthy people too — imagine they’re not there and you’re comparing your existence to 100 years ago.
There is also the data of consumer purchases, which suggest that the overwhelming majority of Americans see trade as an opportunity to improve their lives by buying imports.
Set the U.S. federal corporate tax at zero and place a 20% tariff on everything sold in the U.S. that is made outside the U.S. (including services) and I would be much happier with trade.
Why not tax foreign and American goods equally in order to not violate WTO rules. Set the corporate tax rate to 0 and recoup all the taxes with a consumption (VAT) tax. Since foreign countries continue to also face corporate taxes, this would be a competitive advantage for American goods while, on paper, seeing all goods and services receive identical treatment from tax code perspectives.
It depends on what you are trying to accomplish. I would like to see a vibrant manufacturing sector in this country with jobs for everyone. I also believe that it is in the national and security interests of this country to not be dependent on any other country or international trade for essential goods and services. So if the intent is to make sure we make things, a lot of things and certainly make all of the things of critical and security importance it may well be necessary to place barriers or at least hurdles in place to make sure that the U.S. gets a share of some/all markets. So yes I would place a 20% tariff on all imports and I would further like to see a reciprocity relationship with our trading partners where if they sold us a billion dollars worth of goods and services that they would have to buy an equal amount from us. Today the U.S. is seen as a giant rich customer to buy stuff. Other countries don’t see us as a trading partner we are a customer to exploit. I would like to see a level playing field or even one that favors us.
Not quite a fluid connection, but it seems an appropriate place to remind of the old saying “in capitalism, man exploits man, in socialism, it is the other way around.” (it comes to mind due to consideration of “a customer to exploit”. Don’t forget that many American-based or -owned multinationals are very actively “exploiting” consumers worldwide.)
I think it makes sense for major powers to be concerned about strategic industries in managing risks for the potential event of war (it should suffice that allies can supply the requisite goods), but I think that such reasoning can be too easily taken too far, and prevent from capitalizing on comparative advantage across economies. Also, for a lot of goods (say, computers, IT stuff, autos), it is not necessary that you can presently produce those goods, rather, that the domestic capacity to retool within a reasonable timeframe exists. Smaller countries, of course, do not have such luxuries – pursuing self sufficiency in a small economy is a recipe for economy-wide inefficiency and stagnation, regardless of the relatively high risk this poses in the event of major trade interruptions in the case of widespread war.
The set of “strategic industries” should be defined as narrowly as possible. Outside of aerospace and military technologies, I think the costs are simply too high on the economy. Agriculture can be ramped up fairly rapidly as well (in the event of major war, some hundred million or more Americans can plant their backyards, for example, as promoted or even required by war planners) – I think strategic considerations about agriculture have much too highly negative consequences on the world’s poorest (smalholder farmers in developing countries) and should be revised, for example. The world pays a very high price for cheap American corn and chicken, etc.
“many American-based or -owned multinationals are very actively “exploiting” consumers worldwide”
True, but in almost every country they place obstacles to goods and services from another country. Try selling Fords in Japan or Germany. IF (wish I could make that bigger…) IF we had ‘real’ free trade than there would be no issue. But we do not. Every country places barriers to free trade in place that favor them, every country except one. One stupid country where the leaders would rather have power and payola than protect their citizens does not and that country is ours. The NAFTA agreement gave it all away and every trade agreement since has given the rest of the world advantages we do not have. It could be simple stupidity or incompetence on the part of our leaders and negotiators but what are the odds. We have been sold out, our jobs have been stolen and given to Mexico, Canada, China, etc. At the very least we should make it fair. If China wants to sell us $100 billion in goods every year, no problem, but they must buy $100 billion in goods from us in return. Zero trade deficit enforced by scaled up tariffs and if necessary an embargo that kicks in when any countries exports to us exceeds it’s imports from us. Let Apple make their iphones in China, I don’t care but they run the risk of not being able to sell them in their prime market if the trade deficit goes against us. Let American companies move their customer service to India but if India runs us into a trade deficit the service gets shut off. Why not? Why should we run trade deficits? Why should we export jobs?
If Ford wants to sell cars in Japan or Germany, they should produce vehicles which comply with local regulations. Instead, their engineers serve the American market and ignore these foreign markets. Germany and Japan both have exceedingly strong interest to ensure energy security and efficiency resource allocation by having regulations which have preference for small cars, but American car makers refuse to play by different rules and instead try to claim that these are non-tariff barriers. Indeed, they are technically non-tariff barriers, but ones which can be easily met by any player willing to serve the domestic market.
I think the general perspective that non-tariff barriers can skirt the intent of free trade agreements is really important. However, the WTO is both competent and empowered to evaluate and rule on such complaints.
I understand the intuitive appeal of “if we sell them $X of stuff, they should have to buy $X of stuff too”. However, a) the logic of the benefits of free trade is not obvious unless you’ve learned about it, normally as a part of studying 1st and 2nd year economics, or perhaps in more philosophical exposure to political economy (e.g., Ricardo and Adam Smith), and b) it would be very cumbersome to force such deals across all bilateral trade relations.
Even in the case of zero overall trade deficit, it is extraoridnarily likely that you will run a trade deficit with one country and a trade surplus with another, due to differing comparative advantages across countries. Much like you run a trade deficit with your barber and a trade surplus with whatever clientele your employer serves. Insisting on trade balance with your barber and business clientele would lead the economy to grind to a halt, because coordination costs and lack of specialization would be too high.
To the extent that we allow it thw WTO and other international agreements can control us. What I am suggesting is that we opt out and refuse to allow a cabal of all the nations against us control us. Our new free trade agreement is simple: If you want to buy our goods fee free to do so and if you want to sell to us feel free to do so but you cannot use us as a dumping ground and to show your good will you must buy as much from us as we sell to you. You don’t need 2000 pages for a free trade agreement.
Do not assume that only you took 1st and 2nd year economics. But what you are missing is the other countries in the world are eating our lunch. You theory and logic is fine if everyone played by the rules. I am suggesting that we set our own rules and if our trading partners don’t like it they are “free” to not trade too.
The goal should be zero trade deficit. The real life results should allow for small deviations of a few percent. Today we have deviations of 100% or 1000%. The rest of the world is using us as suckers.
“Insisting on trade balance with your barber and business clientele would lead the economy to grind to a halt,” You miss the point. You seem to believe that everyone is playing fair. If every trading partner were playing fair than we could indeed expect that perhaps China might import from us half the value of goods and services that we import from them. But no. They may import from us 0.1% of the value of goods and service and then only raw materials which they use to make goods to sell to us. Where is the good faith effort? The worlds largest market for customers for cruise ships is the U.S. So you might think that some portion of those cruise ships were made in the U.S. but NO. ZERO are made in the U.S. But again perhaps some portion of the staff on these ships are U.S. citizens, again NO perhaps 1% or less are Americans. Whwere is the good faith effort??? If I had a barber that treated me and other American customers like that I would find another barber.
Ford has international operations, including in Germany. Vehicle makers went to ‘internationalized’ models in the late 1970s (Ford Escort had been European rear drive until the FWD international Escort)
The North American variant of the Ford Escort is a compact car introduced by Ford in 1980 for the 1981 model year. Adopting the “Escort” name used by Ford of Europe since 1968 along with the general design and layout of the third-generation European Escort
In 1990 for the 1991 model year, the Escort and the Mercury Tracer were replaced by models based on the Mazda B platform (BG), which was also used by the Mazda 323, Protegé and first generation Kia Sephia.
Countries don’t buy stuff, people do. Read Thomas Hardy’s The Distracted Preacher. It shows what happens when people can’t get what they want.
Into the world of knowledge and having a brain + ethics, deontological and visa versa, as is knowledge — at the margins . . .
a big big, doesn’t waste his time . . . unless he’s in company of a lotta bigs . . .
Exports work for large capital intensive industries and also for regional economies like Europe where political differences are almost nil. But if exports were a ticket to prosperity, Japan would be the most prosperous nation in the world. Fact is, it is best to have a large, internally generated, organic growth economy. But I like the possibility of exporting free market principles around the world by US missionaries for free market capitalism.
Most Japan IS one of the most prosperous countries in the world.
lil, bits&byes in the futurah, we is here, u is there
we is just happy 2b here, or was, or when
talk 2me, U lil whining people, we have a whole universe out here . . .
Support for foreign trade increases when a Democrat is in the White House?
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