Archive for Free Trade

Trump and Trade

Posted in For Free Trade with tags , , , on April 5, 2018 by cavalier973

This article discusses the problems with Trump’s attempt to spark a “trade war” with China (the term “trade war” is nonsensical; it is like saying “pedestrian motorist”). The author echoes a position I have, which is that Trump is undermining the foundation for economic success he is building by his deregulation efforts and the Tax Cut enacted last December.

Perhaps he is only playing the part of the dealmaker, where he takes a tougher stance initially, in order to get the party of the second part to acquiesce to something, but it is unnecessary for government to wheel’n’deal when it comes to trade, because the private entities that engage in trade are already doing the deals.

There should be no NAFTA. There should be no CAFTA, or GATT or TPP. There should be no government, negotiated trade treaties at all. Government just needs to remove itself from the trade arena altogether, and allow the interested parties do what they do.

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So; what are the Chinese up to?

Posted in For Free Trade with tags , , , , , on March 27, 2018 by cavalier973

China is quietly establishing the Indian Ocean as its primary trade area.

An excerpt:

“The move away from depending on cheap exports to America and elsewhere is likely to gain momentum, reducing the relative importance of Trump’s tariffs. Instead, China is creating what amounts to a large free trade area throughout Asia with her partners in the Shanghai Cooperation Organisation. This is the opportunity offered to other foreign suppliers to the region, such as the UK, assuming she has the gumption to become involved after Brexit.”

 

New Zealand and trade

Posted in For Free Trade with tags , , on March 23, 2018 by cavalier973

An article at FEE.org.

FEE Article from 1994

Posted in For Free Trade with tags , , , , , , , on March 22, 2018 by cavalier973

An excerpt:

The experience of the most free-trading nation on earth, Hong Kong, clearly illustrates this point. With no natural resources, except its people and one of the world’s finest natural harbors, but with complete free trade, Hong Kong has witnessed an increase in its per capita income over twenty-five fold and an increase in employment of over twenty times within a short span of forty years. Today, its per capita income is greater than that of the United Kingdom, of which it is still a colony. This stellar economic performance has been achieved while the population of this largely barren island-peninsula colony increased from around 300,000 to six million over this period.”

Another excerpt, more relevant to today’s environment:

“Restricting steel imports destroyed jobs. It is estimated that in the 1980s, steel restraints protected 17,000 jobs in the whole industry, while they cost 54,400 jobs in steel-related industries, for a net loss of over 35,000 jobs. Higher steel costs added to the burden of steel-using industries that were trying to compete against foreign manufacturers. Thus, for example, expensive steel raised the cost of building cars in Detroit and promoted Japanese auto imports.”

The effects of the Smoot-Hawley Tariff

Posted in For Free Trade with tags , , , on March 22, 2018 by cavalier973

Some have asserted that the Smoot-Hawley Tariff had significantly less adverse impact on the U.S. economy during the Great Depression than conventional wisdom claims.

Mario Crucini and James Kahn have tried to correct systematic underestimates of the harm of Smoot-Hawley found in a variety of macro studies that ignored the effect of tariff retaliation on the rate of capital accumulation. Using a general-equilibrium model, they calculate that the microeconomic distortion effects reduced U.S. GNP by only 2 percent in the early 1930s. Likewise economist Douglas Irwin computed the general-equilibrium inefficiencies caused by the tariff at nearly 2 percent of GNP.”

2%? That doesn’t sound so bad. The article discusses the issue in more depth.

You have a patriotic duty to be robbed.

Posted in For Free Trade with tags , , , , , on March 14, 2018 by cavalier973

The Protectionists/mercantilists have a curious philosophy: the free market can only work with heavy government intervention. They have the long-discredited belief that manufacturing creates wealth, while trade is a zero-sum game which always “loses jobs” for “our side” to the perfidous foreigners who are selling us goods and services.

They claim that Free Trade is somehow unpatriotic, because apparently they believe that the product of citizens’ labors belongs to the collective, and only the government can properly determine what standard of living each citizen should enjoy. What is amusing is that the Protectionists/mercantilists claim that Free Trade is “Marxist”.

The problems that Protectionists/mercantilists ascribe to Free Trade are actually the result government intervention, which they propose to increase. Deregulation and reduction in government spending and taxation are the true remedies to economic problems, which is why I’ve been hopeful about Pres. Trump’s administration, so far. His unpatriotic push to increase taxes on American citizens will reverse whatever good he has done to this point.

The protectionists/mercantilists have the mistaken believe that a shortage of available goods and services results in a higher standard of living.

From Bastiat: 

“Which is preferable for man and for society, abundance or scarcity?

“What!” people may exclaim. “How can there be any question about it? Has anyone ever suggested, or is it possible to maintain, that scarcity is the basis of man’s well-being?”

Yes, this has been suggested; yes, this has been maintained and is maintained every day, and I do not hesitate to say that the theory of scarcity is by far the most popular of all theories. It is the burden of conversations, newspaper articles, books, and political speeches; and, strange as it may seem, it is certain that political economy will not have a completed its task and performed its practical function until it has popularized and established as indisputable this very simple proposition: “Wealth consists in an abundance of commodities.”

Do we not hear it said every day: “Foreigners are going to flood us with their products”? Thus, people fear abundance.

Has not M. de Saint-Cricq said: “There is overproduction”? Thus, he was afraid of abundance.

Do not the workers wreck machines? Thus, they are afraid of overproduction, or—in other words—of abundance.”

“‘Marxist’ Free Trade”

Posted in For Free Trade, Uncategorized with tags , , , , , on March 7, 2018 by cavalier973

So, President Trump is indulging his neo-mercantilist demons, by proposing that a 25% tariff be imposed on foreign-produced steel, to “protect American steel companies”.

Were it simply a measure by the President to raise revenue for the government, it wouldn’t be quite so exasperating, but the claim that an increase in taxes somehow helps the American economy, and Americans in general, is maddening.

If one reads the sites of the Neo-Mercantilists/Protectionists, one may run across the phrase “Marxist Free Trade”. The idea behind the phrase is that an unfettered market leads to Marxism, based on something Karl Marx said, claiming some such nonsense.

In reality, it is the Neo-Mercantilist/Protectionists who let the communist camel poke its nose under the tent flap, by promoting a policy of government intervention in the economy to raise the income of a certain group of Americans by requiring all Americans to enjoy a lower standard of living.

If President Trump had been honest and proposed, for example, legislation that resulted in people earning $35,000 a year lowering their standards of living so that a small group of people can increase their incomes from $50,000 to $55,000, then people would likely give the legislation the stink eye. And yet, that’s exactly what he is proposing, but because it is couched in false patriotism, then people don’t automatically reject such a policy.

One of Trump’s advisors claimed that the 25% increase in steel prices would only result in a fraction of an increase in the cost of cans of soup, as an example. The problem is that the advisor specifically mentioned Campbell’s soup company. Such a large company may of course be able to absorb the increased cost, or pass the cost to its customers, but “players at the margin” may not be able to do so. Bob’s Soup Company may go out of business, because it is already operating a extremely low margins. With one less competitor in the soup market, we can expect the prices of soup to rise and/or the quality to be lowered. That’s how the market works. Protectionists seem to have a magical thinking about market forces, and expect that costs will be born by “someone else”, and not ourselves.

One last thing, about Free Trade generally: Free Trade is not only the economically advantageous policy, it is the moral policy, because with Free Trade a person can dispose of the product of his labor as he deems best. Protectionism requires that person to dispose of his income in ways that the Protectionists approve. This is a violation of property rights, and a form of theft.

I was happy with the Trump Tax plan that passed late last year, despite its flaws, and considered voting for him in 2020, if he ran for re-election. This tariff could negate the benefits of the tax plan, and my support.