Yes trade does always create wealth. However it creates wealth for those that can bring a product to market with the lowest over head. If a foreign entity brings a product to market using very low paid employees as well as government subsidies they will "win" the trade war every time. When they win our industry suffers. Of course if we are willing to move our industry to foreign shores and hire those same low paid workers then what was our industry can compete. Those that advocate totally free trade are also advocating the movement of our industry and the lowering of our wages. These result in the backwards movement of our economy to third world status. This is the primary goal of the one world, one people, one economy movement.
From NAFTA to CETA: Canada-EU Deep Economic Integration
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Yes trade does always create wealth. However it creates wealth for those that can bring a product to market with the lowest over head. If a foreign entity brings a product to market using very low paid employees as well as government subsidies they will "win" the trade war every time. When they win our industry suffers. Of course if we are willing to move our industry to foreign shores and hire those same low paid workers then what was our industry can compete. Those that advocate totally free trade are also advocating the movement of our industry and the lowering of our wages. These result in the backwards movement of our economy to third world status. This is the primary goal of the one world, one people, one economy movement.
cavalier973
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There is no trade war. International trade is not a giant contest between governments; it is, instead, a mutually beneficial arrangement between private parties.
You admit that trade always creates wealth, then indicate that you believe it only creates wealth for the producer. Trade creates wealth for both parties in a transaction, or the transaction would not be effected.
"Low paid workers"; a $50 an hour American worker can be less expensive to hire than a $3 a day third-world worker. It depends on what type of production one needs done.
"Low wages"; a person earning $10 an hour could be enjoying a wage rate that is several times higher than someone earning $50 an hour, depending on how many goods to which each person has access. The point of all production is consumption, and the goal should be higher standards of living for individual rather than trying to win an imaginary government chest-beating contest.
Free trade doesn't lead to third-world status, because free trade doesn't destroy a nation's entire industrial base--it just shifts it into areas of which the nation's populace has comparative advantages. An economy grows as individuals specialise and trade; that was the point of Adam Smith's book. One would have a hard time doing everything himself, and the more work that he can allow others to do for him, the more he can focus on one particular type of production.
Barriers to trade destroy wealth and inhibit economic growth, because people have to spend more time doing things at which they have less comparative advantage. If you think of a doctor who is also an excellent typist and can file reports with a high rate of efficiency; it still makes sense for him to hire a receptionist/secretary, so that he can focus on activities at which he has comparative advanatage--seeing patients. If he had to spend several hours a day doing these tasks, then he sees fewer patients and lowers his own income.
Most of the trade that U.S. citizens conduct is not with the citizens of third-world nations. http://en.wikipedia.org/wiki/List_of_the_largest_trading_partners_of_the_United_States
Also, our manufacturing base is the largest of any nation, even though it's not the largest percentage of our economy:
http://en.wikipedia.org/wiki/Economy_of_the_United_States#Manufacturing
"The United States is the world's largest manufacturer, with a 2007 industrial output of US$2.69 trillion. In 2008, its manufacturing output was greater than that of the manufacturing output of China, India, and Brazil combined, despite manufacturing being a very small portion of the entire US economy as compared to most other countries."
and
"The U.S. produces approximately 21% of the world's manufacturing output, a number which has remained unchanged for the last 40 years. The job loss during this continual volume growth is explained by record breaking productivity gains." (emphasis mine)
Technology and improved working methods have done more to "destroy manufacturing jobs" than trade is supposed to have done.
"In addition, growth in telecommunications, pharmaceuticals, aircraft, heavy machinery and other industries along with declines in low end, low skill industries such as clothing, toys, and other simple manufacturing have resulted in U.S. jobs being more highly skilled and better paying." Which demonstrates what I was saying about comparative advantage.
The "one-worlders" that you mention are people who believe in the efficacy of government to make everyone's life better. They promote trade agreements with the label of "free trade" but without the reality of it. Actual free trade would be anathema to them, because it means a removal of government from people's purchasing decisions. They are neo-mercantilists who have figured out that trade somehow promotes wealth, but haven't discovered exactly how it does this.
You admit that trade always creates wealth, then indicate that you believe it only creates wealth for the producer. Trade creates wealth for both parties in a transaction, or the transaction would not be effected.
"Low paid workers"; a $50 an hour American worker can be less expensive to hire than a $3 a day third-world worker. It depends on what type of production one needs done.
"Low wages"; a person earning $10 an hour could be enjoying a wage rate that is several times higher than someone earning $50 an hour, depending on how many goods to which each person has access. The point of all production is consumption, and the goal should be higher standards of living for individual rather than trying to win an imaginary government chest-beating contest.
Free trade doesn't lead to third-world status, because free trade doesn't destroy a nation's entire industrial base--it just shifts it into areas of which the nation's populace has comparative advantages. An economy grows as individuals specialise and trade; that was the point of Adam Smith's book. One would have a hard time doing everything himself, and the more work that he can allow others to do for him, the more he can focus on one particular type of production.
Barriers to trade destroy wealth and inhibit economic growth, because people have to spend more time doing things at which they have less comparative advantage. If you think of a doctor who is also an excellent typist and can file reports with a high rate of efficiency; it still makes sense for him to hire a receptionist/secretary, so that he can focus on activities at which he has comparative advanatage--seeing patients. If he had to spend several hours a day doing these tasks, then he sees fewer patients and lowers his own income.
Most of the trade that U.S. citizens conduct is not with the citizens of third-world nations. http://en.wikipedia.org/wiki/List_of_the_largest_trading_partners_of_the_United_States
Also, our manufacturing base is the largest of any nation, even though it's not the largest percentage of our economy:
http://en.wikipedia.org/wiki/Economy_of_the_United_States#Manufacturing
"The United States is the world's largest manufacturer, with a 2007 industrial output of US$2.69 trillion. In 2008, its manufacturing output was greater than that of the manufacturing output of China, India, and Brazil combined, despite manufacturing being a very small portion of the entire US economy as compared to most other countries."
and
"The U.S. produces approximately 21% of the world's manufacturing output, a number which has remained unchanged for the last 40 years. The job loss during this continual volume growth is explained by record breaking productivity gains." (emphasis mine)
Technology and improved working methods have done more to "destroy manufacturing jobs" than trade is supposed to have done.
"In addition, growth in telecommunications, pharmaceuticals, aircraft, heavy machinery and other industries along with declines in low end, low skill industries such as clothing, toys, and other simple manufacturing have resulted in U.S. jobs being more highly skilled and better paying." Which demonstrates what I was saying about comparative advantage.
The "one-worlders" that you mention are people who believe in the efficacy of government to make everyone's life better. They promote trade agreements with the label of "free trade" but without the reality of it. Actual free trade would be anathema to them, because it means a removal of government from people's purchasing decisions. They are neo-mercantilists who have figured out that trade somehow promotes wealth, but haven't discovered exactly how it does this.
Can you explain how an economy that has the largest industrial base in the world does not have any steel mills? Maybe it is because a "service" based economy does not require steel. Of course even now our service based is being eroded by nations such as India where it is possible to hire an equivalently experienced attorny for about one eigth the cost. Also if I'm not mistaken the U.S. no longer has any aluminium mills at this time. We must import all of the steel and aluminium that we need. So much for industry.
cavalier973
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You shouldn't make claims that are so easy to refute.
For steel:
http://www.uss.com/corp/facilities/facilities.asp
For aluminum:
http://www.vulcaninc.com/?p=vulcan_inc2
US industry may not produce the same percentages of steel and aluminum as in prior years, but that's a different argument than that there is no steel or aluminum produced domestically.
So an Indian lawyer cost 1/8th an equivalently experienced American attorney? So I can hire a lawyer for 1/8th the cost I was expecting, and then have 7/8ths of what I expected to spend available to spend on other things. This is a bad thing?
I can buy an American-made product for $200, or an imported equivalent for $100, with $100 left over to spend on other things; in which case am I better off?
The question isn't in which case are you better off but in which case is our wage earners and economy better off. If you purchase only foreign made products because they are cheaper and are flooding the market what happens to U.S. made products? Do the manufacturers cut wages to third world levels so they can compete? Do manufacturers move their manufacturing plants out of the U.S. and force many workers into service jobs? Do we really need that many burger flippers? Also if you actually read the links you posted you'll find that most if not all of the steel and aluminum "manufacturers" produce a rolled product for their own use not for export.
Adolfo Mena Gonzalez
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No sane person can argue that freer trade has been beneficial to America, so why would lowering tariffs even more make things any better, except ship more jobs overseas?
Adolfo Mena Gonzalez
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Than Jefferson certainly didn't practiced what he preached, because as President, he recognized the necessity of Tariffs and extended the Tariffs of the Adams' Administration.
http://mises.org/daily/4473
cavalier973
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What a silly statement. Free trade among the citizens of the various states has been extremely beneficial to themselves and the nation as a whole. Can you imagine Arkansas trying to impose import quotas against Hawaii in order to build up its pineapple industry? And when a factory owner moves his business from Connecticut to South Carolina, do we say that South Carolina "stole" the jobs from Connecticut, or do we realize that Connecticut probably drove the factory owner away with burdensome taxes and regulations?
"Shipping jobs overseas"; I believe this claim derives from the fallacy that there is a limited amount of work to be done. In reality, human wants are unlimited, so there is always work that can be done to try to satisfy some consumer demand or other.
cavalier973
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Since I am a wage earner, then the question does revolve around whether I am better off. A guy flipping burgers at McDonald's for $8.50 and hour doesn't have a moral obligation to keep a $50-an-hour auto worker in a job.
U.S. made products will continue to be made; they may not be the same products from decade to decade. Competition is always beneficial to the consumer; the more competitors there are, the higher the quality and the lower the price of the good or service.
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cavalier973
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http://www.heritage.org/Research/Reports/2000/08/The-Benefits-of-Free-Trade-A-Guide-For-Policymakers
http://www.heritage.org/Research/Reports/2010/09/Trade-Freedom-Continues-to-Advance-Barely
http://www.heritage.org/Research/Reports/2010/03/China-Job-Loss-Claims-Miss-the-Big-Picture
"The current debates taking place in Washington over the impact of trade on jobs should make every economist cringe. The current analytical structure for judging the impact of trade on jobs is incomplete and inaccurate and has created an environment in which misinformation and misrepresentation can thrive.
In the worst case, analysts focus solely on computing the number of manufacturing jobs lost due to imports. They do not count real jobs that have been lost but instead calculate a number based on the value of imports. Some studies count manufacturing exports as well. This type of analysis at least acknowledges that some U.S. manufacturing jobs exist only because of international trade. Typically, the manufacturing trade balance—a net of imports minus exports—is computed and some resulting job impact is asserted using labor factor productivity tables. This is the type of analysis used recently to trumpet huge job losses because of trade with China."
http://www.heritage.org/Research/Reports/2010/09/Trade-Freedom-Continues-to-Advance-Barely
http://www.heritage.org/Research/Reports/2010/03/China-Job-Loss-Claims-Miss-the-Big-Picture
"The current debates taking place in Washington over the impact of trade on jobs should make every economist cringe. The current analytical structure for judging the impact of trade on jobs is incomplete and inaccurate and has created an environment in which misinformation and misrepresentation can thrive.
In the worst case, analysts focus solely on computing the number of manufacturing jobs lost due to imports. They do not count real jobs that have been lost but instead calculate a number based on the value of imports. Some studies count manufacturing exports as well. This type of analysis at least acknowledges that some U.S. manufacturing jobs exist only because of international trade. Typically, the manufacturing trade balance—a net of imports minus exports—is computed and some resulting job impact is asserted using labor factor productivity tables. This is the type of analysis used recently to trumpet huge job losses because of trade with China."
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cavalier973
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http://www.cato.org/trade-immigration/faqs
"What are the benefits of free trade for the average person?"
"The historical record is very clear that free trade bestows many benefits to the average person. Those countries that lower trade barriers and open their markets enjoy higher economic standards of living. Consumers have access to a wider range of higher quality products at prices lower than they would otherwise pay. The average person also benefits in terms of wages and job opportunities. When labor and capital flow freely to the most productive areas of the economy, workers are employed in better, higher quality jobs with higher wages. While there are inevitable short-term transition costs in some sectors of the economy, the long-term benefits of free trade for all far outweigh such costs."
"Is free trade a threat to the US manufacturing base?"
"Free trade is a boon to the US manufacturing base, which is alive and thriving according to statistical evidence. Access to a greater supply of raw materials at lower prices enables US manufacturers to reduce costs and become competitive in markets around the world. Without such access, US manufacturers would have difficulty pricing competitively in markets with relatively lower incomes and currency values. The presence of foreign-produced finished manufactures in the US compels domestic industries to be innovative and efficient, both of which are keys to profitability and longevity. Statistically, in constant 1996 dollars, manufacturing's share of GDP has held steady at slightly over 17 percent between 1977 (a period of relatively high tariffs) and 1998. Between 1992 and 1999, when the overall economy grew by 29 percent, the Federal Reserve's index of manufacturing output increased by 42 percent!"
"What are the benefits of free trade for the average person?"
"The historical record is very clear that free trade bestows many benefits to the average person. Those countries that lower trade barriers and open their markets enjoy higher economic standards of living. Consumers have access to a wider range of higher quality products at prices lower than they would otherwise pay. The average person also benefits in terms of wages and job opportunities. When labor and capital flow freely to the most productive areas of the economy, workers are employed in better, higher quality jobs with higher wages. While there are inevitable short-term transition costs in some sectors of the economy, the long-term benefits of free trade for all far outweigh such costs."
"Is free trade a threat to the US manufacturing base?"
"Free trade is a boon to the US manufacturing base, which is alive and thriving according to statistical evidence. Access to a greater supply of raw materials at lower prices enables US manufacturers to reduce costs and become competitive in markets around the world. Without such access, US manufacturers would have difficulty pricing competitively in markets with relatively lower incomes and currency values. The presence of foreign-produced finished manufactures in the US compels domestic industries to be innovative and efficient, both of which are keys to profitability and longevity. Statistically, in constant 1996 dollars, manufacturing's share of GDP has held steady at slightly over 17 percent between 1977 (a period of relatively high tariffs) and 1998. Between 1992 and 1999, when the overall economy grew by 29 percent, the Federal Reserve's index of manufacturing output increased by 42 percent!"
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The answer to you questions are in reality somewhat different. The benefits of "free" trade are a short term lowering of prices, a long term lowering of quality and the erosion of wages in the U.S.
The answer to the second question is simply put yes. As unfettered and many times unfair competition in industry progresses the natural response of domestic manufacturers is to lower the wages of current and future employees which in turn damages the economy. If this tactic does not make the industry profitable they simply relocate to foreign shores. The industry that is left tends to be low skill and inconsequential in nature.
Lowering wages and shipping skilled jobs overseas simply cannot be good in the long term.
cavalier973
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Wait, competition lowers quality? Do you understand free market theory at all?
Lowering nominal wages can coincide with ever-increasing purchasing power, as more goods and services are available for purchase. Would you rather live in a country where you are guaranteed a 10% increase in your annual wages, but price inflation is 8% annually, or in a country where your annual nominal wages are cut 5% each year, with average prices that decrease 10% annually. Low wages don't hurt the economy, because the economy isn't driven by "the purchasing power of the consumer". Economic growth is driven by investment, which relies on savings. (I know there is a popular claim that consumer spending is 67% of the economy; it's not true). When people are able to acquire the goods and services they want for a lower price, then they begin to save more, which frees up money for investment.
Fox McCloud
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which leads to even lower prices, and thus an even further increase in the amount of disposable income available--thereby allowing either (a)even more investment (b)the ability to purchase other goods or services that would have otherwise been out of your price-range.
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Assuming you have any income at all after they ship your job to China.
Fox McCloud
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there will always be jobs--to suggest otherwise is to engage in the lump of labor fallacy---China can't specialize in everything, nor can all the other countries, even if they have an absolute advantage over every single thing America does (which I'd put forth is not the case), we'll still have a comparative advantage in something, which ultimately means that we will have jobs which are in high demand.
Adolfo Mena Gonzalez
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That isn't a silly statement at all, roughly 850,00 jobs were lost due to NAFTA from 1993 to 2002, the majority of those jobs, like 80%, were high paying manufacturing jobs. That is just one example of the failure of Free Trade on an unequal playing field with the third world.
http://www.epi.org/publications/entry/briefingpapers_bp147/
Also, since we opened trade relations with the communist chinese in the 70s, real wages have remained stagnate, and by some estimates declined, this is certainly not a coincidence. You seem to have a blind dogmatism to a particular policy for the sake of it's name. Rather than weighing the costs an benefits, you just support it for pure ideological reasons. You aren't being a consequentialist, and that is a flaw in the Libertarian philosophy.
http://illusionofprosperity.blogspot.com/2007/12/historical-real-hourly-wages.html
There is no comparison between commerce between states in one country and trade between different countries.
I guess you are right, I guess that auto technician can just go compete against an illegal immigrant for a job scrubbing toilets for below minimum wage, but I don't think economic policy should be based on a race to the bottom.
Fox McCloud
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he already debunked your first section; showing that manufacturing is at an all time high, not low, and that because of free trade, we've actually gained manufacturing jobs.
Secondly, the declining wages argument has also been obliterated; real wages have remained flat, but when you include compensation, it has risen, steadily (barring recession, of course). Why the move towards benefits as opposed to wages? Well, could be a number of reasons--might be that's what's in demand, or it could be a measure to help avoid governmental taxation (after all, that's why Americans are dependent on their employers for health insurance, these days). If you want more detailed statistics:
If free were truly as terrible as you claim, you wouldn't see kind of charts; they would head on the opposite direction in every instance...but...they don't.
He's not "blinded by dogmatism"; he's just applying good, sound economics to a policy and its effects---which is, contrary to what you're stating, based upon the end effect.
cavalier973
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What Fox McCloud said. Plus, this: http://www.ppionline.org/ppi_ci.cfm?knlgAreaID=108&subsecID=127&contentID=1391
"The U.S. economy now creates in approximately one month the marginal number of jobs lost due to NAFTA in three years. In fact, several studies have shown that NAFTA indirectly contributed to America's economic expansion. Specifically, these studies found that NAFTA had a modest but positive impact on U.S. net exports, income, investment, and jobs supported by exports."
And this: http://online.wsj.com/article/SB120432883739204247.html?mod=Review-Outlook-US
"Ohio workers would pay a heavy price for pulling out of Nafta. Canada and Mexico are the top two markets for exports from Ohio, accounting for more than half of the state's exports in 2006. According to the Ohio Department of Development, 283,500 workers in the state earn their living in the export sector, with machinery, car parts, aircraft engines and optical/medical equipment among the leading exports. A trade showdown would put those good-paying jobs at risk."
"Since Nafta took effect on Jan. 1, 1994, the U.S. economy has added a net 26 million new jobs. The average real hourly compensation (wages and benefits) of workers has climbed 23%. Real median household net worth has increased by a third. Of course, Nafta was not the primary driver of all that good news. But it is a useful counterpoint to the sense that large numbers of Americans have been "devastated" by Nafta and other trade agreements.
In recent years, U.S. manufacturers have enjoyed record output, revenue, exports and profits. Since Nafta, U.S. manufacturing investment in Mexico has averaged a modest $2 billion a year -- a tiny fraction of the $150 billion or more those same companies invest annually in domestic manufacturing capacity. American factories actually added a net half-million new manufacturing jobs in the five years after Nafta."
"The loss of manufacturing jobs in Ohio and elsewhere since 2000 is the result of increased automation and our own domestic slowdown. U.S. factories are producing more and better stuff with fewer workers because their workers have become so much more productive.
Behind this trend has been a shift of production down South to nonunion, right-to-work states, and up the value chain to more technology-intensive products. After 15 years of expanding trade, U.S. factories today are producing fewer shirts, shoes and lower-end auto-parts, and more pharmaceuticals, chemicals, semiconductors and sophisticated machinery and equipment.
Despite the rhetoric during the original debate, Nafta was never going to have, and hasn't had, a major impact on the U.S. economy. American GDP dwarfs that of Mexico, and our tariffs on imports from Mexico were already low to zero. The real payoff has been stronger commercial and diplomatic ties with our southern neighbor."
"The U.S. economy now creates in approximately one month the marginal number of jobs lost due to NAFTA in three years. In fact, several studies have shown that NAFTA indirectly contributed to America's economic expansion. Specifically, these studies found that NAFTA had a modest but positive impact on U.S. net exports, income, investment, and jobs supported by exports."
And this: http://online.wsj.com/article/SB120432883739204247.html?mod=Review-Outlook-US
"Ohio workers would pay a heavy price for pulling out of Nafta. Canada and Mexico are the top two markets for exports from Ohio, accounting for more than half of the state's exports in 2006. According to the Ohio Department of Development, 283,500 workers in the state earn their living in the export sector, with machinery, car parts, aircraft engines and optical/medical equipment among the leading exports. A trade showdown would put those good-paying jobs at risk."
"Since Nafta took effect on Jan. 1, 1994, the U.S. economy has added a net 26 million new jobs. The average real hourly compensation (wages and benefits) of workers has climbed 23%. Real median household net worth has increased by a third. Of course, Nafta was not the primary driver of all that good news. But it is a useful counterpoint to the sense that large numbers of Americans have been "devastated" by Nafta and other trade agreements.
In recent years, U.S. manufacturers have enjoyed record output, revenue, exports and profits. Since Nafta, U.S. manufacturing investment in Mexico has averaged a modest $2 billion a year -- a tiny fraction of the $150 billion or more those same companies invest annually in domestic manufacturing capacity. American factories actually added a net half-million new manufacturing jobs in the five years after Nafta."
"The loss of manufacturing jobs in Ohio and elsewhere since 2000 is the result of increased automation and our own domestic slowdown. U.S. factories are producing more and better stuff with fewer workers because their workers have become so much more productive.
Behind this trend has been a shift of production down South to nonunion, right-to-work states, and up the value chain to more technology-intensive products. After 15 years of expanding trade, U.S. factories today are producing fewer shirts, shoes and lower-end auto-parts, and more pharmaceuticals, chemicals, semiconductors and sophisticated machinery and equipment.
Despite the rhetoric during the original debate, Nafta was never going to have, and hasn't had, a major impact on the U.S. economy. American GDP dwarfs that of Mexico, and our tariffs on imports from Mexico were already low to zero. The real payoff has been stronger commercial and diplomatic ties with our southern neighbor."
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So you are telling me that the Walmart items made in China are of a higher quality than U.S. made quality and they are of a higher quality because of their lower wages? Wow have you ever bought into the one worlders line. Oh and by the way fair competition does indeed help improve quality but slave labor and government subsidies always lower quality.
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