John Stossel: The Stupidity of "Buy American"

[Brian4Liberty]

/double post glitch.

 

[Brian4Liberty]

Was the farmland paved over because of trade, or because of bad government policies? Or, was the farmland paved over because, despite the high quality of the farmland, better uses were found for the land through market forces?

Paving over was caused by the market force of a housing bubble. Is that considered a "real" market force?

The government policy of cutting off the water was the reason that much farmland died and stopped producing, including crops like orchards that take many years to become productive.

 

[helmuth_hubener]

Bump for AF

 

[Anti Federalist]

Bump for AF

Thanks, not ignoring you, just have my hands more full right now than what will do you post justice.

 

[Anti Federalist]

I stand by my apple analogy. Brian4Liberty offered one show of support:
Imagine suggesting that if France tore out their massive vineyards that they could be restored when the money is better for them. Restoration is not always possible - or can only come as the expense of a great deal of capital.

I agree with that analogy, I was just reading over a months old Time, an article on the Fukashima disaster and how our nuclear generating "revival" was dead long before Fukashima, and not because of public opinion.

One of the primary reasons?

We do not have the capacity to forge and build the large pressure vessels for a reactor, nor do we have the manpower that has the knowledge to even start.

If a real war effort was ever required again, on the scale of WWII, we would fail.

It's not a question of just dusting off equipment that had been idle for five or ten years and re-hiring the laid off, it's gone, kaput, empty fields and falling down empty buildings.

It would take a generation and trillions of dollars of capital to get to that point.

Which would leave us in a position that Hong Kong was, a decade ago.

Very prosperous economically, but when the hapless, feckless Brits pulled the plug, the people of Hong Kong had no choice in the matter, no self determination whatsoever, it was back into the fold of Mother China, like it or not.

Bad part is, we are not even free enough to make the prosperous economy out of nothing, like they were.

We have the very worst of both worlds, communistic domestic policies coupled with fascistic corporate and economic policy.

Joy.

 

[Anti Federalist]

Tariffs are not going to bring the capital back. If it's not profitable for businesses to operate in the USA -- and it's not -- then that's that. Tariffs don't change that; they don't magically make it profitable to do business here; they don't magically make the USA not a horrible jurisdiction.

On that assumption rests the whole free trade argument. (keep in mind, I don't disagree for second that the business environment is horrible here for reasons other than tariffs)

But that assumption is false.

Tariffs are the only reason Honda and Toyota make the best selling cars in the country in Ohio and Kentucky.

Tariffs are the only reason Ford was able to hold such a market share and keep building the best selling vehicle in the country, because of tariffs on imported trucks.

It was F150 sales that helped Ford weather the meltdown and not take bailouts.

 

[helmuth_hubener]

But that assumption is false.

Tariffs are the only reason Honda and Toyota make the best selling cars in the country in Ohio and Kentucky.

The tariffs don't make it any more profitable to make these cars in the US. They just make it less profitable to make them overseas. So you're right, but this was basically what I was saying. I guess I was wrong to say absolutely that tariffs won't bring any capital back, period. But they don't solve the real problem. France couldn't have tariffed its way to prosperity in the early 1900s. Tariffs would have made less profitable for US companies exporting to France to do business, true. A few companies might game the system by setting up assembly plants on French soil (that's all that Honda and Toyota are doing, of course). But that's not going to make France rich. It doesn't make it more profitable to do business in France, it only makes it less profitable to do business in the US.

What's more, the only product-makers the French tariff will majorly affect are the ones for which most of the market for them is in France. Products the USA is exporting worldwide, no one's going to bother building a loophole factory in France for those products. That's, again, what's going on with the cars: virtually the entire market for these cars is in the US. So, Toyota says, OK, it makes sense to spend some money to dodge the tariff. Do the cars rolling off the line in Kentucky then get shipped all around the world? Not hardly. All or virtually all are sold in the US, is my understanding. If this were not true, they'd still be building them in Japan. The cars they make in the US are, as you say, the best selling cars in the country. But a product which sells, in a single version, the world over, for which the US is just one market? Nobody's going to decide to build a factory here to assemble it, just to avoid the US tariff. They'll go on building it in the profitable, free, and stable jurisdiction. And as the US becomes a progressively smaller market because we're getting poorer, while other countries become larger markets, the situation only exacerbates. If Luxembourg put a tariff on everything, let me tell you: no one would be building factories in Luxembourg to game their tariff system. Luxembourg would just be shooting themselves in the foot; no one else would care.

 

[Wesker1982]

Smashing Protectionist "Theory" (Again)

 

[Krugerrand]

Smashing Protectionist "Theory" (Again)

First of all, keep in mind that the attack on Stossel was an attack on voluntary "Buy American" campaigns.

Moving on to the article:

Let us now turn to some of the leading protectionist arguments. Take, for example, the standard complaint that while the protectionist "welcomes competition," this competition must be "fair." Whenever someone starts talking about "fair competition" or indeed, about "fairness" in general, it is time to keep a sharp eye on your wallet, for it is about to be picked. For the genuinely "fair" is simply the voluntary terms of exchange, mutually agreed upon by buyer and seller. As most of the medieval Scholastics were able to figure out, there is no "just" (or "fair") price outside of the market price.

So what could be "unfair" about the free-market price? One common protectionist charge is that it is "unfair" for an American firm to compete with, say, a Taiwanese firm which needs to pay only one-half the wages of the American competitor.

There's pretty much universal agreement that much of the problem is our own nations fault. Our own regulations and tax codes setup advantages to companies outside of the US. Still much of the fairness issues lies in other countries preventing us to trade freely with them. So, the only thing we can exchange for their goods is our assets. We cannot exchange goods for goods.

Another contradictory line of protectionist assault on the free market asserts that the problem is not so much the low costs enjoyed by foreign firms, as the "unfairness" of selling their products "below costs" to American consumers, and thereby engaging in the pernicious and sinful practice of "dumping."

Suppose, for example, that Sony is willing to injure American competitors by selling TV sets to Americans for a penny apiece. Shouldn't we rejoice at such an absurd policy of suffering severe losses by subsidizing us, the American consumers? And shouldn't our response be, "Come on, Sony, subsidize us some more!" As far as consumers are concerned, the more "dumping" that takes place, the better.
...
But, as we have seen, economic theory shows that this would be a mug's game, losing money for the "dumping" firms, and never really achieving a monopoly price. And sure enough, historical investigation has not turned up a single case where predatory pricing, when tried, was successful, and there are actually very few cases where it has even been tried.

That's a bold statement - and false to boot. In the days of video rentals, grocery stores around here offered super cheap rentals until the small stores were out of business ... then they jacked up their prices.

Once your means of production is dismantled, it can be exceptionally difficult, and in some cases impossible, to reassemble it. Okay, perhaps full monopoly may not be an issue. What is an issue is that our county must produce. When our dollar is worthless we will not be able to afford these imports. We will not own our country.

We will be forced to produce and will not have the capital to invest in reassembling our means of production.

(Plus, I seem to remember something about this is how we 'acquired' Hawaii. Through unbalanced trade positioned them into a point of dependance where statehood was their only viable alternative. If somebody knows more about that and can point me to a decent link, I'd appreciate it.)

Another charge claims that Japanese or other foreign firms can afford to engage in dumping because their governments are willing to subsidize their losses. But again, we should still welcome such an absurd policy. If the Japanese government is really willing to waste scarce resources subsidizing American purchases of Sonys, so much the better! Their policy would be just as self-defeating as if the losses were private.

Again, that's great if you're not losing your shirt in the process. See above about what will you do when your dollar collapses.

But now, in the fiat-money era, balance-of-payments deficits are truly meaningless. For gold is no longer a "balancing item." In effect, there is no deficit in the balance of payments. It is true that in the last few years, imports have been greater than exports by $150 billion or so per year. But no gold flowed out of the country. Neither did dollars "leak" out. The alleged "deficit" was paid for by foreigners investing the equivalent amount of money in American dollars: in real estate, capital goods, US securities, and bank accounts.

In effect, in the last couple of years, foreigners have been investing enough of their own funds in dollars to keep the dollar high, enabling us to purchase cheap imports. Instead of worrying and complaining about this development, we should rejoice that foreign investors are willing to finance our cheap imports. The only problem is that this bonanza is already coming to an end, with the dollar becoming cheaper and exports more expensive.

DING DING DING DING DING DING

We finally hit on both serious problems and they get dismissed for no reason. I have a problem with massive foreign ownership of our country. That is a bad place to be. Show me a thriving country that is owned by foreigners.

And, the dollar collapse is no issue to be dismissed lightly. Then what?

How can this author say ... don't worry, it's not as bad as losing your gold. You're only being delivered into mass indebtedness and losing everything you own. So, for that reason, all is good.

In the host of special interests using the political process to repress and loot the rest of us, the protectionists are among the most venerable. It is high time that we get them, once and for all, off our backs, and treat them with the righteous indignation they so richly deserve.

Finally, this is what we've seen so much of already on this thread. I'm seeing righteous indignation rather than answering the serious issues of:
- dismantled means of production
- foreign ownership of country
- situation post USD-collapse.

 

[helmuth_hubener]

Finally, this is what we've seen so much of already on this thread. I'm seeing righteous indignation rather than answering the serious issues of:
- dismantled means of production
- foreign ownership of country
- situation post USD-collapse.

I've tried to intelligently talk about the first. I don't see how having high tariffs helps with any of the three.