If you adhere to the views of Milton Friedman as expounded in his books and his television show Free to Choose then you would welcome international trade even where a country subsidizes its industry and sells more cheaply to you. Friedman's attitude is if the policy of those country's is to extract wealth from their population to put it into a sector and that results in cheaper prices for you then you should take advantage of that to its maximum and buy up to your hearts contentment. Take advantage of their lopsided ways. Likewise with labor. When labor is cheaper elsewhere then take advantage of that. Friedman analyzes the flow of capital and labor as numbers. As always Friedman sides with freedom no matter how disruptive initially.
What Friedman doesn't account for is massive social disruption on a national scale. It doesn't matter to Friedman if a controlled command economy has a policy that destroy's a nation's critical industry such as steel and automobile manufacturing and textiles. If other countries do it more cheaply then fine. Friedman doesn't account for an entire middle class siphoned to Asia and other 3rd world countries with no genuine reciprocity in trade. International trade agreements that create imbalances that over time drain the wealth of a nation to the advantage of other nations, draining our middle class while building theirs, were lower costs for the world and greater overall efficiencies lead to the destruction of socioeconomic tiers while creating greater extremes between rich and poor. To Friedman, people are aggregate numbers and it is those numbers that are important and not American middle class, the acknowledged strength of the nation.
Presently America is the world's golden market. Everyone wants to sell here. We attempt to be leader in free market principles. And countries do take advantage of this. And that is good. While protecting their own markets. And that is bad. Items produced in America face outrageous tariffs in other countries even our allies. So the cost of American goods is increased in foreign markets while the production of their economies are open in ours.
Friedman would say to stick with the areas that you excel. Growing corn and wheat for the rest of the world for example. And buy all you like from countries that sell to you cheaply. Those cheap products are an advantage to American consumers. To the point that Americans no longer have jobs to afford them.
China is not part of NAFTA. NAFTA has allowed China to skirt trade restrictions with the United States designed to correct imbalance of trade due to China's restrictions. With NAFTA China can access American market while continuing to restrict American imports. The imbalance of trade tells the story. It's not because America has nothing worthwhile to trade. Instead of dealing with U.S. directly and trade with U.S. fairly with equal import / export rules, China can go through Canada and Mexico instead, by direct sales and by manufacturing. China builds manufacturing plants in our neighboring countries, trades its raw material with them instead of with us, and has instant access to the American market. This is how third party nations exploit loopholes in NAFTA.
Mexico would prefer no border with U.S. so its labor can move freely to the disadvantage of American lowest economic tier. In essence, our middle class gets exported to Mexico by their workers coming here and sending earning home, while manufacturing opens there to the expense of our labor. Mexican middle class grows while ours shrinks, China's middle class grows at the exense of our middle class. Our lower tier grows and becomes even more economically stuck. Canada wants to tack on a whole list of 1st nation progressive agenda items that have nothing to do with legitimate trade and add costs to American products. Canada takes manufacturing jobs with raw materials from 3rd party countries like China with instant access to U.S. market.
Open trade with free flow of goods and labor is still the ideal. And NAFTA is a great idea in theory. A great start and a welcome development. But it has to result in genuine free trade and not hobbled stilted one-sided free trade. Not politicized trade such as Canada insists on inserting. And it's not just China in the east. Over decades Japan too has been incredibly unfair to U.S trade. Tariffs on American-made automobiles are outrageous as with American beef and commodities such as rice, corn, and wheat. The things that we're good at producing are made more expensive in other countries so less of our production is sold there. Trade is not what it could be. All that has to change for genuine free trade. And that is why NAFTA must change or be gone. That is what Trump is addressing presently.
8 comments:
Chip - very well said.
I always wondered how steel imports, shipped here from thousands of miles away, could be less expensive than steel produced here. Was it due to mostly govt subsidies?
Yes. China's export of steel is greater than our entire production. While their slave-labor wiped out our entire textile industry.
I have an aunt who used to always give us clothes as gifts. Which to a kid doesn't even count as a gift. It was the easiest gift she could give, to use her own employee discount at the clothes manufacturer where she worked. Then they all suddenly stopped. Her business shut down along with all the other textile jobs in Pennsylvania. Undersold by the Chinese slaves producing inferior clothes. Thinner material, cheaper dyes, buttons that break and sewn on with three loops of cheaper thread. Jeans that feel wrong made of cheaper denim. Shirts that don't fit. Shoes that fall apart.No environmental protections. No labor protection. But products that are considerably cheaper to buy but now no job to buy them.
You can still buy American jeans. Made with original selvedge denim. Heavy cotton thread. Wider range of body styles made to fit American butts. But they're expensive. $250 a pair instead of cheap-ass Chinese made wonky-shrinking leg twisting non-selvedge and cheap thin synthetic threads. Jeans that really feel new when you buy them and take a lifetime of hard activity to break in. Manufacturers like Detroit Denim.
American steel and textiles haven't been wiped out 100% obviously, there are still manufacturers around. Still doing things to American standards. But you must appreciate the difference in quality to accept the difference in cost. So they cater to an exclusive market.
Thoughtful post and lucidly written. I got to the end. Thoughtful discussions of trade policies are easy to abandon,.....There's no way I will ever buy a $250 pair of jeans. Someone is getting rich selling $250 jeans, but I doubt if it's Norma Jean......I do buy New Balance shoes. The fact that they're made n America is a selling point. They're comparable in price to Nikes and exceed them in quality.
Never trust Chinese steel. Case in point. The Bay Bridge rebuild was contracted out using Chinese rather than American steel. Turns out the steel is shit and the welds on that still were worse.
Wait. What? Chip Ahoy is now punctuating as Troop always did?
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Also, we do know how to search out and buy American-made products, from pencils to underwear and so many products in between. It took focused work over a couple-so decades to know how to do that, and it was worth it on account of the success. This is not to say that we don't buy things that are not purely American-made. However, even those are choices based on knowledge and effort, not slogans or tribalism un-vetted.
NAFTA seems to be misnamed,at least in the case of Mexico .We aren't trading with Mexico we are outsourcing the manufacturing and reimporting without tariffs. I can't think of anything Mexican we import except possibly foodstuff. For the most part that's what were doing with China too. I wonder if Bagoh2o is competing with Chinese firms or US firms manufacturing in China.
Did Trump say we would get tired of winning or whining?
Get to work.
@bagoh20:
We're already on it and already have been--working, that is. For years. What it takes.
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