Trade Policy: Countering The Walmart Effect

[hblask 1]

Cute theory that probably worked in feudal economies, but this global capitalism thing is totally unprecedented in human history. We can't ignore the fact that some countries live much worse off than we do and there's a huge, negative social consequence if we ship our job base over to those places for the sake of cost savings. Here in the midwest, we have a lot of guys who are best suited for blue collar work. What is the libertarian dogma for them? That they should go become nurses and home health aides? That their jobs are expendable because some gook is willing to work for slave wages? Our aggregate standard of living is less important than maintaining ideological suicide pacts about free markets? "Hey, everyone! Life sucks, joblessness is sky high, wages are depressed, inflation is raging, but don't worry because we're keeping true to libertarian free market dogma!"

Wait, are you saying that the other 95% should suffer through lower standards of living because a few people don't want to retrain?If there is an excess of blue collar workers, that drives down the prices of things that require those things but can't be shipped overseas. Cheaper houses, cheaper shipping costs, cheaper packages for all of us. When 5% makes a little bit less, and 95% gets cheaper stuff, that's a huge win for the economy. Yeah, those 5% suffer a little, but isn't that better than stagnant technology and higher prices for everyone?

[AmScray 355]

The libertarian dogma is "You're going to make better decisions than a central planner. Figure it out." I think you're underestimating them. Once people start talking about a "job" as something that exists outside of economic forces, as a concrete thing to which certain people have a right, we're subject to all manner of stupidity like cash for clunkers. The US government decided that the automakers' right to exchange the making of cars for money should be protected, even if there was no net contribution of cars to society. Likewise, Paying farmers not to farm. Paying diggers to dig and fillers to fill back in. We really are this corrupt and stupid as a government.

I agree that we have to guard against stupidity, but the 'free market economic forces' in question are now global, transcendent of our national borders and localized interests. This is where the libertarian dogmatists aren't keeping up with reality. We can argue that its OK if our net standard of living decreases by 80%, so the net standard of living in India can increase by 20%, so long as its driven by organic, free market forces... and when its all said and done, what do we wind up with? A little gold star that says congrats, you maintained an ideological dogma, straight down the road to hell? No one individual has a right to a job, but I think it's ****ing absurd to think that our collective job base is something we can leave to the whimsy of foriegn governments who are playing by a TOTALLY different set of rules than we do... Environmental rules, labor rules, economic rules, currency rules... It's like going off to fight a 'fair fight' with boxing gloves, when you know damn well your opponent will have a pistol. Maybe your relatives can pat your corpse on the back for being so 'honorable', but you're fucking dead. That's where we're at. If we don't start minding our affairs and taking counter-measures to stop the bleeding, the only thing we'll have left is idealism and the hollow non-reward of maintaining intellectual consistency in an inconsistent world.

[AmScray 355]

Wait, are you saying that the other 95% should suffer through lower standards of living because a few people don't want to retrain?

I don't know who the 95%/5% ratio is supposed to represent.If the question is: Should 95% of people overseas suffer because 5% of Americans don't want to retrain?... the answer is yes.

[hblask 1]

I agree that we have to guard against stupidity, but the 'free market economic forces' in question are now global, transcendent of our national borders and localized interests. This is where the libertarian dogmatists aren't keeping up with reality. We can argue that its OK if our net standard of living decreases by 80%, so the net standard of living in India can increase by 20%, so long as its driven by organic, free market forces... and when its all said and done, what do we wind up with? A little gold star that says congrats, you maintained an ideological dogma, straight down the road to hell? No one individual has a right to a job, but I think it's ****ing absurd to think that our collective job base is something we can leave to the whimsy of foriegn governments who are playing by a TOTALLY different set of rules than we do... Environmental rules, labor rules, economic rules, currency rules... It's like going off to fight a 'fair fight' with boxing gloves, when you know damn well your opponent will have a pistol. Maybe your relatives can pat your corpse on the back for being so 'honorable', but you're fucking dead. That's where we're at. If we don't start minding our affairs and taking counter-measures to stop the bleeding, the only thing we'll have left is idealism and the hollow non-reward of maintaining intellectual consistency in an inconsistent world.

You seem to be implying in this response that there is a large percentage of Americans who will refuse to do anything than their current job, and that they will never retrain. I can't really think of a large class of people for whom that is true. I know individuals like that, but they tend to be despicable people anyway, so no major loss. Most people have no problem switching jobs. There doesn't seem to be any reason to believe that the net positive effect of trading stops at borders. If trading with your neighbor is good, and trading with the guy after that is good, and down the line, why would it stop at an imaginary line? If another country wants to give us really cheap stuff, that frees up more of our resources to buy machines so that even the dumbest guy can build a car. That basically is what has happened: the guys on the assembly lines used to have to be marginally competent, and know how to use tools and be strong enough to lift stuff. Now, they mostly just watch as robots do the work, so that even a well-trained monkey could do it. Why? Because there are lots of little Asian kids locked in factories soldering wires for our robots. If not for cheap electronics, much of our economy would crumble right now, and all those people you claim free trade is harming would be in even worse shape, because there is just no way that having Bruno stand there with a crescent wrench is economically feasible anymore.

I don't know who the 95%/5% ratio is supposed to represent.If the question is: Should 95% of people overseas suffer because 5% of Americans don't want to retrain?... the answer is yes.

The 5% was an upper estimate I'd give on the number of people who are totally unsuited to any other job other than the one they are currently doing. I think realistically it's less than 1%, but I was giving you the benefit of a doubt.

[brvheart 1,752]

No one individual has a right to a job, but I think it's ****ing absurd to think that our collective job base is something we can leave to the whimsy of foriegn governments who are playing by a TOTALLY different set of rules than we do... Environmental rules, labor rules, economic rules, currency rules...

Well, the libertarian ideologues would get rid of most of those rules, which would make the fight more fair.

[hblask 1]

. Environmental rules, labor rules, economic rules, currency rules...

brv's response reminded me I want to make note of this -- I think there is a place for trade regulation in the cases where other countries are just blatantly ignoring laws against force and fraud. So if they have cheap production because they are dumping arsenic in the rivers, yes, we should impose tariffs until they fix that. Or if they are using political prisoners to produce goods in sweatshops, then yeah.But cheap labor in and of itself is not an unfair or immoral practice. The choice is not to manufacture widgets here for $12/hr or manufacture widgets there for $1/hr. The choice is manufacture it there for $1/hr or go without. Forcing us to use vacuum tubes in order to keep jobs in vacuum tube companies isn't good policy.

[Roll the Bones 74]

brv's response reminded me I want to make note of this -- I think there is a place for trade regulation in the cases where other countries are just blatantly ignoring laws against force and fraud. So if they have cheap production because they are dumping arsenic in the rivers, yes, we should impose tariffs until they fix that. Or if they are using political prisoners to produce goods in sweatshops, then yeah.But cheap labor in and of itself is not an unfair or immoral practice. The choice is not to manufacture widgets here for $12/hr or manufacture widgets there for $1/hr. The choice is manufacture it there for $1/hr or go without. Forcing us to use vacuum tubes in order to keep jobs in vacuum tube companies isn't good policy.

Well, I think that this is my point. We have to face the fact that we aren't dealing on a level playing field and that other countries, specifically China, are outright using our ideology against us. They devalue the dollar, subsidize over 3900 products and if the roles were reversed they could give a rats ass about "free trade" and once they reach financial independence could care less if we starved, collapsed economically or whatever. That is why the article makes some good points on "fair" vs "free" trade, looking at things like similarity in pay scales, environmental abuse etc. Free trade with a similar economic entity makes sense, in the latter there should be some exceptions. Obviously what we are doing now isn't working. China is kicking our ass and stealing, techonology, jobs, patent abuse, and a host of other things. It seems to me that the knee jerk reaction of "nationalism" or opposing "free trade" is not facing reality. If the use of tarriffs and dollar valuations, penalties etc, would force China into a more fair, "free trade" policy then we should consider it, imho.

[ahosang 0]

...

[phlegm 6]

An anecdotal solution to our job problem.When I was 12 I had 5 people that I mowed their lawn for 20 bucks. A new kid moved in and offered to do it for 15, and I lost them.A week later I saw the kid at burger king, and I kicked his ass. He then quit mowing my people.after he quit they called me to come back. I said I would come back for 25.Not sure how this would work on the international stage, but the principle is solid.

[Roll the Bones 74]

No, you are making NATIONALIST arguments, and your concerns are in that vein without even realising it. Get a clue...

I understand that. I am simply saying that labeling it whatever you want to and dismissing it because of that "label" isn't addressing the issue. Being regressive and doing nothing doesn't seem to be working out all that well, is what I am saying. If you would care to offer up a counter arguement I am willing to listen, or you can go ahead and simply insult me some more as if that is constructive.

[brvheart 1,752]

They devalue the dollar, subsidize over 3900 products and if the roles were reversed they could give a rats ass about "free trade" and once they reach financial independence could care less if we starved, collapsed economically or whatever.

What?How would someone "reach financial independence" if all of their "trade partners" were dead?

[ahosang 0]

I understand that. I am simply saying that labeling it whatever you want to and dismissing it because of that "label" isn't addressing the issue. Being regressive and doing nothing doesn't seem to be working out all that well, is what I am saying. If you would care to offer up a counter arguement I am willing to listen, or you can go ahead and simply insult me some more as if that is constructive.

Forget it. Crossed wires...

[hblask 1]

Well, I think that this is my point. We have to face the fact that we aren't dealing on a level playing field and that other countries, specifically China, are outright using our ideology against us. They devalue the dollar, subsidize over 3900 products and if the roles were reversed they could give a rats ass about "free trade" and once they reach financial independence could care less if we starved, collapsed economically or whatever. That is why the article makes some good points on "fair" vs "free" trade, looking at things like similarity in pay scales, environmental abuse etc. Free trade with a similar economic entity makes sense, in the latter there should be some exceptions. Obviously what we are doing now isn't working. China is kicking our ass and stealing, techonology, jobs, patent abuse, and a host of other things. It seems to me that the knee jerk reaction of "nationalism" or opposing "free trade" is not facing reality. If the use of tarriffs and dollar valuations, penalties etc, would force China into a more fair, "free trade" policy then we should consider it, imho.

It's not just a matter of competing against China. It's a matter of competing against reality. There is no such thing as a high-level economy that pays Billy Bob to turn a wrench or stack wood. For a high level high standard of living economy to exist, we have to have moved past those things. Protectionism doesn't make more jobs available, it puts a lid on the possible progress the economy can make so that old, terrible jobs can stay here. Advancing through levels of economic success doesn't decrease job availability any more than vacuum tubes caused massive unemployment. FedEx doesn't exist in a world of horse-drawn carriages. We've moved beyond $1/hr labor, but there is still stuff we are willing to only pay that much for that helps us. The choice is make it overseas or go without, or build robots that work cheaper than $1/hr. This latter is not always an option, though, so really, it's just the first two choices.

[FCP Bob 1,312]

From the South China Morning PostA lot of manufacturing is already moving out of China to lower wage countries such as Viet Nam as things get more expensive in China.Also the Chinese currency has risen in value in relation to the $USD by quite a bit already over the last little while.China's manufacturing exodusRelentless inflation in production costs and wages had forced many manufacturers to relocate production from the Pearl River Delta or Yangtze River Delta to Southeast Asian countries such as Vietnam and Indonesia, some buyers said at the 110th China Import and Export Fair at the weekend. They said moving offered a solution for manufacturers, who had limited room to raise costs for buyers at a time of a possible double-dip recession in the United States and European Union, China's largest trading partners. It also came at a time when Beijing's policy was to force factories to upgrade or migrate...."One in every four of my Chinese suppliers have moved to Vietnam and another 20 per cent will be moving before the Chinese New Year [in January]," said a Hong Kong-based Canadian trader of home electrical appliances named Richard, a fair regular for the past 40 years. "Labour cost inflation in China is not going away," he said, adding that inflation was stable relatively in Vietnam and Indonesia. He expected 60 per cent of his company's products to be sourced from Southeast Asian countries by 2013, but China was now the group's dominant source, supplying 80 per cent of products....Inflation is also spreading across the supply chain as costs rise for raw materials, rent, utility bills and labour, while the yuan keeps hitting new highs against the US dollar. Premier Wen Jiabao, who officiated at the fair on Friday and toured Guangzhou at the weekend, promised to keep the yuan's value stable to protect exporters. The yuan was at 6.378 per US dollar on Friday. It has gained 3.31 per cent this year, and 7.02 per cent since it was delinked from the dollar in June last year. Economists expect it to hit 6.25 or 6.20 per dollar by December 31. The persistent inflation and the strong currency effectively means China's days as a low-cost producer are numbered, particularly in the Pearl River Delta. Shenzhen, for example, recently raised the minimum wage 16.6 per cent to 1,320 yuan (HK$1,600) a month, the highest in China, and surpassing the average 1,310 yuan in Zhejiang province in the Yangtze River Delta.

[vbnautilus 48]

I understand that. I am simply saying that labeling it whatever you want to and dismissing it because of that "label" isn't addressing the issue. Being regressive and doing nothing doesn't seem to be working out all that well, is what I am saying. If you would care to offer up a counter arguement I am willing to listen, or you can go ahead and simply insult me some more as if that is constructive.

Randy, he's a nationalist.

[Dread Aidan 8]

Randy, he's a NATIONALIST.

Fixed.

[Roll the Bones 74]

Randy, he's a nationalist.

haha, proudly!To be honest, I am a libertarian at heart. I just don't think we'll get to that level in society where the principles actually work (fully) in my lifetime.

[ahosang 0]

Fixed.

Good man!

[AmScray 355]

[strategy 4]

An anecdotal solution to our job problem.When I was 12 I had 5 people that I mowed their lawn for 20 bucks. A new kid moved in and offered to do it for 15, and I lost them.A week later I saw the kid at burger king, and I kicked his ass. He then quit mowing my people.after he quit they called me to come back. I said I would come back for 25.Not sure how this would work on the international stage, but the principle is solid.

I've never liked you

[akoff 0]

An anecdotal solution to our job problem.When I was 12 I had 5 people that I mowed their lawn for 20 bucks. A new kid moved in and offered to do it for 15, and I lost them.A week later I saw the kid at burger king, and I kicked his ass. He then quit mowing my people.after he quit they called me to come back. I said I would come back for 25.Not sure how this would work on the international stage, but the principle is solid.

Outstanding!! This is the old Italian mobs business model!! Everything goes in a circle.

[FCP Bob 1,312]

Now I don't agree with everything in this article it's worth reading and thinking about.Apple's China sales show why US trade warriors are wrong

Apple may be archetypal Silicon Valley success story, but the gadgets it sells in such vast numbers are not manufactured in the US. Instead they are made in vast factory complexes in southern China employing hundreds of thousands of lowly-paid workers. As a result, for every US$499 iPad shipped across the Pacific to the US from its factory in China, the US trade deficit rises by US$275. If those iPads were made in the US, reason the China-bashers in Washington, legions of jobs would be created for American workers, and the US trade deficit would be eliminated. But things aren't that simple. Crack open an iPad, and you find that, although it is assembled in China, none of the components are manufactured by Chinese companies. Most of the machine's high-value innards are actually made by Korean companies, including LG and Samsung, who contribute the display and memory chips. Other bits and pieces come from companies based in Taiwan, Germany, Japan and even the US. According to a recent analysis by researchers at the University of California, Irvine, these assorted component manufacturers capture US$88 of the value of each US$499 iPad sold in US shops. Distributers and retailers get another US$75. Material costs make up US$154 of the retail price, while the labour costs of assembly - the element that so vexes the China-bashers - account for just US$8. Apple itself, responsible for design and marketing, captures by far the lion's share of the value of each iPad sold: a handsome US$150 (see the chart). Looked at in this way, the damage inflicted on American jobs and the US trade balance by US companies outsourcing their manufacturing to China dwindles almost to nothing. And if you then consider the value captured by the American economy as a result of Apple's soaring sales in China, the picture reverses entirely. That same iPad, which sells in California for US$499, sells in Shenzhen, the city where it is assembled, for 3,988 yuan, or US$625. Allowing for the differences in sales taxes, that mark-up implies that for each iPad sold in China, Apple captures value of at least US$219. None of that gain shows up in the US trade statistics. After all, the iPad was both manufactured and sold in China. But the value certainly shows up in Apple's profits, which came to US$6.62 billion for the three months to September. And the benefit of those profits flow back to the US economy, to Apple's highly paid US workforce and to the company's largely US-based shareholders (and to the US tax authorities).

[brvheart's I Phone 0]

The trade deficit would be eliminated if Apple made iPads in the US? Who knew?Also, this is my favorite part:"Apple itself, responsible for design and marketing, captures by far the lion's share of the value of each iPad sold: a handsome US$150 (see the chart)."THE EVIL CORPORATION TAKES THE LION SHARE OF ALL THESE NUMBERS WE'VE MENTIONED!!! (even though our own chart suggests that material cost is higher than what we are now pointing out! ps. Please gloss over how we snuck in the fact that out of Apple's $150, they have to pay for design and advertising, since that's no big deal. pps. Also please ignore the fact that we didn't mention any of Apple's other major expenses, like employees, facilities, and don't you dare bring up taxes. You know that all ****ing evil US corporations cheat their way to a 0% tax rate!)"Journalists": God love 'em.

[hblask 1]

If the iPad sold for $2500, what would that do to our trade deficit? What would it do for US jobs, seeing as how they'd only sell a couple of them per year?That, in a nutshell, is why trade works. You can't just charge significantly more for something and expect to get the same economic results.

[mrdannyg 274]

The trade deficit would be eliminated if Apple made iPads in the US? Who knew?Also, this is my favorite part:"Apple itself, responsible for design and marketing, captures by far the lion's share of the value of each iPad sold: a handsome US$150 (see the chart)."THE EVIL CORPORATION TAKES THE LION SHARE OF ALL THESE NUMBERS WE'VE MENTIONED!!! (even though our own chart suggests that material cost is higher than what we are now pointing out! ps. Please gloss over how we snuck in the fact that out of Apple's $150, they have to pay for design and advertising, since that's no big deal. pps. Also please ignore the fact that we didn't mention any of Apple's other major expenses, like employees, facilities, and don't you dare bring up taxes. You know that all ****ing evil US corporations cheat their way to a 0% tax rate!)"Journalists": God love 'em.

Umm, the part that you quoted contains absolutely nothing negative about Apple. It specifically says they're responsible for the design (aka intellectual property), and so they get the majority. Again, it does not refer to them in any negative way. Your whole evil corporations rant is mildly crazy.In fact, even the part you suggest is wrong - that the material cost is bigger than apple's share - while your interpretation is not unreasonable (and of course, 154 > 150...), you'll note the word 'value' is used, as opposed to a strict amount. A less dogmatically republican way to interpret that statement would be that the 'value' of Apple's $150 is greater than the net value of the $154 of materials - this is very likely true, as Apple probably has a higher profit margin on that portion than the material producers on their portion.