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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: craig crawford who wrote (21465)	3/15/2002 9:10:37 PM
From: Ilaine	Respond to of 281500

>> it can never be related to our foreign trading partners engaging in unfair, anti-competitive business practices such as dumping or state subsidies<< Nobody said that. The problem is tit-for-tat. Someone has to end the cycle first, otherwise it never ends.

To: craig crawford who wrote (21465)	3/16/2002 2:30:31 AM
From: frankw1900	Respond to of 281500

CB has it right. The long term problem with tariffs is that they grow, and grow, and grow, in retaliatory measure. Tariffs and subsidies are to economies what alcohol is to an alcoholic - the last binge felt so good that even now, with the hangover, more is going to be even better..... whenever a manufacturing industry in america fails it is always due to our lack of efficiencies. it can never be related to our foreign trading partners engaging in unfair, anti-competitive business practices such as dumping or state subsidies. A "manufacturing industry" doesn't usually fail. Certain companies within it fail. In the steel industry it has been the old line primary smelting companies that fail and are being out-competed by newer mini mills. The requirements of other industries demand specialty products. World demand on a per capita basis for steel is declining - less is used to make a car, a building, etc. Companies that don't adapt sufficiently will go out of business. These are facts. The US is the largest, wealthiest, most prosperous and most technically advanced economy in the world. This means the general price level in the US is higher than most other places and this is a Good Thing: It means wages, standard of living, reinvestment and new business formation [competition] are very high. It also means a high level of business failure - see paragraph above. It means also that it will not pay to invest in, and run, technically unadvanced businesses. It didn't pay a hundred years ago and it doesn't pay today. Those steel companies which are not cuttting edge will go out of business, whether or not there are "cheap imports." About the countries from which come the "cheap imports." Whether or not they subsidize their industries, the general price level is lower and comensurately they have lower wages, standard of living, but not necessarily lower levels of reinvestment, new business formation, business failure. (That depends on their savings rate and the level of external investment and the general business culture). However, it usually means they can produce technically unadvanced products more cheaply than the US, whether or not they subsidize the relevant industries. The reason for their general price level being lower is is that they are, as the term accurately states, less developed. Generally, they are price takers, not price setters - they are responding to market demands from the US and other countries. They export to get imports. They will always have a trade deficit with more developed countries because the latter are richer and can buy more stuff. This will go on until they've developed their economies to such a degree their price level rises sufficiently to afford investment in import substitution and then they will import more and it will be higher margin stuff. You may well feel it a good thing to confiscate your fellow citizens' wealth in subsidizing the failing (eg) steel companies through high tariffs and other barriers. You won't get support from me in your socialist endeavour. If it's felt to be socially (not economically) necessary to support the laid off workers, it would be far cheaper, in terms of cost to the economy, to buy them pensions with your fellow taxpayers confiscated wealth than impose a tariff. I go back to the example of Japan, the most protectionist modern economy. Its manufacturers are very efficient, possibly the most efficient in the world. They have balance of trade surplus. And yet they've had a recession/depression for ten years. During most of this period the US, while pursuing freerer trade, has had great prosperity until the business cycle's inevitable over investment, over inventory, led to the present recession, (which is just about over). The case where tariffs might be an economically justified cost is in lesser developed countries subject to primary resource developments. The sudden incoming wealth makes local products, particularly agricultural, too expensive compared to cost of imports, and there are no alternative local sectors in which to invest the extra money. But to argue the US is a parallel situation with no other sectors for workers to move to or invest in, as you've done elsewhere, is to argue it's a lesser developed country. And that doesn't match reality. The US got away with lots of tariffs during the 19th century because there were vast amounts of 'free' land, and lots of foreign investment to support its improvement, and huge immigration to improve it and provide an immensely growing local market. The tariffs ripped off the consumer and slowed the rate of capital investment. The US didn't need the 19th century tariffs any more than it needs today's. In your erroneous economic argument you are only providing cover for the usual socialist program. The Russians and the rest are finally getting away from this stuff and you're suggesting the US go for it. It would be far clearer, intellectually, if you would come straight out and show your socialist colours and argue your kleptocratic social program.