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PierzStyx

Trade Defecits and Tariffs

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[QUOTE=PierzStyx;6601366]There is no such thing as a trade deficit.

I go down to the local 7-11. I buy some snacks. I pay them. They give me food. Is there a trade deficit? Maybe on the surface, after all I didn't trade them any of my possessions for any of their possessions. They didn't get my TV or car or anything. But I did trade them the property I was willing to part with and which they wanted -money- in exchange for goods I wanted. That isn't a deficit. That is a win.

Insisting that I should go home and first waste all my time building a car from scratch in order to go back and exchange that for what I wanted isn't smart. It is a stupid waste of time, resources, effort, and wealth producing a product that would've been produced more easily by someone else. And it wouldn't make me richer, it would make me poorer because instead of using my time wisely to work in some way that would add value to society and give me a greater, more flexible, source of wealth I am stuck doing more and getting less. It would degrade me, my home, and my standard of living.

And that is what tariffs do to the people and countries- degrade them, make them poorer, and cause waste.

Bastiat, explaining why a French tariff against cheap foreign steel was bad explains it succinctly:

[QUOTE]Now in all fairness, we must do justice to the arguments of this mine owner who wanted a tariff to increase domestic employment. His reasoning was not entirely false, but rather incomplete. In securing from the government a special privilege, he had correctly pointed out certain results that can be seen. But he completely ignored certain other effects that cannot be seen.

True enough, the five-franc piece thus directed by law into the cash-box of the domestic producer does serve to stimulate the economy along the lines he predicted. That can easily be seen. But what is not seen is this: That five-franc piece comes, not from the moon, but from the pocket of some French citizen who must now pay 15 francs for the thing that cost him only 10 francs in a free market. And while the protected industrialist may well use the five francs to encourage national industry, the French citizen himself would also have used it for the same purpose, if he had been left free to do so. He would have used his five francs to buy a book, or shoes, or some other article or service he wanted. In either case, national industry as a whole would be stimulated by the same amount.

Thus the new tariff law has resulted in this: The protected industry now makes a high profit to which it is not justly entitled. The average French citizen has been duped out of five francs by his government, and must therefore do without the article or service he would have bought with it. One segment of the economy has profited at the expense of many others. True enough, because of the artificial price increases, new jobs have been created in the protected industry. But what is not seen is the fact that the extra money now spent for iron must necessarily result in reduced spending for other products and services, and thus fewer jobs in those industries. And worst of all, the people have been encouraged to think that robbery is moral if it is legal.[/QUOTE]

Indeed, the only people who prosper are those business with connections to political elites. The rest of us suffer as we pay more for less, and a more inferior product to boot. Here, Dean Russell from FEE has a good modern example.

[QUOTE] I sometimes suggest to my students in international marketing that the use of compensatory tariffs by the European Common Market today gives precisely the same result that Bastiat pointed out in his story, i.e., tariffs cause higher prices and a decrease in products and services always. The students seem to understand the idea better when I put the transaction in story form, a la Bastiat.

“Take wheat, for example,” I begin. “And let’s follow the American owner as he enters a European port with a shipload of wheat grown in Kansas. The American owner wants to sell his wheat for, say, $3 a bushel. But the officials in the European Economic Community refuse to accept that low price and insist that the European purchasers must pay a much higher price.”

At that, my students begin to look at me strangely. “You mean the European people insist on paying more for the wheat to bake their daily bread than they need to?”

“That’s right,” I answer. And in spite of their doubting expressions, I continue with my story.

“You see, while the Europeans believe in competition, it must be fair competition. And those vast wheat lands in Kansas are just better suited to grow wheat than are the small European farms. So it’s not fair competition—obviously. Further, those Kansas farmers have another big advantage, i.e., vast amounts of capital (farm machinery) that’s just not available to European farmers. The result is unfair competition, i.e., the costs of production for many wheat farmers in Europe are perhaps twice as high as in Kansas. And while most Europeans claim to favor the free market economy and open competition, naturally it must be fair competition. Everybody is in favor of competition, as long as it’s fair. And since fair competition is obviously impossible when the Americans enjoy those two big advantages, tariffs must be used to equalize the situation. Fair’s fair, you know.

“First, the EEC officials check around Europe to find the cost of producing a bushel of wheat by the most inefficient wheat producer in all of Europe. The chances are that’ll be a French farmer who insists on growing grain on his land when the market says grapes or vegetables.

“Once the costs of this most inefficient wheat farmer in all of Europe are determined, then the compensatory tariff to wipe out the American production-advantage is set so that European consumers will find little or no advantage in buying American wheat over French wheat. The price to them will be about the same.

“That’s what most people seem to mean by ‘equal competition,’ i.e., tariffs to wipe out any advantage (natural or man-made) enjoyed by the foreign producer over the domestic producer. The result is that the Europeans must pay perhaps 100 percent more for their daily bread than would be necessary under free trade. And since there are always low-cost producers in any industry, those European wheat farmers who are more efficient than that marginal French wheat farmer just automatically reap high profits—while the people in general have less bread and other goods and services.”

[url]https://fee.org/articles/tariffs-are-legal-plunder/[/url][/QUOTE]

Which is one of the reasons poor people in America make more on average than the middle class in Europe.

Tariffs impoverish the people and enrich the few anti-free market corporatists. Nothing more.[/QUOTE]
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