Conservatives and the Free Trade Straw Man

[TheTexan]

I don't even know why this is an argument. It should just be common sense.

I used to see an ethical argument against trade restrictions/tariffs, but any ethical concern is resolved by upholding the right to secede.

[tebowlives]

You make my point for me.

That wasn't free trade.
Free trade is bad.
Those were good.

All resources and industries that are available in out territory should receive at least a slight advantage in order to increase our own wealth and independence.

At a minimum we need to shift all taxation to tariffs.

Since when are tariffs good? Short term to stop another countries tariffs on us?

remember this? - “A tariff can’t fix this. A tariff is a tax and the tax is on the people who live in the country who raises it,” he said. “People that might be enjoying $25 tennis shoes will have to pay $100. That doesn’t help anybody.”

An advantage for who? Certainly not we the people by paying higher prices. We don't need a central authority hand picking winners and losers.

It's the lessor of 2 evils vs income tax. It's still evil.

[Swordsmyth]

Since when are tariffs good? Short term to stop another countries tariffs on us?

remember this? - “A tariff can’t fix this. A tariff is a tax and the tax is on the people who live in the country who raises it,” he said. “People that might be enjoying $25 tennis shoes will have to pay $100. That doesn’t help anybody.”

An advantage for who? Certainly not we the people by paying higher prices. We don't need a central authority hand picking winners and losers.

It's the lessor of 2 evils vs income tax. It's still evil.

The ridiculous part about free trade theory is that it pretends that workers and consumer are different people.
Tariffs are like going to the gym to build your muscles, in the end you are much better off at the cost of a temporary sacrifice of time and effort.
Free trade is like putting yourself in bed while getting everyone else in your household to cater to you and bring you food and change bed pans, you get to enjoy some "luxury" while your muscles atrophy and your health evaporates.

Given time a tariff regime will make everyone in the country richer and able to enjoy five sets of $100 sneakers instead of being lucky to afford the $25 pair after free trade has ravaged the economy and lowered all but the international class to the level of subsistence farmers in the poorest nation on earth.

And since we do have to have a nation state to defend liberty then we must have taxes so we might as well have the kind with the least downsides and most beneficial side effects: tariffs.

Defensive tariffs against other nations that tariff us or subsidize their exports are a no-brainer but they will lead to all involved escalating further. (which is not a bad thing in the end)

[TheTexan]

We don't need a central authority hand picking winners and losers.

An ideal tariff would just be a flat % across the board. For everything.

The only "winner" and "loser" that would be picked, is America, and China, respectively...

[TheTexan]

Switzerland is a good example.

Extremely high salaries (higher than the US).

Very high quality of life.

Extremely high agriculture tariffs.

Their #1 import? Gold.

The US #1 import? Cars...

Their #1 import country? Germany.

Our #1 import country? China....

Switzerland is perhaps the only country in the world that beats the US in terms of general economic prosperity. The US could learn a thing or two.

With that said, even Switzerland is falling to the same mistake of increasing free trade. I would not be surprised if they lose their economic edge over the next 10-20 years.

[TheTexan]

The ridiculous part about free trade theory is that it pretends that workers and consumer are different people.

I think its ridiculous because the whole premise is that free trade allows you to take advantage of specialization and economies of scale.

And that premise necessarily implies that, globally, a specific industry is localized to a handful of specific regions in the world.

From a national security perspective, that is transparently disastrous.

From a monopoly perspective, it implies that there are a handful of companies in the world competing in that industry.

From a logistics perspective, it requires that the value gained from "specialization" exceeds the value spent on shipping a physical product 1000's of miles, which is almost always going to be ludicrous and unsustainable.

Any kind of "benefit" to free trade is temporary, unsustainable, and relies on slave labor... for what? Slightly cheaper lawn chairs?

[tebowlives]

I think its ridiculous because the whole premise is that free trade allows you to take advantage of specialization and economies of scale.

And that premise necessarily implies that, globally, a specific industry is localized to a handful of specific regions in the world.

From a national security perspective, that is transparently disastrous.

From a monopoly perspective, it implies that there are a handful of companies in the world competing in that industry.

From a logistics perspective, it requires that the value gained from "specialization" exceeds the value spent on shipping a physical product 1000's of miles, which is almost always going to be ludicrous and unsustainable.

Any kind of "benefit" to free trade is temporary, unsustainable, and relies on slave labor... for what? Slightly cheaper lawn chairs?

We are talking about tariffs on goods that are produced domestically i assume.

How does more expensive steel benefit me? I'm paying higher prices. My wages aren't being raised because of protectionist policies.
I was going to say why would I purchase cheap goods from China that are dangerous and don't last? But many others do. There are quality products with good value that I want to pay a lower price.

Where is the real world proof that tariffs help in the long run?

[tebowlives]

Switzerland is a good example.

Extremely high salaries (higher than the US).

Very high quality of life.

Extremely high agriculture tariffs.

Their #1 import? Gold.

The US #1 import? Cars...

Their #1 import country? Germany.

Our #1 import country? China....

Switzerland is perhaps the only country in the world that beats the US in terms of general economic prosperity. The US could learn a thing or two.

With that said, even Switzerland is falling to the same mistake of increasing free trade. I would not be surprised if they lose their economic edge over the next 10-20 years.

We could learn from their low welfare.

[tebowlives]

I think its ridiculous because the whole premise is that free trade allows you to take advantage of specialization and economies of scale.

And that premise necessarily implies that, globally, a specific industry is localized to a handful of specific regions in the world.

From a national security perspective, that is transparently disastrous.

From a monopoly perspective, it implies that there are a handful of companies in the world competing in that industry.

From a logistics perspective, it requires that the value gained from "specialization" exceeds the value spent on shipping a physical product 1000's of miles, which is almost always going to be ludicrous and unsustainable.

Any kind of "benefit" to free trade is temporary, unsustainable, and relies on slave labor... for what? Slightly cheaper lawn chairs?

Why is it disastrous from a national security perspective? Economic security I'm assuming and not militarily.

[CCTelander]

We are talking about tariffs on goods that are produced domestically i assume.

How does more expensive steel benefit me? I'm paying higher prices. My wages aren't being raised because of protectionist policies.
I was going to say why would I purchase cheap goods from China that are dangerous and don't last? But many others do. There are quality products with good value that I want to pay a lower price.

Where is the real world proof that tariffs help in the long run?

There is none because they don't. The belief that they do anything but harm is based upon economic fallacies and myths repeated in certain conservative circles for many, many decades. But repeating falsehoods over and over again doesn't make them true.

[TheTexan]

There is none because they don't. The belief that they do anything but harm is based upon economic fallacies and myths repeated in certain conservative circles for many, many decades. But repeating falsehoods over and over again doesn't make them true.

Do you contest the notion that our current trade situation with China is a wealth export? Or are you suggesting that a wealth export does not affect the US?

[TheTexan]

Why is it disastrous from a national security perspective? Economic security I'm assuming and not militarily.

Both economic and military security. There are numerous situations that a free market cannot predict, that can result in trade routes being denied, cut off, or otherwise unavailable. For a nation to be secure and sovereign, it needs to be capable of sourcing raw materials and manufacturing from home.

[TheTexan]

We are talking about tariffs on goods that are produced domestically i assume.

I'm referring to tariffs on imports.

How does more expensive steel benefit me? I'm paying higher prices. My wages aren't being raised because of protectionist policies.

Wages do get raised in a protectionist environment when tariffs are applied equally. The US has very limited protectionist policies. Your wages aren't getting raised because the US's wealth is being exported to China. We are subsidizing their growth at the expense of our own.

Every time the US purchases a consumer good or service from overseas, wealth is transferred.

We primarily import from China, because they use cheap wages as their economic advantage. Every time we buy consumer goods from China, their wages increase, and our wages decrease.

I was going to say why would I purchase cheap goods from China that are dangerous and don't last? But many others do. There are quality products with good value that I want to pay a lower price.

Goods from China aren't that much cheaper. There is a huge shipping cost. If the US had even a fraction of China's manufacturing capability, the same items could be built in the US for almost the same price, and eventually less, as US manufacturing would increasingly invest in automation.

Where is the real world proof that tariffs help in the long run?

In the very long run (100+ years) they probably don't help. In 100 years the world will be close to economic equilibrium and tariffs will likely not be necessary. Currently we are subsidizing China to help them catch up their wages to the US. In equilibrium that wouldn't be the case.

I don't have good proof for you that tariffs work. But there's plenty of evidence that free trade in the current environment doesn't work. Just look at the destruction of the American middle class. There are multiple factors at play certainly, but it's a mathematical fact that our trade situation with China is contributing to it.

[tebowlives]

I'm referring to tariffs on imports.

I didn't type that well. I meant tariffs on goods that we already produce domestically. If we don't grow bananas why put tariffs on them.

Wages do get raised in a protectionist environment when tariffs are applied equally. The US has very limited protectionist policies. Your wages aren't getting raised because the US's wealth is being exported to China. We are subsidizing their growth at the expense of our own.

Every time the US purchases a consumer good or service from overseas, wealth is transferred.

We primarily import from China, because they use cheap wages as their economic advantage. Every time we buy consumer goods from China, their wages increase, and our wages decrease.

Saving a dollar vs paying more and keeping that money here. Understood

Goods from China aren't that much cheaper. There is a huge shipping cost. If the US had even a fraction of China's manufacturing capability, the same items could be built in the US for almost the same price, and eventually less, as US manufacturing would increasingly invest in automation.

China goods quality is often much worse

In the very long run (100+ years) they probably don't help. In 100 years the world will be close to economic equilibrium and tariffs will likely not be necessary. Currently we are subsidizing China to help them catch up their wages to the US. In equilibrium that wouldn't be the case.

I don't have good proof for you that tariffs work. But there's plenty of evidence that free trade in the current environment doesn't work. Just look at the destruction of the American middle class. There are multiple factors at play certainly, but it's a mathematical fact that our trade situation with China is contributing to it.

[Krugminator2]

Go back and read a few pages... already had this discussion. You are confusing wealth with value. Value is composed of goods and services consumed. You don't receive wealth by consuming services. Otherwise I could get wealthy by spending my money on hookers & coke. If only it were so.

Once you understand the difference, it becomes clear that it's an irrefutable fact that the current trade situation with China is a wealth transfer, from us to them.

Wealth isn't green squares. Wealth is the goods and services that can be consumed. The only rational reason to produce and save is to have the ability to consume. What you are able to consume is your wealth. If the world suddenly became unproductive and goods and services decreased dramatically because of an electrical grid failure or an asteroid hit wealth would be diminished. Having a stockpile of gold and green squares isn't going to prevent you from being less wealthy in that scenario. The stock of gold isn't that much higher than 200 years ago. But the quality and quantity of goods and services is significantly greater so the world is much richer.

I wrote all that because I have no idea what you are trying to say so hopefully my correct take helps. Trading with China is not a wealth transfer. Trade is win-win otherwise it doesn't happen. The people of the United States are wealthier because of trade with China. If a dollar buys one pack of American made gum and one dollar buys two packs of Chinese gum. I should buy the Chinese gum. I am wealthier because I get more stuff with my dollar from trade with China.

[TheTexan]

I wrote all that because I have no idea what you are trying to say so hopefully my correct take helps. Trading with China is not a wealth transfer. Trade is win-win otherwise it doesn't happen.

You unfortunately repeated what you've already said basically word for word which isn't helpful. I have no retort except to repeat what I have already said, which likely also wouldn't be helpful. If you care to further the discussion, I would encourage you to go back and re-read what I've already written.

If a dollar buys one pack of American made gum and one dollar buys two packs of Chinese gum. I should buy the Chinese gum. I am wealthier because I get more stuff with my dollar from trade with China.

You can't get wealthy by buying gum. Unless you're in the business of re-selling gum. When you buy a pack of chinese gum, you are making the chinese seller more wealthy. You in return, get a temporary boost of sugar and artificial flavor.

[Krugminator2]

Y

You can't get wealthy by buying gum. Unless you're in the business of re-selling gum. When you buy a pack of chinese gum, you are making the chinese seller more wealthy. You in return, get a temporary boost of sugar and artificial flavor.

Well.. Actually you are wealthier. A dollar is only worth what you can get for it. Two packs of gum is better than one pack of gum. If I have a dollar I want to get the maximum amount of stuff possible for it. I don't care if the product is made is China or Texas.

There is a whole idea accepted by every economist called comparative advantage. If a Chinese manufacturer can make something more efficiently than an American manufacturer, then they should. And that is why Chinese companies typically focus on lower end stuff and Americans produce higher end technologies that require more education. Good for China. Good for the US.

[TheTexan]

Well.. Actually you are wealthier. A dollar is only worth what you can get for it. Two packs of gum is better than one pack of gum. If I have a dollar I want to get the maximum amount of stuff possible for it. I don't care if the product is made is China or Texas.

There is a whole idea accepted by every economist called comparative advantage. If a Chinese manufacturer can make something more efficiently than an American manufacturer, then they should. And that is why Chinese companies typically focus on lower end stuff and Americans produce higher end technologies that require more education. Good for China. Good for the US.

You're not understanding my point.

You cannot get wealthy by spending money on consumer items and services. Otherwise I could become Jeff Bezos rich by spending my savings on hookers & coke. If only it were so.

When you buy a pack of gum from a store, the store owner is receiving wealth. You are spending wealth.

I understand you receive value in exchange for your wealth, but the wealth only goes one way. To the store owner.

[TheTexan]

"Wealth" is a pretty standard word with a pretty straight forward definition.

The free traders in this thread (not just you Krug) seem to be bending over backwards to try to re-define this word.

When you find yourself re-defining words to support your position, it's usually a sign that your position is wrong.

[Krugminator2]

You're not understanding my point.

You cannot get wealthy by spending money on consumer items and services. Otherwise I could become Jeff Bezos rich by spending my savings on hookers & coke. If only it were so.

When you buy a pack of gum from a store, the store owner is receiving wealth. You are spending wealth.

I understand you receive value in exchange for your wealth, but the wealth only goes one way. To the store owner.

And you aren't understanding. I never said spending is what makes you wealthy. The ability to have a product to spend money on makes you wealthy. More products to consume means more wealth.

I am guessing you didn't take Econ 101. And that's fine. Here the classic example from my intro notes I just dug out from 19 years ago.

China and the United States can produce a given number of units of coconuts and bananas

Coconuts Bananas
China 40 10

United States 50 25


Notice the United States has the ability to produce both more coconuts and bananas if they focus on one or the other. So should the US try to make them both or try to make coconuts because they make more? No. The solution is for the US to focus and specialize on bananas because they have a comparative advantage and trade. (The cost of producing 1 banana is 2 coconuts for the US and the cost for China of producing 1 banana is 4 coconuts) China focuses on coconuts. The US makes bananas and everyone wins. More stuff to go around.

[TheTexan]

And you aren't understanding. I never said spending is what makes you wealthy. The ability to have a product to spend money on makes you wealthy. More products to consume means more wealth.

I am guessing you didn't take Econ 101. And that's fine. Here the classic example from my intro notes I just dug out from 19 years ago.

China and the United States can produce a given number of units of coconuts and bananas

Coconuts Bananas
China 40 10

United States 50 25


Notice the United States has the ability to produce both more coconuts and bananas if they focus on one or the other. So should the US try to make them both or try to make coconuts because they make more? No. The solution is for the US to focus and specialize just on bananas because they have a comparative advantage and trade. (The cost of producing 1 banana is 2 coconuts for the US and the cost for China of producing 1 banana is 4 coconuts) China focuses on coconuts. The US makes bananas and everyone wins. More stuff to go around.

You are not arguing against my point. You are arguing against a strawman you have set up for yourself. I understand what you are trying to say. It simply is not relevant to my point at all.

It is an irrefutable fact that when you spend money on consumer items, you are spending your wealth, and the store owner is receiving that wealth. This is not complicated.

My assertion is likewise not complicated:

When the US spends money on consumer items from China, the US is spending its wealth, and China is receiving that wealth.

With such a trade, do you:
1) Contest the fact that wealth has been transferred?
or,
2) Contest the notion that we should be concerned that wealth has been transferred?

[Krugminator2]

It is an irrefutable fact that when you spend money on consumer items, you are spending your wealth, and the store owner is receiving that wealth. This is not complicated.

My assertion is likewise not complicated:

When the US spends money on consumer items from China, the US is spending its wealth, and China is receiving that wealth.

With such a trade, do you:
1) Contest the fact that wealth has been transferred?
or,
2) Contest the notion that we should be concerned that wealth has been transferred?

If the US were getting poorer from the transaction the value of the dollar would drop relative to the Yuan and it would cost more dollars to buy the same amount goods in China. It is a neutral event.

Chinese firms only take dollars if they can get something of equal or greater value in return.

[TheTexan]

If the US were getting poorer from the transaction the value of the dollar would drop relative to the Yuan and it would cost more dollars to buy the same amount goods in China. It is a neutral event.

If I spend my savings on hookers & blow, is that a wealth neutral event?

I leave that transaction with the same amount of wealth as I entered into it?

[A Son of Liberty]

I kind of want to jump back in, but I realize it's fruitless. It's you're turn Krug. Good luck.

[Krugminator2]

If I spend my savings on hookers & blow, is that a wealth neutral event?

I leave that transaction with the same amount of wealth as I entered into it?

You would have less wealth but the relative wealth of countries would go unchanged. If you went to China, bought hookers and blow with US dollars it would not mean the United States is now poorer and China is now richer. At least not in any meaningful sense. The person who provided the hookers and blow didn't take worthless little green squares. They took receipts on what those green squares could buy which they will one day consume.

[TheTexan]

I kind of want to jump back in, but I realize it's fruitless. It's you're turn Krug. Good luck.

I may just step out myself. Basically having the exact same discussion all over again that I already had with you.

Why is it such a difficult concept to grasp, that a consumer transaction (with anybody) is a transfer of wealth? This, to me, seems like a statement of fact yet 6 out of the last 7 pages is me trying to explain this concept.

It's fine to disagree about what such a fact means to the economy more broadly... but to deny it altogether, is just nonsensical

[CCTelander]

"The term 'wealth' has a special meaning in Economics. In the ordinary language, by 'wealth', we mean money, but in economics, wealth refers to those goods which satisfy human wants. But we should remember all goods which satisfy human wants are not wealth. For example, air and sunlight are essential for us. We cannot live without them. But they are not regarded as wealth because they are available in abundance and unlimited in supply. We consider only those goods which are relatively scarce and have money value as wealth." - Adam Smith

[TheTexan]

You would have less wealth but the relative wealth of countries would go unchanged. If you went to China, bought hookers and blow with US dollars it would not mean the United States is now poorer and China is now richer. At least not in any meaningful sense.

If just 1 person does it, it changes nothing in any meaningful sense.

If an entire nation does it, you better believe it will have an impact on your nation's wealth.

[TheTexan]

"The term 'wealth' has a special meaning in Economics. In the ordinary language, by 'wealth', we mean money, but in economics, wealth refers to those goods which satisfy human wants. But we should remember all goods which satisfy human wants are not wealth. For example, air and sunlight are essential for us. We cannot live without them. But they are not regarded as wealth because they are available in abundance and unlimited in supply. We consider only those goods which are relatively scarce and have money value as wealth." - Adam Smith

a) That's Adam Smith's definition and he lacks the authority to say that is how "we" define it outside the scope of his writings,
and
b) I've already provided a definition of how I use the term; if anyone cares to argue with me I would ask they use the term as I have defined it, or provide an alternate word that I can use that is less confusing to your specific lexicon

[Krugminator2]

If just 1 person does it, it changes nothing in any meaningful sense.

If an entire nation does it, you better believe it will have an impact on your nation's wealth.

Strangely the people of the United States keep getting wealthier and wealthier all the while running a trade deficit.

Life keeps getting better and better and people have more and better products and services and yet you and Ross Perot and Pat Buchanan and the preppers keep thinking the country is going to look like Detroit any day now.

The country has run a trade deficit for almost the entirety of the last 220 years. Maybe someday you will be right and it will be instant poverty and a collapse dollar. Wrong for 220 years but keep the faith. Someday in the arc of history maybe you will be right.