Showing posts with label Trade. Show all posts
Showing posts with label Trade. Show all posts
Wednesday, September 19, 2012
The Invasion is On!
As part of OccObs' ongoing "Annex Canada" series, I'm excited to bring you some web links I've recently discovered. One makes a comprehensive case for our pending land grab:
InvadeCanada
The next link shows that our government has already planned the attack. It's sitting in the archives somewhere right next to the Ark of the Covenant:
Invasion Plans
Which just leaves me with one question: How much do we need to give each citizen of Canada to get the Canadians to surrender their meek past and embrace their new calling as Americans. I'm thinking $10K to each man, woman and child. For a measly $350B (only 1/3 of our typical annual budget deficit, funded--of course--by T-bonds purchased by the Federal Reserve), we will have successfully "integrated" Canadian resources into our sovereign territory. It will go down in history as a better deal than the Alaska purchase.
InvadeCanada
The next link shows that our government has already planned the attack. It's sitting in the archives somewhere right next to the Ark of the Covenant:
Invasion Plans
Which just leaves me with one question: How much do we need to give each citizen of Canada to get the Canadians to surrender their meek past and embrace their new calling as Americans. I'm thinking $10K to each man, woman and child. For a measly $350B (only 1/3 of our typical annual budget deficit, funded--of course--by T-bonds purchased by the Federal Reserve), we will have successfully "integrated" Canadian resources into our sovereign territory. It will go down in history as a better deal than the Alaska purchase.
Labels:
Annex Canada,
Energy Policy,
Foreign Policy,
Monetary Policy,
Trade
|
1 comments
Sunday, March 04, 2007
Free and fair trade
By many ardent free-traders, there is a presumption that tariffs are universally inappropriate. I think the burden of proof for such a position would fall on those who would stand by such a universal statement, especially when there are many examples that run counter to the idea (countries that have seen their economies grow sharply despite the use of tariffs).
But I think it’s helpful to state a positive, and not just attempt to negate the other’s guys argument, so I opted to spend some time doing just that when blackhedd on RedState asked me the following question: "For what objectives do you think tariffs are a good idea"?
One of the primary distinctions drawn in the 19th century arguments over tariffs was between “revenue” tariffs and “punitive”/protectionist tariffs. Common sense dictated that at a certain level, foreign companies would still be willing to sell goods to the American consumer, even if they had to pay the US government for the privilege of doing so. I agree with this in principle: why should a company owned by Americans and employing Americans have to pay a (double) income tax to shoulder the cost of government, but not foreigners who seek to gain advantage by selling to our markets? Do not foreign exporters also gain some benefit from US government expenditures, such as on infrastructure, market regulation and law enforcement (allowing for a more efficient, less corrupt marketplace), and even to some degree, military readiness (global stability is probably a net positive for international trade).
Of course, there is the question of the connection between tariffs and higher prices to the American consumer. The answer to this question is usually given as a "yes" by the universally-anti-tariff crowd, without much further explanation. The "yes" is usually closely followed by the catch phrase, "tariffs are a tax on the consumer." In reality, it's a bit more complicated than that. It will have a lot to do with the goods in question, and price elasticity in the marketplace. In some situations, depending on the level of competition and the power of consumers in the market for a particular good or service, foreign producers will be able to pass on much of the cost, while at other times they will not.
Even where more of the tariff's costs are being passed on to consumers, the “tax” is twice as effective as opposed to traditional income tax. Not only does the indirect “tax” associated with tariffs put revenue in our government's pocket, but raises the price of certain goods, making it more likely that domestic producers will be able to competitively enter the marketplace, or improve the financial situation of existing domestic firms.
In those situations where price elasticity prohibits the foreign firms from raising prices, they will be forced to determine if they can still satisfy their investors' cost of capital requirements at lower prices, and either accept a reduced profit or leave the marketplace to domestic firms. Much like with the income tax, setting an appropriate revenue tariff level is more art than science. Lower rates are usually better than higher rates, and Congress has to figure out how to get a little wool without killing the sheep.
Protective tariffs, in the 30-50% range, serve another purpose altogether. At this point, you're pretty much telling the foreign manufacturer to pack up and leave. I think these types of tariffs are extremely counterproductive, and the only reason to even consider them is if another nation has already enacted an aggressive policy towards the US first. Even then, the goal is not to stop doing business with that country, but to help them see that a one-way street will cost them in the long run.
In the Cold War, Reagan's maxim "peace through strength" worked out: we never had to fight the Soviets (directly) because they knew we had the will and ability to win. If China knew that we had the will and ability to level the playing field with them, and mirror their practices (export subsidies, import tariffs, and I'll leave currency aside for the moment), my guess is their trading laws would become more liberal very quickly. Getting us to the place where, I think most Americans agree, we want to get to: trade with less government intervention than exists now.
-----------------------------
As an aside, it seems that any time the issue of trade and tariffs comes up, the words "Hawley-Smoot" come out. I offered this thought on the comment board at RedState:
But I think it’s helpful to state a positive, and not just attempt to negate the other’s guys argument, so I opted to spend some time doing just that when blackhedd on RedState asked me the following question: "For what objectives do you think tariffs are a good idea"?
One of the primary distinctions drawn in the 19th century arguments over tariffs was between “revenue” tariffs and “punitive”/protectionist tariffs. Common sense dictated that at a certain level, foreign companies would still be willing to sell goods to the American consumer, even if they had to pay the US government for the privilege of doing so. I agree with this in principle: why should a company owned by Americans and employing Americans have to pay a (double) income tax to shoulder the cost of government, but not foreigners who seek to gain advantage by selling to our markets? Do not foreign exporters also gain some benefit from US government expenditures, such as on infrastructure, market regulation and law enforcement (allowing for a more efficient, less corrupt marketplace), and even to some degree, military readiness (global stability is probably a net positive for international trade).
Of course, there is the question of the connection between tariffs and higher prices to the American consumer. The answer to this question is usually given as a "yes" by the universally-anti-tariff crowd, without much further explanation. The "yes" is usually closely followed by the catch phrase, "tariffs are a tax on the consumer." In reality, it's a bit more complicated than that. It will have a lot to do with the goods in question, and price elasticity in the marketplace. In some situations, depending on the level of competition and the power of consumers in the market for a particular good or service, foreign producers will be able to pass on much of the cost, while at other times they will not.
Even where more of the tariff's costs are being passed on to consumers, the “tax” is twice as effective as opposed to traditional income tax. Not only does the indirect “tax” associated with tariffs put revenue in our government's pocket, but raises the price of certain goods, making it more likely that domestic producers will be able to competitively enter the marketplace, or improve the financial situation of existing domestic firms.
In those situations where price elasticity prohibits the foreign firms from raising prices, they will be forced to determine if they can still satisfy their investors' cost of capital requirements at lower prices, and either accept a reduced profit or leave the marketplace to domestic firms. Much like with the income tax, setting an appropriate revenue tariff level is more art than science. Lower rates are usually better than higher rates, and Congress has to figure out how to get a little wool without killing the sheep.
Protective tariffs, in the 30-50% range, serve another purpose altogether. At this point, you're pretty much telling the foreign manufacturer to pack up and leave. I think these types of tariffs are extremely counterproductive, and the only reason to even consider them is if another nation has already enacted an aggressive policy towards the US first. Even then, the goal is not to stop doing business with that country, but to help them see that a one-way street will cost them in the long run.
In the Cold War, Reagan's maxim "peace through strength" worked out: we never had to fight the Soviets (directly) because they knew we had the will and ability to win. If China knew that we had the will and ability to level the playing field with them, and mirror their practices (export subsidies, import tariffs, and I'll leave currency aside for the moment), my guess is their trading laws would become more liberal very quickly. Getting us to the place where, I think most Americans agree, we want to get to: trade with less government intervention than exists now.
-----------------------------
As an aside, it seems that any time the issue of trade and tariffs comes up, the words "Hawley-Smoot" come out. I offered this thought on the comment board at RedState:
The great apart about invoking "Hawley-Smoot" is that you don't have to say how the tariff was related to the Depression: people make the link and that is enough. My main problem with the way Hawley-Smoot gets thrown around is that it: (1) is seen as a proxy for all tariffs, and (2) is assigned a disproportionate share of the blame for the events of the 1930's.
Labels:
Trade
|
0
comments
Sunday, December 31, 2006
Innovation in a vaccuum
Americans have become increasingly comfortable with the idea of exporting our manufacturing jobs because, as the argument goes, the R&D side of manufacturing is staying here in the US. And, the economists tell us, R&D is where "the real money" is made, and the "well paying jobs" are.
The NYT, in a surprisingly useful article, asks the question, "can we still be the hotbed of innovation when our production capacity is gone?" As they say, it is a question infrequently asked, which is unfortunate, since we're staking our economic future on it.
The NYT, in a surprisingly useful article, asks the question, "can we still be the hotbed of innovation when our production capacity is gone?" As they say, it is a question infrequently asked, which is unfortunate, since we're staking our economic future on it.
Labels:
Trade
|
1 comments
Friday, December 15, 2006
Fair Trade Hunter
John Hawkins of Right Wing News conducted an extremely interesting interview with Duncan Hunter here.
While the interview covered a lot of ground, his dicussion of trade policy is worthy of note. Especially since this will likely be a point of differentiation between him and the rest of the GOP field.
While even the armchair economist (like myself) is aware that free trade leads to the most efficient use of capital, the political question that confronts America at this point in time is how America should respond to nations that trade with us but do not maintain a level playing field. Most GOP politicians just parrot the party line that "free trade is better", but they rarely address the fact that free trade, as far as our government is concerned, is generally a one way street: we open our markets to foreign nations while our partners enact policies designed to create a trade surplus with the US. The tilted playing field is being created by foreign governments, and cannot merely be resolved by companies increasing efficiency or improving their products. The government needs to act and has not.
The net result is that there are areas of the country, especially the rust belt, where the loss of manufacturing jobs has devastated the economy. This can get lost in national GDP statistics, but it has a real impact in terms of people's lives and, therefore, in the nature of our political discourse. Take last month's Senate vote in OH. Mike DeWine is looking for a job right now, and that has as much to do with Sherrod Brown skillfully using the trade issue as with Iraq. While the majority of folks in flyover country are conservative in temperment (and, IMHO, lean-GOP voters), many people are simply tired of watching a continued deterioration of the job and wage situation for a large number of their neighbors. Or worse yet, for themselves. As a result, Republicans made no headway against Demcoratic incumbents in MI, and GOP seats were lost in large numbers in the industrial belt from IN (Chocola, Hostetler, Sodrel) to OH (Padget, DeWine, Blackwell) to PA (Santorum). Restoring the confidence of rust-belt working class Americans (who are socially conservative but have seen their states come on hard times) in the GOP will be essential for the future succeess of national Republican candidates.
While the interview covered a lot of ground, his dicussion of trade policy is worthy of note. Especially since this will likely be a point of differentiation between him and the rest of the GOP field.
While even the armchair economist (like myself) is aware that free trade leads to the most efficient use of capital, the political question that confronts America at this point in time is how America should respond to nations that trade with us but do not maintain a level playing field. Most GOP politicians just parrot the party line that "free trade is better", but they rarely address the fact that free trade, as far as our government is concerned, is generally a one way street: we open our markets to foreign nations while our partners enact policies designed to create a trade surplus with the US. The tilted playing field is being created by foreign governments, and cannot merely be resolved by companies increasing efficiency or improving their products. The government needs to act and has not.
The net result is that there are areas of the country, especially the rust belt, where the loss of manufacturing jobs has devastated the economy. This can get lost in national GDP statistics, but it has a real impact in terms of people's lives and, therefore, in the nature of our political discourse. Take last month's Senate vote in OH. Mike DeWine is looking for a job right now, and that has as much to do with Sherrod Brown skillfully using the trade issue as with Iraq. While the majority of folks in flyover country are conservative in temperment (and, IMHO, lean-GOP voters), many people are simply tired of watching a continued deterioration of the job and wage situation for a large number of their neighbors. Or worse yet, for themselves. As a result, Republicans made no headway against Demcoratic incumbents in MI, and GOP seats were lost in large numbers in the industrial belt from IN (Chocola, Hostetler, Sodrel) to OH (Padget, DeWine, Blackwell) to PA (Santorum). Restoring the confidence of rust-belt working class Americans (who are socially conservative but have seen their states come on hard times) in the GOP will be essential for the future succeess of national Republican candidates.
Here's what Duncan Hunter had to say on the topic:
Duncan Hunter: Well, first, ...I'm a supporter of supply side economics and I think the general proposition that if you leave a few bucks in the pockets of American businesses rather than take it for taxes, ...(then) the tax base is actually increased and revenue is enhanced. I believe that's a valid proposition and I support that and that's been reflected in my voting record for tax cuts. So I think that's the way you supply - you increase the revenues into the federal government and you do that by encouraging growth.
Now there's one thing that I think is very, very important right now, where I diverge, I think, some from the Club For Growth...I'm a Ronald Reagan trader...let me quote you Ronald Reagan on trade. He said, "To make the international trading system work all must abide by the rules." He further said, "When governments assist their exporters in ways that violate international laws, then the playing field is no longer level and there's no longer free trade."
Right now...when we compete with China, China starts with 74 points on the scoreboard before the opening kick-off. They get a 17% rebate...to their exporters; they're exporting to the US. Basically they're allowed to operate tax-free. Then they put in place a 17% penalty on our importers. That creates a 34% disparity in the world's competition. Then they de-value their currency by 40%, through currency manipulation. So they start with 74 points on the scoreboard before the opening kick-off.
That disparity is so great that you now have lots of financial advisers who are walking into the boardrooms of companies throughout America telling their people that even if they have a more efficient labor and production rate than the Chinese in their particular industry, that it makes sense from a tax and tariff standpoint to move their jobs from the US to China. So we have actually...acquiesced to a system that doesn't allow the most efficient trader to win. It allows the subsidized trader to win and the effect of that is that you have businesses which pay high wages throughout this country -- not based on labor rates but based on the way government has set the rules and set the competition in this arena called trade, that are contemplating moving to China.
...Let me give you an example. I was in South Carolina. Nucor Steel in Charleston has 800 workers. They produce as much steel as... a Chinese plant which has 17,000 workers. They beat the Chinese 20 to 1 for labor efficiency and they pay their people an average of $75,000 a year. Labor cost is not a major issue with them because they're so highly efficient and they are so leveraged with technology and yet, they see now China which is expanding its steel production this year by 130 million tons which is more than the total steel production of the US.
That's not fair; that's cheating and that causes aberrations in the trade system and it moves massive amounts of income of what otherwise would be American revenues off-shore. So I don't think you're going to be able to get the US budget deficit under control unless we have a fair trading system. So I believe very strongly in the Reagan position on trade when he said what he said to make the international trading system work, all must abide by the rules. They're not abiding by the rules and it doesn't make a lot of sense to play in a league in which all the other teams have 74 points on the scoreboard before the game begins. If they're really that efficient and really that good and they really want the rules of Adam Smith to work, then they shouldn't need the 74 points before the game starts.
That has to be a part of any attempt to balance the federal budget - and one more point, we in government do lots of things that individuals should do for themselves. I'm a conservative; I believe that the government that governs the least governs the best. There is one area where only the government can make a difference and can control the situation and that's in international trading arenas. Only the government can sign a trade deal; individuals can't sign a trade deal. So, if China insists on a trade deal that gives them 74 points on the scoreboard before the opening kick-off, the workers and management at Nucor Steel can't change that. They have to live within the rules that their government has created so that's one obligation of government which not only should be discharged by government but government is the only entity which can discharge it. So that's a difference that I have with some of my colleagues.
Labels:
2008,
Trade
|
1 comments
Friday, November 17, 2006
China Rising
I don't mean to sound like a broken record, but I continue to assert that China, not N.Korea, Iran or Syria, is the greatest long term threat to the U.S. Take a look at this article.
Labels:
Trade
|
3
comments
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