Quantcast

Free Trade?

Changleen

Paranoid Member
Jan 9, 2004
9,902
5
Hypernormality
So as things stand there is massive international trade protectionism employed by the developed 1st world, especially by the US and Europe.

The US government employs probably the most wide ranging and 'costly' (for it's trading partners) suite of protective measures to prop up domestic industry. Agriculture and manufacturing protection account for the lion's share of the pie, as to a large extent these services can be provided for cheaper elsewhere.

Europe's main receipiant of subsidies is agriculture. They get a whopping percentage of the EU's entire budget. However, manufacturing still gets a look in here too.

Many other countries governments also try and do their best for 'important' local industry if they can. Obviously the extent to which these measures may be effective is largely based on the financial clout of the country or trading block in question.

Sometimes in certain markets the commodity in question may be rare, or otherwise special enough to bend these rules in favour of the small, but on the whole, across most of the planet the rich get richer, and the poor generally stay poorish compared to them, and - hopefully - slowly everything gets better for everyone as the average standard of living across the entire population of the world gets better.

Ideally we can push a greater and greater percentage closer to the top of the 'quality of life' tree, but greed, the restricted availibility of energies and shortsighted economics often restrict this process.

Some people feel the current policies of western governments are now overly protectionist and distorting to the world economy and are damaging overall growth and long term viability as a result.

This brings us to the question:

Would some degree of removal of trade protectionism on the part of everyone, especially and more heavily those who benefitfrom it most be beneficial to the world economy in general, and achieving our goal of dragging more people into higher standards of living faster?
 

LordOpie

MOTHER HEN
Oct 17, 2002
21,027
3
Denver
Changleen said:
Would some degree of removal of trade protectionism on the part of everyone, especially and more heavily those who benefitfrom it most be beneficial to the world economy in general, and achieving our goal of dragging more people into higher standards of living faster?
Forgetting any sort of details, the answer is, of course.

But I'd say it's not so much protectionism as the lack of encouragement and partnering. The US/Europe can still protect while helping others grow.

I'd say it's less about trade and more about enabling.

Wow, too much Dr. Phil.
 

Changleen

Paranoid Member
Jan 9, 2004
9,902
5
Hypernormality
Westy said:
Please explain these protective measures on manufacturing the US uses?
The two major methods at work are:

1) Tariffs - The US (and others) levy addtonal charges, normally by way of a import tax, on foreign goods that can compete with domestic products. Two notable (because of their size) examples of this type of protectionism of US manufacturing are the the tariffs on Steel (mostly construction types) and Timber. Brazil has a large capacity to produce steel at a cheaper price than can be done in the US, but the US governement adds a tariff fo the importer so the cost to the US domestic market is equalised (or even overstated) and US mills can continue operating in the face of competition who can produce an equivalent product for less money. Timber imports from South America and Canada suffer the same fate.

2) Government subsidies - A great example of this is Boeing. Boeing receives money directly from the US government to support it's operations. On the other side of the Atlantic, Airbus, the largest European plane manufacturer also receives similar subsidies. The two are constantly bickering with the WTO about who gets more and who therefore has an unfair advantage. In reality it could be argued that both companies are kept unfairly ahead of the rest of the international aircraft market due to the size of the subsidies they receive. Boeing and Airbus both receive subsidies that roughly double their operating capital. For example, half of the development costs of the new Airbus were met by the EU. Being as these companies are the largest anyway, you can see how this keeps them on top.
 

ALEXIS_DH

Tirelessly Awesome
Jan 30, 2003
5,473
251
Lima, Peru, Peru
hey, i am reading about that a lot.
peru is about to sign a "free trade" treaty with the US. chile already has one, and most non lefty SA countries are on the same tracks.

my meat is not with the "free trade" idea. that is fine, even tough its not as free because the US will not reduce tariffs or subsidies on certain stuff. but anyway, even if its not perfect... at least is better than nothing.
the issue is that "free trade treaties", are not just about trade.
they use the market of the US as a leverage tool to enforce laws not related at all to trade, to benefit certain groups, like the pharmaceutical industry, or to get influence in politics and production quotas.
 

ohio

The Fresno Kid
Nov 26, 2001
6,638
4
SF, CA
Changleen said:
The two major methods at work are:

1) Tariffs
Mmmm-hmmmm.... and what do you think it does for a country that already has massive trade defecits to remove those tariffs? what do you think it does to local economies that rely on single or few industries when those tariffs suddenly disappear? But hey, feel free to simplify.

Changleen said:
2) Government subsidies
Do you believe our governments should stop funding medical research because it gives our hospitals and biotech firms an unfair advantage, stop subsidizing student loans because it gives our students an unfair advantage? You cite Boeing and Airbus... are you aware of anyone else that aspires to build aircraft? Would you fly in them? What would happen to the airline business and all of the businesses that require air travel if those subsidies disappeared?

Because of what a commercial airliner has become technologically and as an economic investment, the capital, the facilities, and the technology required to build one already exclude any other players from entering the market. You'll need to find a better example.
 

ALEXIS_DH

Tirelessly Awesome
Jan 30, 2003
5,473
251
Lima, Peru, Peru
ohio said:
Mmmm-hmmmm.... and what do you think it does for a country that already has massive trade defecits to remove those tariffs? what do you think it does to local economies that rely on single or few industries when those tariffs suddenly disappear? But hey, feel free to simplify.



Do you believe our governments should stop funding medical research because it gives our hospitals and biotech firms an unfair advantage, stop subsidizing student loans because it gives our students an unfair advantage? You cite Boeing and Airbus... are you aware of anyone else that aspires to build aircraft? Would you fly in them? What would happen to the airline business and all of the businesses that require air travel if those subsidies disappeared?

Because of what a commercial airliner has become technologically and as an economic investment, the capital, the facilities, and the technology required to build one already exclude any other players from entering the market. You'll need to find a better example.

i guess the subsidies changleen is talking, are the farming subsidies.
 

Changleen

Paranoid Member
Jan 9, 2004
9,902
5
Hypernormality
ALEXIS_DH said:
i guess the subsidies changleen is talking, are the farming subsidies.
Not entirely - I'm talking more about the culture of subsidisation and protectionism. Edit: Although practically this does largely mean I'm talking about agriculture...
 

Changleen

Paranoid Member
Jan 9, 2004
9,902
5
Hypernormality
ohio said:
Mmmm-hmmmm.... and what do you think it does for a country that already has massive trade defecits to remove those tariffs? what do you think it does to local economies that rely on single or few industries when those tariffs suddenly disappear? But hey, feel free to simplify.
Dude, I'm not trying to simplify the situation. Obviously instant removal of money that huge industries have come to rely on would cause a lot of problems. In reality this is never going to happen is it? I personally think it would be a good idea for these to be slowly reduced in a lot of cases and the international markets reduced to a much more level playing field. I think eventually it would be better for everyone. By keeping the system as it is, 1st world countries are artificially skewing their economies and that of their trading partners and the more the wealth gap grows, so does the skew. It's unsustainable. Would you argue for never ending subsidies for US and European economies?

Do you believe our governments should stop funding medical research because it gives our hospitals and biotech firms an unfair advantage, stop subsidizing student loans because it gives our students an unfair advantage?
No, but I don't see that as being in the same boat. The 2nd and third world are not exactly clamouring with competition for these high tech industries. I'd support the advancement of education and most technologies like these as far as I can. I'm talking about 'protectionism' rather than 'beneficial aid' - The difference being The US and EU are stunting the development of many countries lower technology industries and hence their entire economies just to protect American workers in low technology industries from being exposed to the reality of the international market - that someone else can do the same job for cheaper.
You cite Boeing and Airbus... are you aware of anyone else that aspires to build aircraft? Would you fly in them?
Yes, and Yes, lots of them.
What would happen to the airline business and all of the businesses that require air travel if those subsidies disappeared?
Obviously it would be a huge blow to the Boeings and Airbusses. On the other hand it would give smaller companies a greater opportunity to take their 'fair' share of the market. There would be more genuine competition and in the end everone would get a better product.
Because of what a commercial airliner has become technologically and as an economic investment, the capital, the facilities, and the technology required to build one already exclude any other players from entering the market. You'll need to find a better example.
I disagree. Look at Cesna, Learjet and so on. These products are in the same technological league as the big players. If subsidies were never introduced we'd probably be in a situation where the market was less dominated by the big two.

You're essentially arguing that because we have subsidies now, it would be damaging to remove them, especially if it was done fast. I agree. However, this doesn't mean it was right to let subsidies grow into the economic monster they've become today, nor should it stop us seeking to level out this imbalance over time if we can.

Surely you can see how unsustainable this is in the long term, and how especially 'protectionist' behaviours surrounding lower tech industry and agriculture are damaging the economies of the rest of the world?
 

blue

boob hater
Jan 24, 2004
10,166
0
california
Removal of protective tariffs=increased globalisation, correct? It doesn't seem the Chinese have any free trade issues with flooding the American economy with cheaply made goods...Most favored nation, bah.
 

ohio

The Fresno Kid
Nov 26, 2001
6,638
4
SF, CA
Changleen said:
Yes, and Yes, lots of them. Obviously it would be a huge blow to the Boeings and Airbusses. On the other hand it would give smaller companies a greater opportunity to take their 'fair' share of the market. There would be more genuine competition and in the end everone would get a better product. I disagree. Look at Cesna, Learjet and so on. These products are in the same technological league as the big players.
Sorry, I thought it was clear we were talking about large commercial airliners. I thought it was also clear that we were looking for examples outside of the US and Europe. Doesn't really prove a whole lot to point out makers of private jets in Wichita and, uh, Wichita, does it?
 

ohio

The Fresno Kid
Nov 26, 2001
6,638
4
SF, CA
ALEXIS_DH said:
i guess the subsidies changleen is talking, are the farming subsidies.
In that case I would have agreed with him. He pointed to commercial airliners...
 

Changleen

Paranoid Member
Jan 9, 2004
9,902
5
Hypernormality
ohio said:
Sorry, I thought it was clear we were talking about large commercial airliners. I thought it was also clear that we were looking for examples outside of the US and Europe. Doesn't really prove a whole lot to point out makers of private jets in Wichita and, uh, Wichita, does it?
Yes, I'd rather keep this discussion to the international stuff, especially LDCs and the effects on them, so I'll find some good examples in a bit, but the same thing does sort of apply here. Because Boeing recieves such huge subsidies, supposedly to keep it on a level pegging with Airbus, the knock on effect is still that smaller US manufacturers are cut out of the game to a certain extent.
 

ohio

The Fresno Kid
Nov 26, 2001
6,638
4
SF, CA
Changleen said:
are damaging the economies of the rest of the world?
whoa whoa whoa. let's be clear. there may be slower economic growth in developing nations than if all tariffs disappeared, but that is very VERY different than the US damaging those economies. After all, even with the tariffs in place, almost all economic growth in a developing is largely thanks to purchase of goods by developed nations.

You've seen my arguments on this before. You know I'm not a protectionist, and I think the US is approaching this issue (threat, even) in entirely the wrong manner. You should also know I'm a proponent of free trade. But you're making outrageous statements, and I want something firmer and more grounded associated with a free trade position than pie-in-the-sky it's-all-America's-fault-isms.
 

Changleen

Paranoid Member
Jan 9, 2004
9,902
5
Hypernormality
ohio said:
whoa whoa whoa. let's be clear. there may be slower economic growth in developing nations than if all tariffs disappeared, but that is very VERY different than the US damaging those economies. After all, even with the tariffs in place, almost all economic growth in a developing is largely thanks to purchase of goods by developed nations.
OK, maybe 'hindering' would be a term we can both agree on.

You've seen my arguments on this before. You know I'm not a protectionist, and I think the US is approaching this issue (threat, even) in entirely the wrong manner. You should also know I'm a proponent of free trade. But you're making outrageous statements, and I want something firmer and more grounded associated with a free trade position than pie-in-the-sky it's-all-America's-fault-isms.
I don't think they're that outrageous... Essentially I'm espousing a gentle removal of specifically protectionist trade behaviours (not stuff like science grants), mostly on behalf of the US and Europe in order to enable more people in LDCs to lift themselves into better living conditions. Is that so outrageous?
 

ALEXIS_DH

Tirelessly Awesome
Jan 30, 2003
5,473
251
Lima, Peru, Peru
Changleen said:
OK, maybe 'hindering' would be a term we can both agree on.

I don't think they're that outrageous... Essentially I'm espousing a gentle removal of specifically protectionist trade behaviours (not stuff like science grants), mostly on behalf of the US and Europe in order to enable more people in LDCs to lift themselves into better living conditions. Is that so outrageous?
i think the farming subsidies are the biggest issue.
really, after the cold war.. i really dont see how big of a need is to subsidise local farmers in the US, at the expense of the US taxpayers, and by boycotting the already very poor world farmers with dumping exports...
 

fluff

Monkey Turbo
Sep 8, 2001
5,672
0
Feeling the lag
ohio said:
whoa whoa whoa. let's be clear. there may be slower economic growth in developing nations than if all tariffs disappeared, but that is very VERY different than the US damaging those economies. After all, even with the tariffs in place, almost all economic growth in a developing is largely thanks to purchase of goods by developed nations.
Sorry, but damaging is the correct term when you look at stunting the growth of other economies. When you tax your own people to pay producers subsidies that mean another nation's producers cannot sell into your home market you are without a doubt damaging the economy of that nation by removing a market, creating a surplus etc, etc.

It's massively damaging and shameful.
 

fluff

Monkey Turbo
Sep 8, 2001
5,672
0
Feeling the lag
ohio said:
Mmmm-hmmmm.... and what do you think it does for a country that already has massive trade defecits to remove those tariffs? what do you think it does to local economies that rely on single or few industries when those tariffs suddenly disappear? But hey, feel free to simplify.
Then isn't it a shame that developing countries can often only get assistance from the developed world on condition that they do not use such tactics to boost their economies?

So it's OK for us to mismanage our economies but not for the poor people?
 

ohio

The Fresno Kid
Nov 26, 2001
6,638
4
SF, CA
fluff said:
Sorry, but damaging is the correct term when you look at stunting the growth of other economies. When you tax your own people to pay producers subsidies that mean another nation's producers cannot sell into your home market you are without a doubt damaging the economy of that nation by removing a market, creating a surplus etc, etc.

It's massively damaging and shameful.
Shameful yes, but damaging no. In the absence of the United States, would these economies be growing faster or slower?

Damaging is supporting regimes that prevent growth that would otherwise occur (which we have done at times... Iran, anyone?), but that is not what we're talking about here. Overly passionate wording does no one any favors in arguments about economics.
 

ohio

The Fresno Kid
Nov 26, 2001
6,638
4
SF, CA
fluff said:
Then isn't it a shame that developing countries can often only get assistance from the developed world on condition that they do not use such tactics to boost their economies?
Ah, see now you're talking about foreign debt, which is entirely different than the issue of tariffs and protectionism.

Look, I am more than happy to agree that the US is going about things the wrong way and that we could be doing much more to help ourselves and the world around us in an intelligent and sustainable manner, but that doesn't make any old claim about global economics correct.
 

blue

boob hater
Jan 24, 2004
10,166
0
california
Changleen said:
Yes, I'd rather keep this discussion to the international stuff, especially LDCs and the effects on them, so I'll find some good examples in a bit, but the same thing does sort of apply here. Because Boeing recieves such huge subsidies, supposedly to keep it on a level pegging with Airbus, the knock on effect is still that smaller US manufacturers are cut out of the game to a certain extent.
My father worked for Raytheon, they wanted to break into the airliner market but just couldn't compete with Boeing's huge amounts of cash. Eventually they sold the facility he worked at to an avionics company out of upstate NY (Moog) and he ended up writing documentation for Bombardier :blah:
 

Westy

the teste
Nov 22, 2002
38,225
5,007
Sleazattle
Changleen said:
The two major methods at work are:

1) Tariffs - The US (and others) levy addtonal charges, normally by way of a import tax, on foreign goods that can compete with domestic products. Two notable (because of their size) examples of this type of protectionism of US manufacturing are the the tariffs on Steel (mostly construction types) and Timber. Brazil has a large capacity to produce steel at a cheaper price than can be done in the US, but the US governement adds a tariff fo the importer so the cost to the US domestic market is equalised (or even overstated) and US mills can continue operating in the face of competition who can produce an equivalent product for less money. Timber imports from South America and Canada suffer the same fate.

2) Government subsidies - A great example of this is Boeing. Boeing receives money directly from the US government to support it's operations. On the other side of the Atlantic, Airbus, the largest European plane manufacturer also receives similar subsidies. The two are constantly bickering with the WTO about who gets more and who therefore has an unfair advantage. In reality it could be argued that both companies are kept unfairly ahead of the rest of the international aircraft market due to the size of the subsidies they receive. Boeing and Airbus both receive subsidies that roughly double their operating capital. For example, half of the development costs of the new Airbus were met by the EU. Being as these companies are the largest anyway, you can see how this keeps them on top.
Those are really the only two example of trade barriers on manufactured goods. The US has major farm subsidies and other than that not much else. The whole Boeing Airbus things isn't exactly representative of manufacturing in the US as a whole. Airbus gets direct subsidies for comercial airlines Boeing just gets big cushy military contracts. The whole Steel tarrif thing went away and it actually hurt US manufacturers because it made their raw material costs go up. Foreign competitors saw cheaper steel prices but their final steel products were not taxed, taking away business from US manufacturers. The steel thing was just the government caving from a specific lobby group. Sadly manufacturing in general has little lobby power because the corps in charge just care about proffits and not where the stuff is made.
 

fluff

Monkey Turbo
Sep 8, 2001
5,672
0
Feeling the lag
ohio said:
Shameful yes, but damaging no. In the absence of the United States, would these economies be growing faster or slower?

Damaging is supporting regimes that prevent growth that would otherwise occur (which we have done at times... Iran, anyone?), but that is not what we're talking about here. Overly passionate wording does no one any favors in arguments about economics.
And bigger subsidies would be more damaging too, but that does not exclude the damage currently done, which is preventing growth that would otherwise occur.
 

fluff

Monkey Turbo
Sep 8, 2001
5,672
0
Feeling the lag
ohio said:
Ah, see now you're talking about foreign debt, which is entirely different than the issue of tariffs and protectionism.

Look, I am more than happy to agree that the US is going about things the wrong way and that we could be doing much more to help ourselves and the world around us in an intelligent and sustainable manner, but that doesn't make any old claim about global economics correct.
I am talking about loans. So long as there are conditions attached involving tariffs then they are not entirely different things.