Topic: Immigration and trade
NAFTA: Here We Go Again Presidential candidates Barack Obama and Hillary Clinton Square off on more nonsense!by Christopher Espinal
(Conservative)
Tuesday, April 15, 2008
If there is something that I know the Democratic Presidential candidates dislike, it is free trade. There are weird reasons why people oppose these agreements that are actually helpful for our country and those abroad.
To most of it's opponents free trade allows multi-national corporations to go abroad and exploit cheap workers - leading to "human rights" abuses. Another famous nonsense line is that "jobs go overseas." Allow me to address both circumstances.
Firstly, we need to understand that in the US we have lots of money, resources, and human capital going around. We are a highly productive society which is why we get paid so much more than members of impoverished parts of the world. It's unfortunate that most critics of trade don't quite understand the system used to determine pay: an employee's level of human capital or productivity.
In other words, here in the US, we are paid so much because we are productive to the bone. What makes us so productive is education and free markets. Education provides us with the skills to actually do stuff. Free market capitalism allows individuals to extend their services to a large group of consumers at low costs. That's why we get paid so much relative to the rest of the world.
Because we are highly productive and get paid relatively well, as a people we tend to forget those important ideas. There are folks who look at other parts of the world and talk about poverty and hunger. They see that people are getting paid much less and work much longer hours to feed their families. Here is where we all begin to use the loaded collection of words "human rights abuses."
Why? Individuals living in impoverished countries get paid much, much less. This causes liberals, marxists, and Buchanan conservatives to bust out the word "exploitation." The question is how can we deprive jobs from the impoverished in other parts of the world, especially when they can produce more for much less? For the most part, bringing jobs to impoverished nations lacking economic stability helps and feeds families. It's the best opportunity they have in a place offering no job solutions. The real human rights abuse is forcing the impoverished out of jobs, especially when they have no better options. This is not to say that corporations have a right to murder and use coersion against their low-cost employees overseas. The point is we should all ask "How do we make people in other parts of the world as productive as Americans?"
This idea of jobs going overseas to the "exploited" poor is an excellent introduction to the "jobs" controversy. Opponents to trade say that Americans lose jobs, which destroys their families. Let's track the flow of capital to see what happens:
With an open border economy domestic prices adjust to world prices due to increased competition. If companies have to shift jobs overseas to compete with drops in domestic prices due to international trade, they will do what they need to maintain or increase profit margins. Sure jobs go overseas to low cost labour abroad, and in the short run people lose them here at home, but domestic prices drop which lowers the price level of goods making americans richer overall.
What happens when people have more money? They either save more or spend more, leading to economic growth. The benefit of lower prices, leading to increases in consumption of commodities such as savings and housing goods, far exceeds the costs of people losing jobs at home. Because of economic expansion, those jobs will be replaced.
Thus, in the long run international trade has it's benefits. It allows nations with comparative advantages in certain specializations to maximize productivity. The poor who have less human capital than we do can produce Coca-Cola at a cheaper price. On the other hand, American's learn to deal with technology and provide services for people around the world.
In the long run, trade has improved the human rights situation of the poor abroad, and has made Americans live a better life. If my analysis is correct, it would be a mistake to have the future president hop on the protectionist bandwagon. To be against trade is to say "no" to lower costs that essentially benefits everyone, especially the poor at home!
Interesting Rebuttals:
Trade destroys the middle class.
Nope, not true. I'm assuming that the middle class in this country are the folks who have gone through some education. These are the folks who have more human capital than the impoverished world. They are not likely to lose their jobs to the poor in India or South America. They can do stuff that requires an education that other countries don't have.
If anything, trade affects the poor since unskilled labour is more likely to go overseas to people who can do unskilled jobs at cheaper rates.
If the price level drops in this country, it means that people are more well off leading to economic expansion. Economic expansion improves the human capital of everyone in a nation, not just "CEO's reloading their Rolexes."
Paul Krugman on Trade and Rising Income Inequality: [link edited for length] Krugman's ideas are quite contrary to what I explain. This analysis of his paper is an excellent rebuttal to my claims. If only knew more economics to provide a thorough analysis of his work.
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2008 Christopher Espinal, all rights reserved.
Published: Tuesday, April 15, 2008
Last modified: Saturday, April 19, 2008
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Christopher what can Americans do at a lower cost than other countries can? What do we make that other countries will buy from us? When it comes to manufacturing, American workers have no hope of competing with buck-an-hour labor in China or elsewhere. Can we use robots to improve productivity? Sure but so can they. And because of their cheap labor their manufacturing plants and robots will cost less to build. So they still have the advantage.
How about high tech? Well whenever I call the help desk for PC or software problems I end up talking to someone in India, the Philippines, or Mexico. You see they have smart, well educated people too. But they are willing to work for much lower wages. So we don't win there either.
It seems to me that the only things we can compete on are agricultural products, because our farms are highly mechanized. But the foreign growers will get there too eventually. Aside from that what jobs will we have here? Well any jobs that must be done here will be safe. So construction workers, doctors and undertakers will have jobs, except that construction companies sometimes use illegal Mexican workers who earn less that Americans.
The thing is that we have grown acustomed to a certain standard of living. But now we have to compete against people who have a much lower standard of living. The only way to do that is to lower our standard of living. Personally I'm not anxious to do that. Are you? How would you like to make $2.00 per hour?
Also you say foreign made goods reduce our cost of living. To some extent that's true, but food prices are going up and so are energy costs. And the CPI is also going up while wages are not.
Lastly, our constitution cleary gives congress the authority to levy taxes on imports. But we don't do that. Intead we tax the hell out of our domestic suppliers. They have to pay income taxes to the federal and state governments. They have to pay payroll taxes to the Feds and they have to pay local property taxes. That amounts to hundreds of billions of dollars in taxes levied on our domestic manufacturers while the foreign sources get a free ride. How is that fair? It's like reverse protectionism. It gives the advantage to foreign made goods while penalizing American made products. That only makes sense if the objective is to destroy American manufacturing.
I don't like taxes of any sort, but if we have to get taxes from somewhere why not get them from imports and reduce or eliminate the taxes on our own manufacturers?
Ron Paul supporters love free trade as long as Mestizos are not a part of it. For some reason they don't know that free trade agreements are compromises between two countries. The US is not going to go total free trade when the other nation taxes our exports to them more than we tax theirs. It is a compromise that is better than no trade. Maybe Ron Paul should have said better trade agreements for both sides instead of a doomsday scenario where China instantaneously becomes libertarian and takes over the world. (This could actually happen, but is not likely.)
Posted By: Christopher Espinal
Date: 2008-04-15 20:53:10
Christopher what can Americans do at a lower cost than other countries can?
The US is a service economy. We are more productive in the service economy which means that we can provide services at a lower cost than other nations (not all other nations). The more we can produce within some unit of time the more productive we are. The poor in other nations can't provide the same kind of services that we can because they aren't educated. Thus, we can provide those services at a much lower cost!.
You say food prices have been going up but for what reason? Inflation.....not because of trade. These are two separate phenomenon and should be treated separately.
Whether or not we should levy taxes on imports as opposed to our own manufacturers leads to a question: which of the two ideas do we value more - lower domestic costs or or short term stability for domestic firms.
"The thing is that we have grown acustomed to a certain standard of living. But now we have to compete against people who have a much lower standard of living. The only way to do that is to lower our standard of living. Personally I'm not anxious to do that. Are you? How would you like to make $2.00 per hour"
Yeah right. Totally innaccurate and is the same nonsense that Buchanan preaches. They make our costs at home cheaper which helps our economy expand. All this will do is force our labour force to accustom to modern technology - which most of our economy operates on.
The US, like all great powers before it, was built by tariffs. China imposes great tariffs on our products, though not on the transfer of technology or entire factories.
I know many people who have moved their ops to Mex orig, and now China because it's cheaper. In China they pay 80 cents straight time, for 60 hour weeks. Typically the factories there employ only young women who live in the plant. 30 is too old.
We will become the service economy that China was.
What services can we do that we can sell to the rest of the world?
Doctors? They have their own and they cost less.
Lawyers? Who needs them?
Engineers? Same as doctors- they have their own and they cost less.
Fast food chefs? Well so far no one has figured out how to cook a burger in China and ship it here before it cools off. So those jobs are safe here. But on the other hand that's not a service we can ship abroad.
What services can we do that other countries would buy? Give us some examples.
Posted By: Christopher Espinal
Date: 2008-04-16 14:08:05
It's hilarious how you try to stump me by asking the question: what are some examples. I don't need to give you an example because all that I have to do is ask you to read the current account statement on US trade.
Hundreds of billions of dollars in services are exported from this country. I don't feel like searching for the actual statement. I'm sure you're smart enough to do it yourself.
Christopher if you want us to believe you just show us the proof. What I know is that we import far more from China than we export to them. Last year we imported nearly 5 times as much from them as we sold to them. [link edited for length]
I live in Michigan. Our economy is heavily involved in manufacturing so we are feeling the effects now. The auto makers are closing plants here and opening new ones in China, Mexico and elsewhere. Many people who worked in the auto industry are now out of work. Add that to the upward adjustment on APR loans and you have a recipe for mortgage foreclosures. That's happening big time here as well as in other states. Now certainly the sub-prime mortgage fiasco is a big contributor to the problem but as soon as people lose their jobs and start defaulting on their mortgages the next thing you see is bank failures. And that's starting to happen too. My guess is that we are headed toward extremely deep shit and we no longer have the manufacturing capability which would allow us to dig our way out.
Now let me ask again; what can we make that the rest of the world will buy from us? After-all its your post. You should have the info to back up your claims.
Posted By: Christopher Espinal
Date: 2008-04-16 20:37:34
I will get you the link.
It doesn't matter if we import or export more. Both benefit our economy just as trade between individuals benefits our economy. If you don't like trade then limit it at all levels because its all the same thing.
You subscribe to this notion that deficits are bad for our economy. No evidence suggests this is the case. Sure Michigan is an example of trade's minuses, but the millions of americans who can purchase foriegn vehicles at cheaper prices is what represents trade's pluses. The pluses far surpass the minuses. Why should everyone else suffer from restrictions because a couple of hundred thousand families no longer have jobs? Do you want potentially high prices to hit everyone else? Besides....cheaper prices helps the economy expand because that gives an incentive for consumers to either save money or buy more stuff. Economic expansion will replace those lossed jobs with better ones. The crappy low skilled ones go abroad.
It shows that we are becoming increasing strong in the service area. That's a good thing because essentially that is where modern nations make lots of money. We may have a deficit but that means nothing. Deficits don't matter.
Posted By: Christopher Espinal
Date: 2008-04-16 20:40:35
Lloyd, with all due respect take a class in economics and learn about the things that aren't so obvious. What's obvious to you is the plants go abroad. What isn't obvious to you are the side benefits of low skilled jobs going abroad. It will help the economy expand with cheaper prices and create a demand for skilled labour. People who believe in the nonsense that you believe will only hurt everyone as an aggregate.
In 1997 the trade deficit was a $108 billion. Ten years later in 2007 it was $711 billion, nearly 7 times higher in only a decade. [link edited for length]
That’s a rather disturbing trend. China and other low cost countries cannot immediately start producing all goods as soon as free trade is established. It takes time to build the manufacturing plants and the infra-structure to support them. So we are still ahead in some areas. But China is catching up fast.
You may think that we are just sending the physical labor jobs overseas and that we will still be doing the smart work. But I assure you we aren’t smarter than people in other countries. China and India have highly educated people too. And they can do any job that Americans can do except those jobs which must be done on location. With the internet it is now possible for engineers in India to work on projects in the US, and they do it for less. So, American engineers are losing out that way too.
I retired several years ago so I am no longer dependent on a paycheck. I live mostly on my savings. For me, free trade is a good thing because the low cost goods stretch my dollars further, but I pity the young folks who are struggling to find jobs. I am not a believer in welfare. But when people are willing to work it’s a damn shame that they should be beaten down by unemployment.
BTW I’m not suggesting that we stop trading with other countries. I’m only saying take some of the tax burden off American companies and put it on the imports. Look at the disadvantage we subject our own manufacturers to. They are stuck with higher wages, much higher benefits, EPA and OSHA rules, Payroll taxes which add 7% to the cost of each employee, income taxes, and property taxes. The imports get a tax-free ride. How can we expect American companies to compete when all of the cards are stacked against them? It would be like sending our best swimmers to the Olympics with an anchor around their necks, and both hands tied behind their backs and then telling them to go beat the best swimmers from the rest of the world.
Rather then asking again what services we can sell to the rest of the world let me rephrase the question. What field do you think young people should get into to make a decent living?
-If there is something that I know the Democratic Presidential candidates dislike, it is -free trade. There are weird reasons why people oppose these agreements that are -actually helpful for our country and those abroad.
Wrong!
Tell that to all the people that lost jobs post NAFTA! The Fruit of the Loom factory is S Lousiana, The Chemical Plant in Oakdale, La, Lyondell in Lake Charles, LA, Friut and vegetable industry, the beef industry. I know many cattlemen post NAFTA that just let their cows go for pennies on the dollar. All because of NAFTA.
-To most of it's opponents free trade allows multi-national corporations to go abroad -and exploit cheap workers - leading to "human rights" abuses. Another famous -nonsense line is that "jobs go overseas." Allow me to address both circumstances. -Firstly, we need to understand that in the US we have lots of money, resources, and -human capital going around. We are a highly productive society which is why we get -paid so much more than members of impoverished parts of the world. It's -unfortunate that most critics of trade don't quite understand the system used to -determine pay: an employee's level of human capital or productivity.
The USA does not have alot of money. WHat are you talking about? Have you not seen our falling dollar? Please look us up on the CIA factbook and see how much in debt the USA is. The USA is in serious financial trouble.
In other words, here in the US, we are paid so much because we are productive to the bone. What makes us so productive is education and free markets. Education provides us with the skills to actually do stuff. Free market capitalism allows individuals to extend their services to a large group of consumers at low costs. That's why we get paid so much relative to the rest of the world.
Okay I will most likely repeat this, but if most or all of the jobs go overseas, who here in the USA will buy the cheap stuff shipped here? "That is why we get paid reletive to the rest of the world" WHAT? We get pid so well due to past trade protections against "out of the country" cheap goods. We used to have Fair Trade deals that were very fair to us. Why should we just let the globalist free traders sell out the USA for the sake of their own pockets?
Because we are highly productive and get paid relatively well, as a people we tend to forget those important ideas. There are folks who look at other parts of the world and talk about poverty and hunger. They see that people are getting paid much less and work much longer hours to feed their families. Here is where we all begin to use the loaded collection of words "human rights abuses."
Although my heart goes out to the third world I still am loyal to the USA intrest first. The "poorness" of the rest of the world in not the USA's fault and we need to let these countries fix themselves or die out. Sounds harsh but I am loyal to the USA first and not the rest of the world.
Why? Individuals living in impoverished countries get paid much, much less. This causes liberals, marxists, and Buchanan conservatives to bust out the word "exploitation." The question is how can we deprive jobs from the impoverished in other parts of the world, especially when they can produce more for much less? For the most part, bringing jobs to impoverished nations lacking economic stability helps and feeds families. It's the best opportunity they have in a place offering no job solutions. The real human rights abuse is forcing the impoverished out of jobs, especially when they have no better options. This is not to say that corporations have a right to murder and use coersion against their low-cost employees overseas. The point is we should all ask "How do we make people in other parts of the world as productive as Americans?"
To answer the question above is simple. Don't do free trade! Has Mexico really benifited from NAFTA. If you say yes them why do we have such a huge amount of them coming over hear looking for work? Free Trade didn't work now did it? What we need is Fair Trade deals. One simple economic fact is PEOPLE WITH NO MONEY CANNOT BUY THINGS. On a fair trade deal it would be agreed upon for these other counries to pay their people a FAIR WAGE so thier people could buy our stuff. If not no deal! You most likely claim that free trade allows the poor people of other countries to buy our stuff. Wait! They are poor and they can't buy our stuff BUT the companies can send the cheap stuff over here and shut down the Americian companies that are doing the same thing!
This idea of jobs going overseas to the "exploited" poor is an excellent introduction to the "jobs" controversy. Opponents to trade say that Americans lose jobs, which destroys their families. Let's track the flow of capital to see what happens:
With an open border economy domestic prices adjust to world prices due to increased competition. If companies have to shift jobs overseas to compete with drops in domestic prices due to international trade, they will do what they need to maintain or increase profit margins. Sure jobs go overseas to low cost labour abroad, and in the short run people lose them here at home, but domestic prices drop which lowers the price level of goods making americans richer overall.
In the short run the people loose their jobs here and the jobs are replaced by lower paying jobs. Wow we have cheap prices here in the USA but in the long run there is nobody here left with a job to buy anything. WOW what a good concept. We are richer overall? Not in the long run. Cheaper prices due to free trade sells out the future. We need tarriffs and Trade barries to protect our workers.
What happens when people have more money? They either save more or spend more, leading to economic growth. The benefit of lower prices, leading to increases in consumption of commodities such as savings and housing goods, far exceeds the costs of people losing jobs at home. Because of economic expansion, those jobs will be replaced.
Far exceed the loss of jobs at home...All for lower prices?
If you have lost your job at home and have no money how are low prices going to matter? What economic expansion? The US dollare is falling and failing. The USA is in debt and need to get it under control or this country will have an event that will make the great depression look like a speedbump.
Thus, in the long run international trade has it's benefits. It allows nations with comparative advantages in certain specializations to maximize productivity. The poor who have less human capital than we do can produce Coca-Cola at a cheaper price. On the other hand, American's learn to deal with technology and provide services for people around the world.
Not if the people are too poor to go to school. We can produce Coca-Cola here cheaply BTW we did it before. We need to protect the USA worker first. Let the rest of the world fix it's own problems.
In the long run, trade has improved the human rights situation of the poor abroad, and has made Americans live a better life. If my analysis is correct, it would be a mistake to have the future president hop on the protectionist bandwagon. To be against trade is to say "no" to lower costs that essentially benefits everyone, especially the poor at home!
The poor at home will get pooer due to their loss of jobs to the Free Trade deals. Once again People with no monety cannot buy things.
Interesting Rebuttals:
Trade destroys the middle class.
Nope, not true. I'm assuming that the middle class in this country are the folks who have gone through some education. These are the folks who have more human capital than the impoverished world. They are not likely to lose their jobs to the poor in India or South America. They can do stuff that requires an education that other countries don't have.
If you have just lost your good paying job and there are no more jobs of your type due to Free Trade what is your education going to matter? The fact is people HAVE lost their jobs to India and SOuth America. Why due too the Free Trade Treasonous sellouts in our country. Be they govement of corporations.
If anything, trade affects the poor since unskilled labour is more likely to go overseas to people who can do unskilled jobs at cheaper rates.
Please tell me where our poor who have lost their jobs go to get a job? If their low skilled industry had been protected then they would be working right now.
When it get's bad enough I hope that the Free Trade Globalist can keep the masses of the desperate poor form breaking down their doors to get all the stuff they got.
If the price level drops in this country, it means that people are more well off leading to economic expansion. Economic expansion improves the human capital of everyone in a nation, not just "CEO's reloading their Rolexes."
Please explaing this "economic" Expansion that I hear from all Free Trade Globalist. types.
Posted By: Christopher Espinal
Date: 2008-04-18 21:53:31
Eric, each of your points of rebuttal do one thing: they talk about the experience that people have with NAFTA. However, what they don't address are the implicit benefits to trade...or the long term stuff. You can't look at trade and just look at its immediate effects. You have to look at its effects in the short run and the long run. I would suggest you read Part 2 of this article.
Here I will explain this economic expansion that you don't see. Firstly, when we import our money goes abroad and that creates a foriegn demand for American assets - securities, government bonds, etc. There is expansion as a result.
Secondly, when we compete with world prices and such prices are lower, then that will cause a downward pressure on our prices. Thus, the price level falls and it creates a demand for more good and service consumption, or for more savings. Thus the supply of loanable funds increases lowering offering rates on loans, causing investment to expand. Thus expansion again. If you don't understand that then please pick up Gregory Mankiw's economics textbook and read it, or any other reputable economics text. I don't have time to explain such thorough details.
Posted By: Christopher Espinal
Date: 2008-04-18 22:03:08
David S.,
I will only respond to this:
"Rather then asking again what services we can sell to the rest of the world let me rephrase the question. What field do you think young people should get into to make a decent living?"
All the other stuff was mentioned already. My general response to those claims is: if you like free markets then you will like trade because its the same damn thing at all levels, between you and I and between countries. The market will select for the best price....period. If you don't like that then you don't like trade, and you don't like free markets, because that is a general idea of what free markets entail. Creative destruction from technology or better productivity is what the market selects for.
As for your question: again....the market decides what's the best thing. It's quite rediculous to ask me specifics on an economy that is constantly producing new opportunities. Business never stops making new things..plain and simple. What people need to do is track what the economy demands. I don't know what those things may be! Supposedly, we need more scientists and universities are spending billions of dollars to attract more scientists.
Another important thing: you don't need poor folks for there to be rich folks. Rich folks want more rich folks so sell them more expensive stuff. Free markets never have a set number of niches for a given number of people. In a creative system we can create niches.
Christopher what would you say about eliminating the corporate income tax and instead creating an import tariff which would offset the revenue lost from the corporate income tax?
Posted By: Christopher Espinal
Date: 2008-04-21 14:34:07
That's an entirely different debate. As a fiscal conservative I would agree with any tax reduction. As an economic conservative I agree with efficiency over equity and support low prices - as low as possible. If economic theory and its assumption of humans seeking optimal solutions are correct then low prices should lead to economic expansion. I have to say that the only "economic" circumstance that I believe may require some government intervention is global warming. If it is as bad as some scientists say it is (assuming they have no political bias in their analysis) the government should tax the hell out of gas and oil consumption. However, there are other concerns because taxing these things will hurt the poor more than anyone else.
I don't work.
Thanks for your comment David. You weren't condascending like the rest of the people on this website for espousing a different view.
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