Posts Tagged ‘Free Trade’

The fall and fall of U.S. tariff barriers

March 1, 2019

Click to enlarge. Hat to Barry Ritholtz

The United States, like almost all industrial countries, built up its infant industries behind protective tariff walls that shielded them from more efficient, because longer-established, competitors.

This historical graph shows what has happened since then.  Tariffs against foreign imports are down to a tiny fraction of what they were in the 1930s or 1940s.

President Trump deserves credit for forcing trade policy onto the national agenda.  Unlike his predecessors, he does not argue that more and more globalization is the answer  He is right that it is time for a change.

But trade wars aren’t an answer either

Rather the U.S. should do what successful exporting nations do, which is to build up their industries through a carefully targeted industrial policy.


Free trade, fair trade and economic nationalism

March 9, 2016

The theory of free trade is that everybody benefits when individuals and corporations based in different nations are allowed to buy and sell goods and services without restriction.

India and trade DilemaUnfortunately most of the world operates on a different theory—that the exchange of goods and services should be to the benefit of the nation, not the corporation or the individual.

Subcontracting of manufacturing by, for example, Apple Computer to the Chinese company Foxconn is of mutual benefit to Apple and Foxconn, but it is not of mutual benefit to the USA and China as nations.  It is China’s gain and America’s loss.

Governments of China, Japan, Germany and other countries regard regard the unit of international economic competition as the nation rather than to the individual or the corporation.  They don’t care about the economic benefit to the trading partners.  They’re concerned about the economic benefit to the nation as a whole.

If an American corporation wants to do business in China or Japan, its executives have to provide something that benefits the Chinese or Japanese economy—a transfer of technology, or the creation of manufacturing jobs.

You have the strange situation of American business corporations dictating policy to Washington while kowtowing to Beijing.


What is Hillary Clinton’s trade policy?

March 4, 2016
HIllary Clinton

HIllary Clinton

Unlike with Donald Trump and Bernie Sanders, it is hard to figure out Hillary Clinton’s positions on trade treaties.

They are clearly and consistently opposed to all the major trade treaties from the North American Free Trade Agreement onward, including the proposed Trans Pacific Partnership Agreement.

Clinton has been all over the map on this issue, supporting some trade treaties and opposing others.  The TPP agreement was signed while she was Secretary of State.  She supported it at the time, but now has doubts.  Some observers, however, wonder whether that is her true opinion, or whether pressure from the Sanders’ campaign has pushed her to the left.

If you put that topic to one side, I have to say that her foreign trade proposals are more detailed and thoughtful than either Trump’s or Sanders’.  She at least recognizes that the key is for the United States to rebuild its manufacturing strength rather than trying to force other nations to change their own economic policies.

Here are key Clinton proposals:

  • Reform the tax system so that American businesses can’t evade U.S. taxes by “inversion”—an accounting scheme where profits are assigned to overseas subsidiaries in tax havens.
  • Provide tax incentives for manufacturing companies to locate and remain in the United States, especially in high-unemployment areas.
  • Invest in infrastructure and in research and development to build up U.S. productivity.
  • “Aggressively combat” violations of trade treaties by foreign governments.
  • Set a “high bar” for future trade treaties.


Does Bernie Sanders have a real trade policy?

March 3, 2016
Bernie Sanders

Bernie Sanders

Bernie Sanders is an economic nationalist, like Donald Trump.  But while Trump complains about how other countries are taking advantage of the United States.  Sanders talks about how international corporations are taking advantage of working people (to be sure, with China’s help).

He said he has voted against every trade treaty that came before Congress during his tenure in the House and Senate, and said that, if elected President, he would rescind them all.  Like Trump, he opposes the Trans Pacific Partnership (TPP) agreement.

His opposition is fully justified, in my opinion.  The World Trade Treaty, the North American Free Trade Agreement (NAFTA) and similar agreements limit the ability of national governments to regulate foreign corporations, and give these corporations equal standing with supposedly sovereign governments.

These agreements are not what I would call free trade, but Sanders is not for free trade either.  He says he is for “fair trade,” which I take to mean a fair balance of trade with other nations.  Unlike Trump, he does not say anything about imposing new tariffs and restrictions on imports.


Would Donald Trump’s trade policy work?

March 3, 2016

Donald Trump’s trade policy might be better than what the United States has now.  The problem with Donald Trump’s trade policy is that it is based on trying to force China and other countries to comply with U.S. demands rather than improving American economic performance.

Ultimately the future of the United States rests on what we Americans do, not on what the Chinese do or do not do.

Donald Trump

Donald Trump

He is right about one important thing.  Washington’s trade policies have not served Americans well.

In some ways, current reflect the priorities of Richard Nixon and Henry Kissinger, who thought the trade policies that favored nations such as Japan or Saudi Arabia were a price worth paying to keep them as loyal allies during the Cold War.

In other ways, they reflect the neo-liberal philosophy that emerged during the administrations of Ronald Reagan and Bill Clinton, which was that the route to prosperity was to serve the interests of large corporations.

International agreements such as the North American Free Trade Agreement and the proposed Trans-Pacific Partnership Agreement guaranteed the rights of corporations to move money and goods freely, but restricted the rights of governments to legislate on behalf of workers, consumers and the environment.

Such agreements have contributed to the erosion of American jobs, wages and national economic strength.

Donald Trump’s solution, as stated on his web site, is as follows:

  • Declare China a currency manipulator and demand that China allow its currency to rise to its natural rate.  Trump said its current rate is between 15 percent and 40 percent too low.  A rise in the exchange rate for the Chinese yuan would, all other things being equal, raise the prices of Chinese-made products in the U.S. and other countries.
  • Demand that China obey international standards for copyright and patent protection.  This would mean greater revenues for U.S.-based and other non-Chinese media, drug and information technology companies.
  • Demand that China stop subsidizing its export industries by such means as free or cheap rent, utilities, tax breaks and raw materials, low-interest loans and special tax breaks.
  • “Challenge” China to comply with 21st century labor and environmental standards
  • Lower or eliminate the U.S. government budget deficit so that we wouldn’t have to depend on the Chinese and other foreigners to buy government bonds.
  • Reduce the top corporate tax rate from 35 to 15 percent, and eliminate inheritance taxes and capital gains taxe
  • Build up American military forces in the South China Sea.


Economists, free trade and the TPP

June 12, 2015

Free-Trade-pg1-copyA writer named Michael Goodwin and an illustrator named Dan E. Burr have come up with a clear and complete explanation of the problems with free trade in general and the Trans Pacific Partnership in particular.  Click on Economix Comix to read it.

Debating the TPP: links to the pros and cons

May 2, 2015

I’m strongly against the proposed Trans Pacific Partnership agreement and the fast track proposal for approving it, based on what I know of both.

I write this even though I admit I don’t know what will be in the TPP when it is finally submitted to Congress.  I could be wrong in everything I say.   I don’t think I will be, in fact I’m pretty sure I won’t be, but in this post, I link to arguments in favor as well as those opposed so you can judge both sides of the question.

I link.  You decide.


The passing scene: Links & comments 5/23/14

May 23, 2014

Everything Is Broken by Quinn Norton for Medium.

An explanation of why there is no such thing as computer security.  Any computer system consists of different software that was created at different points in time, and has to be compatible with other bits of software all over the Internet.  Most software was created by engineers and programmers whose goal was to finish the job within budget by a deadline, not to maximize security.  And because most people are unaware of this, there is no economic incentive to do anything about it.

Trans-Pacific Partnership: Another Trade Liberalization Scam by John Weeks for Triple Crisis.

The fallacy of the argument for unilateral free trade.  Nations benefit from engaging in international trade, but the terms of trade are important, and negotiable, and there is no benefit in a nation refusing to negotiate to its best advantage.  Of course the TPP is not actually a free trade agreement, but that’s another subject.

The Italian Disaster by Perry Anderson for the London Review of Books.

A study of oligarchy and corruption in Europe.  While Anderson made Italy his Exhibit A of corruption, he provided equally blatant examples of corruption in Germany, France, Britain, Ireland, Spain and Greece.

The War Nerd: China, Vietnam and Naval Nerf Wars by Gary Brechter for PandoDaily.

A study of limited war by age-old enemies.   The conflict between China and Vietnam is unlikely to end anytime soon, but so far both sides have kept it from escalating into total war.

Cheap steel, free trade and U.S. jobs

May 22, 2014

The world steel industry is going through a shakeout.  The world’s steel industry is producing more steel than can be sold on the market, which means some steel producers are doomed to go out of business.

USW-Calls-for-Action-amid-Surge-in-Unfairly-Traded-ImportsThe question is: Which ones?  As things stand now, it is the U.S. industry that is at risk, according to the Economic Policy Institute, a pro-labor think tank.   They say that’s because the U.S. market is more open to imports than other countries’ economies, and more vulnerable to dumping.

This means the 125,000 jobs in the U.S. steel industry are at risk, plus, according the EPI, up to three times that many whose jobs indirectly depend on the steel industry.

Senators Sherrod Brown, D-Ohio, and Jeff Sessions, R-Alabama, have asked the U.S. Commerce Department for penalty tariffs against South Korea and other countries.   This may be necessary to enable the U.S. steel industry survive the current shakeout, but it is not a long-term solution to the industry’s problems.

It is an example of Robert B. Reich, writing more than 30 years ago, called industrial policy by historic preservation.   Reich, who later served as Secretary of Labor in the Clinton administration, said the U.S. government will spend money to rescue industries on the brink of failure, but not to help make these industries successful in the first place.


A big deal: TPP negotiators meet in Peru

May 16, 2013

Representatives of 11 nations met in Lima, Peru, yesterday for the start of the 17th round of negotiations for the Trans Pacific Partnership Agreement, a trade treaty that would give corporations  the right to appeal to international tribunals to overturn federal laws, state laws and court decisions regarding not just patent and copyright laws, but also “buy American” rules and environmental and labor laws.

hulk-tppThe text of the draft treaty has not been made public and only limited information is available to Congress and the public.  Business representatives, however, are being consulted on the draft.   The Obama administration has stated that this is the cornerstone of its trade policy.

Once agreement is reached, the Obama administration or its successor will ask for Fast Track authority to require the Senate to vote the treaty up or down as is, without amendments.  The previous Fast Track authority has expired, and should not be renewed.

Similar negotiations are underway for a new Transatlantic Trade and Investment Treaty with the European Union.   This is a very, very big deal, even though there has been little reporting in the national press and network television.

Click on the following links for more information.

Political Corruption and the ‘Free Trade Racket by Dean Baker.

Upcoming Trans-Pacific Partnership Looks Like Corporate Takeover by Dave Johnson of Campaign for America’s Future.

Large Corporations Seek U.S.-European ‘Free Trade Agreement’ to Further Global Dominance by Andrew Gavin Marshall for AlterNet.

The 11 nations in the negotiations are the United States, Canada, Australia, New Zealand, Brunei, Malaysia, Singapore, Vietnam, Mexico, Chile and Peru.   Japan has been invited to join the negotiations.