So if you look into Elizabeth Warren's reasoning more one of the reasons she's pro-tariff is that China is essentially making us trade U.S. tech for market access. [1]
I think the thinking is that Tariffs will be one way to keep China from abusing that. In any case I think the assumption you're making is that it hurts consumers because it destroys consumption of cheap foreign goods. But I think what you're missing is that it increases consumption of domestic goods made by domestic workers. Obviously analogies are bad for discussing the actual nuance of matters.. but think Walmart in a small town that funnels profits out of the local economy versus small town businesses generating and circulating wealth locally.
It may increase domestic production for domestic customers, but I think we ran that experiment before. What I found decades ago is that products made domestically, driven by greed, profit seeking, marketing and labor costs were too expensive for your average customer. Tools for example; look at the pricing of simple domestic hand tools, technical and heavy duty. Scopes, meters, soldering tools, socket sets, electronics, schematics and repair manuals, specialty auto tools; there was a time these were too expensive for the average consumer. Sure it created manufacturing, sales and distribution jobs but by lock in - this did not make the technician or the customer wealthy, but it did make the business owner wealthier as they were the moneyed and licensed gatekeepers, charging royally for access. *As a youth I was screwed by electronics manufacturers, car companies for access to semiconductors, schematics, tools, and special tools. I believe that is exactly what China has faced for decades and has been fighting against, at least partially.
Your comment really made me think for a while why this might be happening. And I have a few conjectures.
1. When a protectionist market is created, global companies generally tend to avoid competing in them. What this means is that the local companies producing the protected goods are generally one-market only. They're only interested in the protected market and know they're shielded from foreign competition... less competition == less incentive to make world class products. And new firms will not generally target the captive market created by regulation unless they know the regulations will stay that way for many decades to come.
2. If you can create regulations to keep foreign competitors out, you can also use regulations to keep domestic competitors out. This is a favorite strategy used by bigger corporations in countries with lax implementation of laws, but strict laws on paper. Just threaten smaller firms that they will be sued and take them over.
Having some experience manufacturing electronics domestically I don't think it's a conscious thing. Domestic companies don't fundamentally understand cost optimization and "good enough".
As an example making a PCB with a nominal impedance spec. A domestic company will take that to mean you want full testing and careful analysis. A foreign company will quickly rough out a stack up and send you the boards.
Because my impedance spec was nominal and not critical the foreign company is the correct approach.
You are missing that it makes goods cost more and people poorer. We don’t want to produce many of these goods domestically because it’s too expensive.
Assembling iPhones in the US would mean more crappy domestic jobs paying near minimum wage. It would also make iPhones more expensive, not just for US consumers, but worldwide. So fewer iPhones are sold. Meaning fewer high paying design and engineering jobs at Apple, at app developers, etc. And more of those jobs in South Korea, at Samsung.
Free trade is a wonderful thing that makes everyone better off in the long run. A lawyer who fires his secretary to do his own typing because he can type faster than her is a fool.
> Free trade is a wonderful thing that makes everyone better off in the long run.
If one of the participants has an absolutely massive population, a unified mono-culture known for being incredibly hard workers, doesn't lack any particular disadvantages, and is run my (what seems to be) and incredibly smart communist dictatorship, how do you guarantee that in one thread of possible outcomes that this dictatorship isn't able and willing to spread its wings to largely bring the entire planet under it's dictatorship. I'd hope you don't deny that the US as de facto world leader exercises a little global influence, if all the pieces fall into place and China with it's massive advantages over the US, how do you guarantee this outcome will not (and can not) come to pass?
A typical response to this question is that a free democracy always beats a dictatorship (this belief is so pervasive and unbending in the West, it's almost like a religion), but this is in no way whatsoever(!!!!!!!!!) guaranteed to always be true, in fact even with our incredibly small historic sample sizes, things were looking pretty iffy with Germany back in WW2, and they are tiny compared to China.
And I suppose I should make it explicit: no, I am not guaranteeing this outcome, I am warning of it as a possibility - but those who say it can not and will not happen are making a guarantee.
They have one aircraft carrier, we have twenty. Their carrier is 60,000 tons, we have eleven 100,000 ton carriers. We have enough nukes to kill every chinese "communist party" member a dozen times over.
It's GDP is about half the US. And their "communist" system is being run entirely off the back of a mostly free market economy. Free markets always beat communism and socialism.
And if you believe that none of this matters, that China is a real threat, the last thing you want is to impose tariffs on them that hurt us more than they hurt China.
You are assuming an iphone assembled in the US would be assembled manually. However cost of labor means Apple is likely to design robots to assemble the iPhone instead. The initial investment is higher, but it is probable that once Apple does this assembling the phone in the US and exporting to China is cheaper than assembling in China for sale in China (assuming no tarries importing China).
Note that Apple is not required to create robots to build in the US. It is an option they have, but there are other options as well. I would expect Apple to be smart enough to consider all options. The obvious alternatives to consider are move the factory to some other country; or have consumers vote against the tariff by showing how much cheaper the iPhone is elsewhere; there are probably more options I haven't thought of.
Right. Apple who has one of the most sophisticated supply chain and production management operations in the world, yet has no clue about the most efficient ways to build it, and only tariffs will suddenly make them realize it.
Tariffs change the inputs to the decisions. Before the costs of robots was greater than cheap labor in China so Apple made the correct decision to not invest in them. After the tariffs Apple needs to revisit the decisions of the past to account for a new world where labor in China isn't as cheap. I cannot tell you what decisions Apple will make, only that they will reconsider the decisions of the past in light of new information. (don't forget new information also accounts for whatever advancements in robotics have been made since they last looked at this decision)
>It would be quicker to just look at the US, where protectionism has resulted in it becoming an economic superpower.
This is laughably false. The postwar US hegemonic sphere is built on trade liberalization. Please read up on GATT, the WTO, OECD, and the 1934 Reciprocal Trade Agreements Act.
Prewar, the 1930 Smoot-Hawley Tariff Act[4] is widely viewed as one of the worst economic decisions ever made, badly exacerbating the Great Depression by collapsing global trade. The US has been the world's main driver of trade liberalization since that protectionist mistake was reversed in 1934, for the entire duration of its superpower status.
The US existed, and was prosperous, before the Second World War. How the US economy functions in the postwar period really has no relevance to how it got to the position it was in before that. I do hope you’re not suggesting that a single protectionist act having a negative result means that 100 years of protectionism was actually bad for the US.
Protectionism was very effective in developing economies. Once your economy dominates and functions mainly by extracting value from submissive developing nations (who are not allowed to enact the same proteionist rules that allowed the US to become so powerful) free trade becomes beneficial to you (but not the other party)
>The US existed, and was prosperous, before the Second World War. How the US economy functions in the postwar period really has no relevance to how it got to the position it was in before that. I do hope you’re not suggesting that a single protectionist act having a negative result means that 100 years of protectionism was actually bad for the US.
The effects of the Smoot-Hawley Act as well as a hundred years of economic consensus are quite clear on this: protectionism is bad.
>Protectionism was very effective in developing economies.
Care to cite any sources? The infant industry argument is not widely supported by economists[0] and is mostly parroted by heterodox/Marxist economists like Ha-Joon Chang.
>Once your economy dominates and functions mainly by extracting value from submissive developing nations (who are not allowed to enact the same proteionist rules that allowed the US to become so powerful) free trade becomes beneficial to you (but not the other party)
This shows a fundamental misunderstanding of the purpose and effects of international trade. Comparative advantage creates a mutual benefit for both parties to trade. The postwar liberal order has been associated with astonishing increases in standards of living across the globe.
> The effects of the Smoot-Hawley Act as well as a hundred years of economic consensus are quite clear on this: protectionism is bad.
Please stop and consider that trade is a very complex situation with dependencies on many things, human psychology being one incredibly important but not very obvious one.
Turning a complex system into a binary, as you are doing, is not an optimal form of analysis. It introduces significant risk, because you are constraining your ability to consider possible outcomes of various policy decisions. Furthermore, you are basing your beliefs on recorded human history, which is an incredibly small sample size, and you are only looking at the average outcome. There is a tremendous amount of uncertainty and luck in human history, but the tone of your writing is that you have an utterly perfect understanding and indisputable conclusion.
At the very least, can you consider the possibility that while free trade is undoubtedly superior on average, that there can be negative individual outcomes in smaller time or regional frames?
EDIT: Also don't forget:
a) History is written by the victor
b) A lot of the studies you may cite (or other may use against you) are written by imperfect human beings, may be not perfectly correct or comprehensive, may contain bias (may be sponsored by someone looking for a particular conclusion) if not outright lies (lies, damned lies, and statistics and all that), and are not guaranteed to play out the same under different conditions.
The above would help explain why there are differences of opinion on such matters as this, and many other things. There seems to be this incredibly pervasive sentiment on both sides (yes, even yours!) of the political divide particularly in Western cultures, that the Ultimate Truth is blatantly obvious, if only the other side wasn't too uneducated to see it. This style of thinking strikes me as very ironic.
EDIT (to Rory, as I am throttled):
> I'm happy to consider exceptions to that rule or reasons to believe it is flawed.
Based on your tone and words, you certainly don't seem to have an open mind on the matter. I don't mean that as a snipe, I mean it is a fact that unfortunately you may find offensive. Keep in mind, people aren't perfect, and you are a person.
Above you said: "The effects of the Smoot-Hawley Act as well as a hundred years of economic consensus are quite clear on this: protectionism is bad."
You didn't say protectionism can be bad, or tends to be bad, you said it is bad. This is the very point of my criticism, it is an absolutist, one-dimensional conclusion on an incredibly complex system, based on a tiny sample size. If this statement offends you, you should stop and think about that for a little while, and I mean that sincerely and as non-offensively as possible.
> However, there is substantial theoretical and empirical work to support this point. Are you proposing an alternative or just handwavingly dismissing it as "science is wrong sometimes"? Unless you'd like to point to evidence that protectionism is good or at least a theoretical framework under which it can be good, the claim is little different from "evolution is just a theory, why don't you consider alternatives?"
Based on a disciplined reading what I've written, without subconscious interpretation and extrapolation, can you try to think of how this statement might be less than perfect? I could easily point out some flaws in this statement, but that tends not to be an effective way of communicating on these topics. Are you able to see any flaws in it, at all? (And, feel more than free to point out logical errors in my thinking, I encourage it!. But in good faith, before doing that please address my reasonable points.)
>Turning a complex system into a binary, as you are doing, is not an optimal form of analysis. It introduces significant risk, because you are constraining your ability to consider possible outcomes of various policy decisions. Furthermore, you are basing your beliefs on recorded human history, which is an incredibly small sample size, and you are only looking at the average outcome.
I'm happy to consider exceptions to that rule or reasons to believe it is flawed. (Certainly there are game theoretical reasons to impose protection in the short term in the hopes of coercing the other party into agreeing to lower overall protection in the long term. Though all indications are that the administration gives lip service to that at best — they are fundamentally opposed to free trade.)
However, there is substantial theoretical and empirical work to support this point. Are you proposing an alternative or just handwavingly dismissing it as "science is wrong sometimes"? Unless you'd like to point to evidence that protectionism is good or at least a theoretical framework under which it can be good, the claim is little different from "evolution is just a theory, why don't you consider alternatives?"
You believe your feelings over the consensus by professional Economists.
As for the rest of your argument:
A) WWI/WW2 onward is related to Free Trade and the other economies being destroyed.
B) Pre-1900s Protectionism was largely due to continuous trade wars with other powers that is universally agreed to have been detrimental for all involved.
Literally everything you are saying is not fact-based.
I think the thinking is that Tariffs will be one way to keep China from abusing that. In any case I think the assumption you're making is that it hurts consumers because it destroys consumption of cheap foreign goods. But I think what you're missing is that it increases consumption of domestic goods made by domestic workers. Obviously analogies are bad for discussing the actual nuance of matters.. but think Walmart in a small town that funnels profits out of the local economy versus small town businesses generating and circulating wealth locally.
1.) http://www.businessinsider.com/r-senator-warren-in-beijing-s...