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***Official International Trade Policy Thread*** (1 Viewer)

Maurile Tremblay

Administrator
Staff member
International trade is complicated.

Some ideas worth understanding include:

* How both trade partners benefit due to comparative advantage.

* How having cheap imports is great for consumers. Why international trade is a form of technology, and provides the same benefits as efficiency-promoting technological advances.

* How imports and exports are strongly correlated, so that the jobs lost due to imports are roughly offset by jobs gained due to exports. If you restrict imports, the effect is to also reduce exports, so the net effect isn't as awesome for employment as you might expect.

* But "roughly offset" does not mean "exactly offset." There are trade imbalances. When we spend dollars buying Chinese goods, not all of those dollars are then spent by Chinese people buying American goods. Some of those dollars are spent by Chinese people buying American government bonds and stuff. (Investment in American capital assets can stimulate the economy and create jobs too, but the association is weaker than with buying American goods and services -- so there's a real sense in which trade deficits can put downward pressure on employment.)

* Trade imbalances are generally self-correcting, and to some extent are therefore not worth worrying about. If we import more from China than we export to them, dollars will be devalued on currency exchanges, which will make Chinese products less attractive to us (and American products more attractive to them).

* But "generally" doesn't mean "always." The Chinese may have manipulated their currency to avoid this natural exchange-rate response. (I've seen claims along those lines, but don't know whether they're true.) It is possible for sustained trade imbalances to exist, putting sustained downward pressure on American jobs.

* Keynesian stimulus spending may be a good antidote to that last point. And given all the benefits of international trade, it seems that free trade plus stimulus spending (when needed) is largely preferable to trade barriers of any sort.

* Of course, care must be taken to distinguish between actual free trade, on the one hand, and agreements touting "free trade" that have more to do with strengthening intellectual property protection (or other objectives) than with removing trade barriers, on the other. The TPP may be an example of the latter. (Again, I've seen claims along those lines, but don't know whether they're true.)

Taking this as a starting point, let's see if we can collectively arrive at a sensible comprehensive trade policy within a couple dozen pages.

 
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I'd state it this way, despite what the current head of the GOP thinks, trade is not zero-sum

 
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Completely anti free-trade with any nations that utilize slave-like labor. We shouldn't import anything from them.
Can you expound on this? Are you referring to so-called sweat shops in third-world countries? Those jobs are generally seen as something to aspire to in those countries, and refusing to buy those products would make the people in those jobs worse off, not better.

 
Completely anti free-trade with any nations that utilize slave-like labor. We shouldn't import anything from them.
Can you expound on this? Are you referring to so-called sweat shops in third-world countries? Those jobs are generally seen as something to aspire to in those countries, and refusing to buy those products would make the people in those jobs worse off, not better.
Some worthwhile articles on sweatshops by Paul Krugman and Nicholas Kristof.

 
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Completely anti free-trade with any nations that utilize slave-like labor. We shouldn't import anything from them.
Can you expound on this? Are you referring to so-called sweat shops in third-world countries? Those jobs are generally seen as something to aspire to in those countries, and refusing to buy those products would make the people in those jobs worse off, not better.
That's not to be hoisted upon the backs of our citizens.

 
Completely anti free-trade with any nations that utilize slave-like labor. We shouldn't import anything from them.
Can you expound on this? Are you referring to so-called sweat shops in third-world countries? Those jobs are generally seen as something to aspire to in those countries, and refusing to buy those products would make the people in those jobs worse off, not better.
That's not to be hoisted upon the backs of our citizens.
I have no idea what this means.

 
Completely anti free-trade with any nations that utilize slave-like labor. We shouldn't import anything from them.
Can you expound on this? Are you referring to so-called sweat shops in third-world countries? Those jobs are generally seen as something to aspire to in those countries, and refusing to buy those products would make the people in those jobs worse off, not better.
That's not to be hoisted upon the backs of our citizens.
I have no idea what this means.
It means it has a direct effect on our workers. Horribly so.

 
OK, I'll try to lay out some of my thoughts on this stuff now. It may be sorta rambling and might not capture all my thoughts but it's a start.

I took a bunch of econ classes in undergrad so I'm familiar with comparative advantage and most of the concepts Maurile discussed in his opening post. Although I guess I would say my knowledge of the monetary policy and currency manipulation stuff is pretty rudimentary.

Anyway, I was fully on board the free trade wagon after taking my economics classes. The concept makes a lot of intuitive sense, it's pretty much universally agreed upon by economists, and frankly my impression was that anyone opposed to free trade was simply uninformed or pandering.

I will say that even today, if I were designing the world's economy from scratch, I would without question have completely free and unfettered trade among nations.

With that said, we're not starting from scratch. There exist today various barriers to trade. And to some extent people have relied upon the current state of the world when making their life choices.

A widget craftsman who has dedicated his life to making great widgets may find himself completely out of a job and with no prospects if a free trade agreement ends up moving all widget manufacturing overseas. And sure, the free trade agreement might create a great opportunity for gizmo designers here in the U.S., but our hero is 50 years old and he doesn't know how to design gizmos, and his family lives in a place where there's no gizmo production anyway. In fact, his entire town may suddenly find itself devastated because the big widget factory moved away and there's no opportunity for all of these people to find work and mostly what they know how to do now is to make widgets.

What I view as these primary problems with free trade relate to time and how integrated the economy is. Briefly, the arguments would be:

Time: I don't dispute that free trade agreements grow the economy in the long term. But people live in the short term. And change can be very painful for a lot of people. So I get concerned about free trade deals that impose harsh burdens now on a certain subset of people (often people that already have struggles due to low income and/or less education) for benefits that accrue primarily to other people and into the future.

"The economy": I also don't dispute that free trade grows the country's economy in total. But it seems too simplistic to act as though the United States economy is just one completely integrated whole. Trade deals create winners and losers. And my impression is that it is often true that the biggest winners are people that are already doing pretty well and the biggest losers are often people that will struggle mightily to recover from their loss. Yes, every consumer can buy things a little cheaper, but that strikes me as a somewhat modest benefit that might not justify the costs imposed on those hurt by the deals.

So what's my point? I don't think we should cease doing trade deals or erect additional barriers to trade. But I do think that the people who will be hurt by trade deals (and those sympathetic to those people) should use their political leverage to extract concessions in exchange for agreeing to go along with the trade deal. We should insist that the first dollars of economic benefit from a trade deal should be allocated towards helping to make people whole who were hurt by the trade deal. If we have a strong safety net, and if we have large-scale programs that help to re-educate displaced workers and revitalize devastated communities, then sure, let's go ahead and do some trade deals. But if the people that profit the most from trade deals are too greedy to have a chunk of those gains redistributed, then I'm inclined to tell them to #### off.

OK, I guess that's a start. Interested in hearing feedback from our economists.

 
I'm pretty much in agreement.

The (cynical) problem with your idea, of course, is the same as the problem with a lot of ideas. If we remove government's ability to pick and winners and losers when it creates legislation and trade deals, then legislators' donors have little incentive to donate, and thus legislators have little incentive to create legislation and trade deals.

 
A widget craftsman who has dedicated his life to making great widgets may find himself completely out of a job and with no prospects if a free trade agreement ends up moving all widget manufacturing overseas. And sure, the free trade agreement might create a great opportunity for gizmo designers here in the U.S., but our hero is 50 years old and he doesn't know how to design gizmos, and his family lives in a place where there's no gizmo production anyway. In fact, his entire town may suddenly find itself devastated because the big widget factory moved away and there's no opportunity for all of these people to find work and mostly what they know how to do now is to make widgets.
This is all true. But I'm not entirely convinced that displacement caused by foreign competition should be treated any differently from displacement caused by domestic competition or anything else.

Lots of widget-makers may lose their jobs when we switch production from widgets to gizmos (as we start importing widgets from and exporting gizmos to China). Lots of cab-drivers may lose their jobs when people start using Uber (or, in the future, driver-less cars). Lots of book-binders may lose their jobs when people start reading everything on their Kindles. Lots of Five Guys employees may lose their jobs when an In-N-Out moves in down the street because In-N-Out is so much better and will capture market share.

We should have a social safety net that helps widget-makers, cab-drivers, book-binders, and people who haven't lost their jobs because they couldn't get jobs to begin with. But is there a case for creating special programs that help widget-makers that aren't available to the other groups -- for helping those harmed by foreign competition but not those harmed by domestic competition?

What's the difference between the widget-makers and the others?

Cab-drivers can become Uber-drivers more easily than widget-makers can become gizmo-makers, but that's not an inherent difference between foreign versus domestic competition; it's just an artifact of the specific examples I chose.

Is the shutdown of a widget factory morally or economically different from the shutdown of a book-binder factory?

I guess one difference is just political. Widget-makers may have more political clout than book-binders; or just because of the fact that legislation is required to subject widget-makers to competition but not book-binders, maybe widget-makers are in a better position to extract concessions from lawmakers than are book-binders. Maybe we'd like to offer help to both widget-makers and book-binders, but giving help to just one group is better than giving help to neither. So the fact that book-binders don't have better relief (or retraining, etc.) programs available to them shouldn't stop us from supporting widget-makers in their quests for concessions.

I guess there may be something to that, but that's the kind of special-interest political stuff that I really don't like. I'd rather craft programs that apply to everyone -- not just to those who've already enjoyed special protectionist privileges that they've gotten used to.

 
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Maurile Tremblay said:
I guess one difference is just political. Widget-makers may have more political clout than book-binders; or just because of the fact that legislation is required to subject widget-makers to competition but not book-binders, maybe widget-makers are in a better position to extract concessions from lawmakers than are book-binders. Maybe we'd like to offer help to both widget-makers and book-binders, but giving help to just one group is better than giving help to neither. So the fact that book-binders don't have better relief (or retraining, etc.) programs available to them shouldn't stop us from supporting widget-makers in their quests for concessions.

I guess there may be something to that, but that's the kind of special-interest political stuff that I really don't like. I'd rather craft programs that apply to everyone -- not just to those who've already enjoyed special protectionist privileges that they've gotten used to.
Well, you anticipated what I would say here. I think we should have a better safety net for all people that are struggling, whether their circumstances are due to free trade or anything else. But so far that has proved difficult to achieve in the political process. Bernie Sanders is trying to make a go of it, but even if he manages to get elected, I suspect he won't be able to pass most of his agenda into law. There are powerful interests opposed to doing so.

It seems more politically feasible to extract at least some of these benefits by tying them to something that the powerful interests actually want. That's a situation where political compromise can actually make people better off. If MegaCorp wants to sell their crap to China, they have to also pay more in taxes to help struggling workers. If a coalition of voters can hold that line (not entirely clear this is possible), then the interests of working people and MegaCorp will align -- both will be made better off with the free trade deal, so both will work to get it passed.

One more note -- describing working class folks as having "enjoyed special protectionist privileges that they've gotten used to" sounds ridiculous to my ears. These are generally not people living lives of luxury.

 
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A few rambling thoughts, thjat may not end up in a coherent position

China's currency has absolutely been manipulated to ensure the continued competitiveness of the Chinese industry. But as the US is not homogenous, neither is China. Low value gods are migrating from Southern Chinese cities like Shenzhen and Guangzhou in the first special economic zone, moving North and East. It used to be that tiles and t-shirts were produced here, now that is being done in Qingdao and Shanghai/Ningbo respectively. Instead, due to increasing wage pressure the South produces electronics such as TVs and iPhones. In addition, currency manipulation is expensive, when trying to lower the value of your currency you have to sell it (if on the open market obviously), thus printing more and more, sparking inflation. If you do not have a floating currency you invite black market exchanges, corruption and attempts to off shore profits in hard currency. Any of the issues ring a bell in connection with China?

We all know that growth in China is slowing so China is buying less raw materials in the world, which in turn means that the former sellers of raw materials are buying less cheap Chinese crap, I thin I read recently that China's purchases from Africa had fallen by 40% over a very short time frame. Copper, coal, zinc, iron prices have all plummeted on lower Chinese demand, sparking economic distress in countries that have strong minng interests. Brazil is a prime example of that. The Chinese sell less so have less money to buy US treasury notes, luxury cars and designer jewelry.

So when a widget factory needs to relocate it may not be that China is the ideal solution. The domestic market there is not great, and people are not really buying as many widgets any more. More over Chinese wages have increased, so it may be a better idea to automate the widget factory and eliminate the human element completely. If the widget market will be in existence for a number of years (allowing for writing off the new factory) this might happen. Widget makers of the world cry in their beers, having become the typesetters of the 2010s.

Sure, you can tax the crap out of foreign widgets but that just makes widget makers on the inside of that protection complacent. Again Brazil is an excellent example of that. High tariffs, have created high wages and inefficient industries. So when the Chinese stopped buying Brazilian raw material, everything just fell apart, very quickly. Sure the politicians have a heavy blame in this. When things were going well for Brazil, did they improve infrastructure, health care, education? Remove tariff barriers and ensure the Brazilian economy fired on as many cylinders as possible? I think you know the answer to that one. In fact the current situation in Brazil with low oil price, and low mineral prices is just about the worst thing that could have happened. No one in Brazil has an answer that will not be extremely unpleasant for a large part of society as it adjusts. In hindsight (and might I add as noted in real time by those of us without blinkers on during the oughts) Brazil should have dropped the tariffs in the good years, taken the hit and worked furiously on becoming competitive again - while there was money to mitigate some if not all of the negative effects.

IMHO the answer to issues such as Chinese currency maniulation is not to raise tariffs (diminish free trade) but to out compete them even if the playing field is not level. If you raise tariffs you become Brazil.

So there you have it

 
Maurile Tremblay said:
I guess one difference is just political. Widget-makers may have more political clout than book-binders; or just because of the fact that legislation is required to subject widget-makers to competition but not book-binders, maybe widget-makers are in a better position to extract concessions from lawmakers than are book-binders. Maybe we'd like to offer help to both widget-makers and book-binders, but giving help to just one group is better than giving help to neither. So the fact that book-binders don't have better relief (or retraining, etc.) programs available to them shouldn't stop us from supporting widget-makers in their quests for concessions.

I guess there may be something to that, but that's the kind of special-interest political stuff that I really don't like. I'd rather craft programs that apply to everyone -- not just to those who've already enjoyed special protectionist privileges that they've gotten used to.
Well, you anticipated what I would say here. I think we should have a better safety net for all people that are struggling, whether their circumstances are due to free trade or anything else. But so far that has proved difficult to achieve in the political process. Bernie Sanders is trying to make a go of it, but even if he manages to get elected, I suspect he won't be able to pass most of his agenda into law. There are powerful interests opposed to doing so.

It seems more politically feasible to extract at least some of these benefits by tying them to something that the powerful interests actually want. That's a situation where political compromise can actually make people better off. If MegaCorp wants to sell their crap to China, they have to also pay more in taxes to help struggling workers. If a coalition of voters can hold that line (not entirely clear this is possible), then the interests of working people and MegaCorp will align -- both will be made better off with the free trade deal, so both will work to get it passed.

One more note -- describing working class folks as having "enjoyed special protectionist privileges that they've gotten used to" sounds ridiculous to my ears. These are generally not people living lives of luxury.
Brazilian workers don't live in luxury. But they have "enjoyed special protectionist privileges that they've gotten used to" - as have their employers

 
Good essay by Paul Krugman: What Do Undergrads Need to Know About Trade?

An excerpt:

One of the most popular, enduring misconceptions of practical men is that countries are in competition with each other in the same way that companies in the same business are in competition. Ricardo already knew better in 1817. An introductory economics course should drive home to students the point that international trade is not about competition, it is about mutually beneficial exchange. Even more fundamentally, we should be able to teach students that imports, not exports, are the purpose of trade. That is, what a country gains from trade is the ability to import things it wants. Exports are not an objective in and of themselves: the need to export is a burden that a country must bear because its import suppliers are crass enough to demand payment.

 
The problem.starts with the deal itself. They are not meant to.lift the countries economy they are meant to enrich a few. It's gotten progressively more so right up to the TPP that was essentially written by corporations for corporations. They are anti-consumer and anti-worker. 

If you want to have real free trade I'm down. But that isn't what the deals give us.

 
The most recent poll from the IGM panel of economists (a group of respected economists with a wide range of political views):

An important reason why many workers in Michigan and Ohio have lost jobs in recent years is because US presidential administrations over the past 30 years have not been tough enough in trade negotiations.

Responses weighted by each expert's confidence:

Strongly Agree: 0%
Agree: 3%
Uncertain: 10%
Disagree: 54%
Strongly Disagree: 32%

 
International trade is complicated.

Some ideas worth understanding include:

* How both trade partners benefit due to comparative advantage.

* How having cheap imports is great for consumers. Why international trade is a form of technology, and provides the same benefits as efficiency-promoting technological advances.

* How imports and exports are strongly correlated, so that the jobs lost due to imports are roughly offset by jobs gained due to exports. If you restrict imports, the effect is to also reduce exports, so the net effect isn't as awesome for employment as you might expect.

* But "roughly offset" does not mean "exactly offset." There are trade imbalances. When we spend dollars buying Chinese goods, not all of those dollars are then spent by Chinese people buying American goods. Some of those dollars are spent by Chinese people buying American government bonds and stuff. (Investment in American capital assets can stimulate the economy and create jobs too, but the association is weaker than with buying American goods and services -- so there's a real sense in which trade deficits can put downward pressure on employment.)

* Trade imbalances are generally self-correcting, and to some extent are therefore not worth worrying about. If we import more from China than we export to them, dollars will be devalued on currency exchanges, which will make Chinese products less attractive to us (and American products more attractive to them).

* But "generally" doesn't mean "always." The Chinese may have manipulated their currency to avoid this natural exchange-rate response. (I've seen claims along those lines, but don't know whether they're true.) It is possible for sustained trade imbalances to exist, putting sustained downward pressure on American jobs.

* Keynesian stimulus spending may be a good antidote to that last point. And given all the benefits of international trade, it seems that free trade plus stimulus spending (when needed) is largely preferable to trade barriers of any sort.

* Of course, care must be taken to distinguish between actual free trade, on the one hand, and agreements touting "free trade" that have more to do with strengthening intellectual property protection (or other objectives) than with removing trade barriers, on the other. The TPP may be an example of the latter. (Again, I've seen claims along those lines, but don't know whether they're true.)

Taking this as a starting point, let's see if we can collectively arrive at a sensible comprehensive trade policy within a couple dozen pages.
Just a quick set of thoughts on the issues that bother me the most, nowhere near fleshed out enough:

Problems with most of our trade agreements include lack of (especially quick) enforcement.  If China manipulates its currency or improperly subsidizes an industry, there need to be consequences rather than an endless series of challenges that don't really go anywhere.  When anti dumping provisions are violated, there need to be quick response consequences, not a year of investigation followed by U.S. duties, followed by the offending country immediately arguing that circumstances have changed and their prices are naturally lower now, and furthermore, anti-dumping duties need to follow products through the chain of production. 

We find a violation of anti-dumping provisions with raw whole frozen shrimp from Vietnam? We need to also apply the duty to value-added products like ready-to-eat shrimp, raw peeled shrimp, etc. from Vietnam.

 
The most recent poll from the IGM panel of economists (a group of respected economists with a wide range of political views):

An important reason why many workers in Michigan and Ohio have lost jobs in recent years is because US presidential administrations over the past 30 years have not been tough enough in trade negotiations.

Responses weighted by each expert's confidence:

Strongly Agree: 0%
Agree: 3%
Uncertain: 10%
Disagree: 54%
Strongly Disagree: 32%
Wouldn't change the mind of a single person who 'knows' it's the government's fault.

 
Question that relates to this:

What can be done to return manufacturing to the US?  Has everyone just given up on this, so we can have $5 T-shirts?

 
Question that relates to this:

What can be done to return manufacturing to the US?  Has everyone just given up on this, so we can have $5 T-shirts?
- People want low-quality products to be cheap

- Low-skilled people in other countries are willing to make low-quality products for 5% of what Americans will make it for

- Low-quality product manufacturing is not returning to the U.S.

Solution:

If the U.S. wants to increase manufacturing then it needs to focus on manufacturing high-quality products that require skilled labor and train people for those jobs.

 
http://www.ft.com/intl/cms/s/2/5e9f4a5e-ff09-11e5-99cb-83242733f755.html



Global trade should be remade from the bottom up

Lawrence Summers




The trouble is that people see integration as a project by elites for elites
Since the end of the second world war, a broad consensus in support of global economic integration as a force for peace and prosperity has been a pillar of the international order. From global trade agreements to the EU project; from the Bretton Woods institutions to the removal of pervasive capital controls; from ex­panded foreign direct investment to increased flows of peoples across borders, the overall direction has been clear. Driven by domestic economic progress, by technologies such as containerised shipping and the internet that promote integration, and by legislative changes within and between nations, the world has grown smaller and more closely connected.

This has proved more successful than could reasonably have been hoped. We have not seen a war between leading powers. Global living standards have risen faster than at any point in history. And material progress has coincided with even more rapid progress in combating hunger, empowering women, promoting literacy and extending life. A world that will have more smartphones than adults within a few years is a world in which more is possible for more people than ever before.


Yet a revolt against global integration is under way in the west. The four leading candidates for president of the US — Hillary Clinton, Bernie Sanders, Donald Trump and Ted Cruz — all oppose the principal free-trade initiative of this period: the Trans-Pacific Partnership. Proposals by Mr Trump, the Republican frontrunner, to wall off Mexico, abrogate trade agreements and persecute Muslims are far more popular than he is. The movement for a British exit from the EU commands substantial support. Under pressure from an influx of refugees, Europe’s commitment to open borders appears to be crumbling. In large part because of political constraints, the growth of the international financial institutions has not kept pace with the growth of the global economy.

Certainly a substantial part of what is behind the resistance is lack of knowledge. No one thanks global trade for the fact that their pay cheque buys twice as much in clothes, toys and other goods as it otherwise would. Those who succeed as exporters tend to credit their own prowess, not international agreements. So there is certainly a case for our leaders and business communities to educate people about the benefits of global integration. But at this late date, with the trends moving the wrong way, it is hard to be optimistic about such efforts.

The core of the revolt against global integration, though, is not ignorance. It is a sense, not wholly unwarranted, that it is a project carried out by elites for elites with little consideration for the interests of ordinary people — who see the globalisation agenda as being set by big companies playing off one country against another. They read the revelations in the Panama Papers and conclude that globalisation offers a fortunate few the opportunities to avoid taxes and regulations that are not available to the rest. And they see the disintegration that accompanies global integration, as communities suffer when big employers lose to foreign competitors.

What will happen next — and what should happen? Elites can continue pursuing and defending integration, hoping to win sufficient popular support — but, on the evidence of the US presidential campaign and the Brexit debate, this strategy may have run its course. This is likely to result in a hiatus in new global integration and efforts to preserve what is in place while relying on technology and growth in the developing world to drive further integration.

The country is systemically important and suffers high and rising corporate indebtedness
The precedents, notably the period between the first and second world wars, are hardly encouraging about unmanaged globalisation succeeding with neither a strong underwriter of the system nor strong global institutions.

Much more promising is this idea: the promotion of global integration can become a bottom-up rather than a top-down project. The emphasis can shift from promoting integration to managing its consequences.

This would mean a shift from international trade agreements to international harmonisation agreements, where issues such as labour rights and environmental protection would take precedence over issues related to empowering foreign producers. It would also mean devoting as much political capital to the trillions that escape tax or evade regulation through cross-border capital flows as we now devote to trade agreements. And it would mean an emphasis on the challenges of middle-class parents everywhere who doubt, but still hope desperately, that their kids can have better lives than they did.



 
"At any given time, it is undoubtedly true that some industries will be adversely affected by competing imported products, just as they are adversely affected by every other source of cheaper or better products, whether domestic or foreign. These other sources of greater efficiency are at work all the time, forcing industries to modernize, downsize, or go out of business. Yet when this happens because of foreigners, it can be depicted politically as a case of our country versus theirs, when in fact it is the old story of domestic special interests versus consumers."

Thomas Sowell, Basic Economics, 5th edition (2014), page 489.

 
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"At any given time, it is undoubtedly true that some industries will be adversely affected by competing imported products, just as they are adversely affected by every other source of cheaper or better products, whether domestic or foreign. These other sources of greater efficiency are at work all the time, forcing industries to modernize, downsize, or go out of business. Yet when this happens because of foreigners, it can be depicted politically as a case of our country versus theirs, when in fact it is the old story of domestic special interests versus consumers."

Thomas Sowell, Basic Economics, 5th edition (2014), page 489.
"Sources of greater efficiency" in a vacuum don't exist between countries with environmental, labor, and other restrictive standards and countries without those standards.

Sowell is a conservative, anti-regulation economist, and I certainly understand the attraction, but his willingness to accept the full loss of certain industries as a natural progression of global trade just isn't realistic.  Can China build computers cheaper? Sure.  Does that mean we shoud simply cede computer building to China? Absolutely not.  To do so would create such a monumental national security problem that we can't possibly allow it.  And it isn't just computers.

In a purely theoretical model, a hands-off fully free trade system is a wonderful thing.  But you have to make sure the other guy is fully free trading with you, and you have to account for state-imposed forces on our markets to protect our air, water, labor force, etc that the other state simply isn't imposing.

 
Can China build computers cheaper? Sure.  Does that mean we shoud simply cede computer building to China? Absolutely not.  To do so would create such a monumental national security problem that we can't possibly allow it.
Possibly true, but off-topic. Sowell isn't purporting to rebut that argument. He's purporting to rebut the argument that "they took our jobs" has special, inherent force in the context of foreign trade -- simply because it is foreign -- that it does not have in the context of domestic competition or technological advance.

 
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But you have to make sure the other guy is fully free trading with you, and you have to account for state-imposed forces on our markets to protect our air, water, labor force, etc that the other state simply isn't imposing.
I'm not really sure what this means.

 

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