Tariffs and protecting our economies

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Biggs
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Tariffs and protecting our economies

Post by Biggs » Mon Apr 02, 2018 5:05 pm

So,

Years ago, you'd find most first world countries were leading in producing and manufacturing. Indeed the United States and Germany can still take some of the cake when we're talking about manufacturing, but it's definitely not what it used to be. These days, you'd be hard pressed not to find the words "Made in China" on something near you.

I've been reading a BBC report into the Tariffs imposed by China I response to the United States increasing duties.

http://www.bbc.co.uk/news/world-asia-43614400

Its an interesting read, insofar as it gives a comprehensive overview of the situation. But what it lacks is any real analysis about the merit of tariffs, and this is because the current 'consensus' in politics is that generally they harm our economies.

The economic rational is really simple. If you, as a consumer, can purchase a product that is cheaper, you will buy the cheaper product and that will therefore support increased production of that cheap product and ultimately become better off because we're buying cheaper goods. So, what's the catch?

Well, its all good and well if you're buying cheap products with the same quality (assuming Chinese manufacturers meet the quality of US, for instance), but there is one central question regarding this issue: Why is it cheaper in China? The answer is pretty obvious...

https://qz.com/170363/the-average-chine ... -thailand/

What we do, every time we purchase products from another country, is we support underpayment. The article above claims that the average Chinese labourer in 2012 earned less than $5,000 a year. Assuming they do 40-hour weeks (a massively optimistic assumption, as they most likely do anywhere between 50-80 hours), that's a rate of little more than $2.40 an hour. We're essentially condoning slave-production of resources, because its cheaper to buy it there. Would we still be purchasing these goods if they really were slaves, and the stuff they were producing became $2.40 cheaper?

Capitalism tends towards this situation. If we allowed free-market global capitalism to take hold, our wages would look similar. Tariffs, in my view, is our way of protecting our living standards and ensuring governments and businesses that allow the conditions for severe in-work poverty to exist, do not simply get away with it. We should hold them to the same standards, especially when they're selling in our markets.

TL;DR Protectionism has a key strategic and moral benefit. We shouldnt ignore its implication in modern society.

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Re: Tariffs and protecting our economies

Post by dox » Mon Apr 02, 2018 5:35 pm

Uhmn. Totally unsolicited. Totally awesome -- great piece Biggs, I'll bite!

This is pure capitalism:
Biggs wrote:
Mon Apr 02, 2018 5:05 pm
If we allowed free-market global capitalism to take hold, our wages would look similar.
This is not:
Biggs wrote:
Mon Apr 02, 2018 5:05 pm
Tariffs, in my view, is our way of protecting our living standards and ensuring governments and businesses that allow the conditions for severe in-work poverty to exist, do not simply get away with it.
Capitalism represents privately owned efforts. The only protection that should be taking place within the scope of that definition is protecting your bottom line by being competitive.

So, if you accept that capitalism needs to be somewhat moderated then you must also step away from the term 'capitalism' and open up pandora's box, probably with a bias toward the dilution of the effect of the core principle of private ownership. This is why concepts like a market economy came in to play and, as is very timely for you to mention, the impact of the global economy with the digital reality has provided great challenge to many of these protections.

So what is it that needs to be protected? You say 'protecting our economies' but I put it to you that its the granularity with which we treat that concept that is the crux of the issue.

Which agents should we be protecting? Governments? Businesses? Individuals? Where is the line drawn? I need to compete, someone needs to win, someone needs to lose. Why protect the losers?

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Re: Tariffs and protecting our economies

Post by Biggs » Mon Apr 02, 2018 11:52 pm

Aha, well I wanted to provoke thought, so I hope I've at least achieved that.

To your comments.
dox wrote:
Mon Apr 02, 2018 5:35 pm
Capitalism represents privately owned efforts. The only protection that should be taking place within the scope of that definition is protecting your bottom line by being competitive.

So, if you accept that capitalism needs to be somewhat moderated then you must also step away from the term 'capitalism' and open up pandora's box, probably with a bias toward the dilution of the effect of the core principle of private ownership.
You jumped right into the deep end here, Dox! At risk of evolving this conversation beyond tariffs, I'll indulge.

You are right that Capitalism represents privately owned efforts, but these have evolved with the involvement of the state and have some key characteristics; the accumulation of capital being one of them. This characteristic, along with private ownership, has allowed the rise of large business and corporations that create distortions in the market. If one business or corporation has any significant influence, then the notion of "free-market" is dispensed. Unregulated markets doesn't lead to free markets for this reason.

So, in our countries, we identify this as a problem and intervene by way of legislating a minimum wage and various labour laws. In both cases, the labour of the country has increased. They were introduced, in the case for the UK, in the early 20th century - I'm sure it's the same for the US - where trade protectionism was rampant, and so these negative externalities weren't so noticeable. "Capital" (I.E businesses and corporations) were unable to trade beyond their own country, without the costs of tariffs, which meant it was still cheaper to source labour locally. As well as this, "Labour" was given powers of organisation - Labor / Trade Unions - that enabled them to bargain and keep their wage at a level consistent with the value of the product that they are producing. By the turn of the century, labor unions have no bite and inflation has completely outstripped wage increases, whilst businesses were free to travel the world to sell their wares and employ whoever they want.

I identify these as big problems, perhaps you don't, and we can talk about that if you like. But part of the problem is definitely the undercutting of our labor supply with other, cheaper sources. In other words, our workers are being told to accept fewer wages, or else their jobs will be outsourced to China. Damn, perhaps Trump can find common ground with me!

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Re: Tariffs and protecting our economies

Post by dox » Tue Apr 03, 2018 12:51 am

Well I can get back on track, sure! I'll stay on with the questioning and play a little devil's advocate to see if I can suss out more clearly where we agree/disagree:

I've been directly competing with foreign workers within the context of providing services for at least a decade. They often represent a cost that is 5-10% of what I would charge and I simply can not compete with them on price. Though there was certainly a period of flux where it was exceedingly hard to find work I adjusted my messaging and my value proposition in order to combat this along with my marketing and sales approach and managed to stay barely afloat - it got even worse when access to my impossible-to-price-match competition became even easier to find.. however, to my pleasant surprise: the market ended up bouncing back a couple years later and was seeking 'local' solutions. Some because their board mandated it (often: for optical reasons) others because my services were simply far superior, others because of plain old national pride.

I've never considered a job being a right, it's a privilege and one you have to earn - how does protecting business make it better? I would have likely never made any changes if I wasn't given a run for my money. As a result I can offer services that can compete _globally_ in terms of quality of service. Isn't that in the best interest for all levels involved? Individuals, businesses and governments?

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Re: Tariffs and protecting our economies

Post by Biggs » Tue Apr 03, 2018 2:04 am

Well, we can certainly talk more about the theories surrounding capitalism, perhaps in another post, since it is worth discussing what we should aspire to do next. "Post-Capitalism" discussion.

Regarding this topic, I'm certainly not suggesting that businesses that compete on the international market simply cannot exist as a result of price competition. I commend your efforts in competing with international sellers, and no doubt your successes have come from your sheer determination and willing to adapt to the changing market. Is your industry something that could be tariff-free, in my opinion? Possibly, sure. But if you're telling me that you're going out of business, because you're paying your staff (or youself) a decent wage, and you're being outbid by a Chinese company that pays their staff peanuts, then that's something we need to look in to, not only on the basis that your economy will hurt (as a result of less jobs, in this case you'd need to find other work), but also on the moral basis that we should not be proping up businesses and governments that allow workers to suffer in squaler.

At the end of the day, the theoretical premise on which I'm making my argument is something that Conservatives use against Liberals and Socialists alike; Greed drives us, and Capitalism turns that greed into something good. Well, if greed leads us down the road of employing slave labour from other countries to produce stuff for us at a price much cheaper than what our own citizens can produce, then I'm afraid I have to disagree with the proposition that Greed and Capitalism lead to a positive outcome.

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Re: Tariffs and protecting our economies

Post by FifthYangPro » Tue Apr 03, 2018 6:39 pm

Biggs wrote:
Tue Apr 03, 2018 2:04 am
At the end of the day, the theoretical premise on which I'm making my argument is something that Conservatives use against Liberals and Socialists alike; Greed drives us, and Capitalism turns that greed into something good. Well, if greed leads us down the road of employing slave labour from other countries to produce stuff for us at a price much cheaper than what our own citizens can produce, then I'm afraid I have to disagree with the proposition that Greed and Capitalism lead to a positive outcome.
Wasn't it the Liberals (Bill Clinton) who passed NAFTA (North American Free Trade Agreement) which, in the words of Ross Perot, created a “giant sucking sound” of American companies fleeing the United States for Mexico, where employees would work for less pay and without benefits.

This is exactly what happened and would've multiplied if TPP (Trans-Pacific Partnership) would have come to realization for America.

Both made or would have made labor cheaper and profit margins (greed) grow.

Having said that, its a conservative that is making it possible for these companies to bring these jobs back to within our own borders. Though, with automation of manufacturing, i don't know if its too late or not.
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