"That's All I Have To Say About That"

Cafe Hayek on "Fair Trade"

Here's a letter to the Washington Post:

Harold Meyerson dislikes foreign trade, in part because it destroys some American jobs ("Go slower on free trade," June 4). And so Mr. Meyerson favorably quotes one of Congress's staunchest protectionists, Sen. Sherrod Brown (D-OH): "A trade deal, says Brown, 'should both protect workers and small businesses and better prepare them for globalization.'"

Let's make a deal. Government will agree to protect only those American workers and small-business owners who in return agree to stop buying foreign-made products.

For example, American steel workers will get protection from steel imports only if they, in exchange, agree to stop buying the likes of Toyota cars, Samsung televisions, Ryobi hand tools, Ikea furniture, Shell gasoline, Amstel beer, vacations to Cancun, and musical recordings by foreign artists such as the Beatles, Elton John, and k.d. Lang. They must also promise to stop buying the likes of bananas, cinnamon, and vanilla and, indeed, even American-made food items if these are shipped to their favorite restaurants and supermarkets in foreign-made trucks - or in trucks equipped with tires made by Michelin, Bridgestone, or some other job-destroying foreign company. These workers would be permitted to drink only Hawaiian coffee; they must quit drinking the Colombian, Guatemalan, and Ethiopian coffees that they've become accustomed to drink. Oh, and absolutely no diamond jewelry, as those gems come from Africa. (Sorry, ladies.)

Small-business owners likewise will get such protection, but only in return for their agreement not only to stop consuming foreign-made products, but also to never sell their outputs to non-Americans. These businesses must, in addition, promise to use in their operations only American-made inputs - such as aluminum, wood, chemicals, and insurance services - even when foreign-made substitutes are available at lower prices or in higher qualities.

Deal?

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

Bonus points to readers who can explain why it would be economically incorrect to point out, in response to my letter, the correct fact that no bananas, vanilla, or cinnamon - or even diamonds - are currently produced in the United States.

A Couple of Links

It's most unsettling to the cluckers of climate change when one of their own leading adherents, who formerly toed the line, becomes skeptical and drop-kicks the "science."
Meet David Evans.
A scientist with six university degrees, Mr. Evans consulted for the Australian Greenhouse Office (today's Department of Climate Change) from 1999 to 2005. He studied carbon in plants, debris, forestry and agricultural products.
But while aboard the global-warming train, he found that the wheels got increasingly wobbly.
"The debate about global warming has reached ridiculous proportions and is full of micro-thin half-truths and misunderstandings," he says. "I am a scientist who was on the carbon gravy train, understands the evidence, was once an alarmist, but am now a skeptic."

Read more: Off the 'gravy train' - Pittsburgh Tribune-Review http://www.pittsburghlive.com/x/pittsburghtrib/opinion/s_739762.html##ixzz1O3qRzkve

http://www.realclearpolitics.com/printpage/?url=http://www.realclearpolitics.com/articles/2011/06/01/government_against_blacks_110051-full.html
Williams elaborates in a new book, "Race and Economics." A chief culprit, he insists, is the minimum wage.
"Let's not look at the intentions behind minimum wage," he said. "We have to ask, what are the effects? Put yourself in the place of an employer who must pay $7.25 no matter whom you hire. Will that employer hire a person who can only add $3 or $4 of value per hour?" 
http://www.realclearpolitics.com/printpage/?url=http://www.realclearpolitics.com/articles/2011/06/01/recovery_summer_part_deux_110050.html
Buy American! A conventional, well-intentioned, patriotically affirming sentiment. We've heard it all our lives. But unless you crave less competition, fewer choices and higher prices, it's also a completely irrational one.
Naturally, then, as we kick off "Recovery Summer! Part Deux," the chairwoman of the Democratic National Committee says that buying homemade cars is a matter of national importance. "If it were up to the candidates for president on the Republican side, we would be driving foreign cars," Rep. Debbie Wasserman Schultz explained while defending the protectionist auto/union bailout. "They would have let the auto industry in America go down the tubes." (And by "we," Wasserman Schultz, proud American, is talking about herself and her sweet Japanese-made Infiniti FX35.)
**I have to say, could there be anything worse than an ignorant, pandering politicians clothing themselves in the robes of good intentions while they use your money and mine to further their political careers?  Contemptible.
He will not. And so fewer young people get hired and "get their feet on the bottom rung of the economic ladder." This hurts all young people, but black teens most, he says, because "many of them get a fraudulent education in the public school system. So a law that discriminates against low-skill people has a doubly negative effect on black teenagers. The unemployment rate among black teens today is unprecedented in U.S. history. In the '40s, black teenage unemployment was less than white teenage unemployment."
And yet a Pew survey says 83 percent of Americans support raising the minimum wage.
"People have the misguided notion that the minimum wage is an antipoverty tool."

Following the Lead of Iran and North Korea?

Would it help our "economy" if we forced each other via the coercive monopoly of the government to only buy products "we've" made in "our" country?  If so, then shouldn't we also restrict sales to only those things made within our own state?  Why not our own county? 

This plan has worked well for Iran and North Korea - I mena, it has worked well for keeping the masters of these nations weathy and relatively unchallenged in their tyranny. 

That aside - assuming we only got coercion in who we could buy and sell from and not in other arenas - would "buying American" help or hurt?
"If we restricted trade to just the 50 states, what would happen immediately -- and would increase over time -- would be a huge reduction in our standard of living, because we wouldn't have access to the cheap goods we get from other countries," Perry said. "We also wouldn't have any export markets, so companies like Caterpillar and Microsoft would have a huge reduction in sales and workforce." (Microsoft is the publisher of MSN Money.)
what do we make of heartfelt pleas to save U.S. manufacturing by buying American, or the many websites (see one here) that catalog U.S. sources for an array of products? Or the Buy American Act, which curbs government purchases of products that are made overseas?
Do such efforts actually hurt the country they're trying to help?
Marc Kruskol, 53, a publicist based in Palmdale, Calif., goes out of his way to purchase products that are made in the U.S. because of his concern over the decline in manufacturing employment.
"I truly believe that we could go a long way towards fixing the economy if we would just put people to work making things in this country that are made in other places," said Kruskol, who spends hours scouring made-in-America websites or visiting brick-and-mortar stores in search of U.S. products.
He recently spent $10 on a pair of salad tongs made in America, which he tracked down in a restaurant supply store, after rejecting 99-cent foreign-made tongs. And he was happy to spend $650 on a domestically produced barbecue grill rather than a $450 imported one, just to support his countrymen.
http://money.msn.com/how-to-budget/what-if-you-had-to-buy-american.aspx
It might be argued that over time "we" would develop domestic manufacturing capacity that "we" don't have now.  But it leads to the question of why it's so expensive to make things in "our" country that someone else can make things thousands of miles away, pay to export them, pay to ship them, and still get the products to market at a price "our" manufacturers cannot match?  OSHA, a sluggish, expensive, over-regulated, unresponsive to consumer needs power system, artificially high labor costs including the costs of Medicare, Medicaid, and Social Security, expensive and ineffective public schools, a remarkably foolish tax system for a nation which states it wants more manufacturers making more products with "US" workers, and a psychotic regulatory scheme that meets politicians needs to be re-elected while repressing business activity and confusing good intentions with environmental care.  Much of the political landscape is schizophrenic as it on the one hand decries tax subsidies for those who "off shore" manufacturing, while claiming to be outraged when a "wealthy" corporation makes money and doesn't pay massive taxes, and then arguing for hokey nonsense like "cap and trade" which will do nothing for carbon emissions but will again ratchet up the incentives to hire folks elsewhere to build things for our markets. 
In short - the "buy American" argument is as economically illiterate as the rest to the discussions taking place in our political gestalt.  We have a literal case of the economically blind leading the economically blind.

Free Trade - Choose "Fair" If You Think It Is, I Won't If I Think It Isn't

"Put differently, among the very reasons that losing a particular job to trade is so traumatic is that that job is made so attractive by trade."
http://cafehayek.com/2010/10/fair-trade-is-good.html

Of course, some people take the notion of fair trade to the point of making it law - which just means every politician competes to define the term "fair" to the benefit of their most powerful, high paying constituency.
http://cafehayek.com/2010/11/fair-trade-is-less-fair-and-less-free-than-free-trade.html

More goodies of late on trade:
http://cafehayek.com/2010/11/misunderstanding-of-free-trade-instance-23784.html

http://cafehayek.com/2010/11/does-trade-loot-jobs.html

http://cafehayek.com/2010/12/united-auto-weenies.html

http://cafehayek.com/2006/03/is_fair_trade_f.html

The Trade Issue Rages On

"In 1820, 79 percent of Americans worked in agriculture.  This number, however, was progressively reduced by improvements in technology.  Chemical fertilizers and pesticides; mechanized planting and harvesting equipment; refrigeration; improved veterinary medicine; better irrigation; faster transportation; and improved packaging for produce – along with more food imports made possible, in part, by motorized sea and air travel – all “destroyed” millions of agricultural jobs."
Creative Destruction


How could we see it any other way?
One other way, I suppose, is to think of it like this.  I mow my own grass.  I don't feel like it's worth paying someone else forty or fifty dollars or more to mow my grass; it takes about an hour (if I could be employed at seventy five dollars an hour during the time I'm mowing the grass, I might see it differently).  But what if I could get someone to mow my grass for less?  At some point, between say a penny and fifteen dollars, I'll bet I'd be paying someone to do the job so I could hang out with my kids or wife.
In effect, that's the decision matrix we follow when buying foreign produced goods.  We realize it's foolish to waste our own time doing something we can get for a price that's worth what we're paying.  We don't make this decision collectively, we make it when we're doing our individual consumption.  It 's also not bad for the same reason it wouldn't be bad for me to pay someone who's willing to do it fifteen bucks to mow my lawn.
Another thought - we had an inverse trade imbalance for a long time - why would presume that to be sustainable?
Lastly, the conversation on trade and 'foreign aid' should not be so bifurcated.  The best foreign aid is buying stuff from countries emerging from poverty into second world status - for one, it works, and for two, it's voluntary; 'foreign aid' on the other hand doesn't work and amounts to stealing money from taxpayers to buy off and stabilize tyrants.

Perry's Clear Thinking Unmuddies

http://mjperry.blogspot.com/2010/09/conundrum-why-care-if-china-manipulates.html
Here's a little editing fun of Harold Meyerson's article in today's Washington Post:
"This week, committees on both sides of Capitol Hill will plumb the conundrum of Chinese currency manipulation. The conundrum isn't that -- or why -- China is manipulating its currency: By undervaluing it, China is systematically able to underprice its exports, putting American (and other nations') consumers and businesses that purchase China's cheap imports at a significant advantage. The conundrum is why the hell the United States thinks it should do anything about it.
There are certainly plenty of senators and congressmen -- and U.S. producers that compete with China -- who'd like to see the White House place some taxes on American consumers and businesses who purchase the low-priced Chinese imports. If the administration doesn't act, Congress may just consider mandating some punitive taxes against American consumers and business on its own."

Protectionism and Trade Imbalance Illusions

Writing to an author critiquing Paul Krugman (which I view as Krugman's best function in the world - provides real economists with softball home run fodder), Dr. Boudreaux lays it out clear and simple:
"You write as if the alleged trade imbalances between the U.S. and China are real. They are not. The Chinese sell Americans goods; we pay with dollars; the Chinese then use many of these dollars to buy IOUs issued by Uncle Sam. Although the result is a measured U.S. current-account deficit with China, there's no more any economically meaningful "imbalance" in such a result than there would be if, say, Texans lent a lot more of their dollars to Uncle Sam.
Talk of imbalances in trade diverts attention from the real problem: Uncle Sam's gargantuan debt. That fast-accumulating debt is a huge problem. It is caused, though, not by trade with China but, rather, by Washington's lack of fiscal discipline. Unless you believe that protectionism (and only protectionism) would induce Congress to be more fiscally disciplined, you should avoid all talk of imbalances in trade and instead talk of imbalances in political institutions that encourage politicians to give disproportionate weight to the demands of current voters and to ignore the resulting ill-consequences that will curse future generations."
http://www.cafehayek.com/