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Globalization, Trade And NAFTA: A Defense of Trade Agreements

Free trade is good. Does anyone disagree? Even "fair traders" agree today. We do not hear about nakedly protectionist domestic content legislation anymore. The "fair traders" argue instead for the need for a "fair playing field" on issues like environmental and labor standards.

But is this new emphasis on equal labor and environmental standards really about anything but protectionism? Is there really an expectation of that countries like Peru, Mexico and the Central American countries (not to mention China and India) will meet US labor and environmental standards? the irony is of course that this would be a form of erstwhile globalization - an attempt to impost US standards on the Thrid World - if it were sincere. It is not. It is just a new way of defending an old idea - protectionism.

I think the evidence of this is obvious - in no other context do we see a drive for higher labor and environmental standards in the Third World. Consider the issue of climate change:

. . . George Bush pulled the US out of the Kyoto treaty, which requires 36 industrial nations to cut greenhouse emissions by at least 5 per cent from 1990 levels by 2012. The US president says Kyoto unfairly burdens rich countries while exempting developing ones such as China and India.

Developing nations say rich states built up their economies without emissions restraints and argue that less-developed countries should have the same opportunity to establish their economies now.

But as emissions from places such as China and India grow, environmentalists say action by the developed world alone will not be enough to stop the warming trend.

Does anyone think George Bush shares the concern of environmentalists on this? Or is it an excuse? And does anyone really think Mexico, Peru and the Central American countries are comparable to China and India on this? Of course not. This is pretext for protectionism.

And the reasons are clear, no one is a saint. Everyone looks out for their own interests. It so happens that for the MAJORITY of Americans, free trade is a clear benefit on many levels. Alan Blinder explains:

. . . Suppose the average American worker earns ten dollars per hour, while the average Japanese worker earns just six dollars per hour. Won't free trade make it impossible to defend the higher American wage? Won't there instead be a leveling down until, say, both American and Japanese workers earn eight dollars per hour? The answer, once again, is no. And specialization is part of the reason.

If there were only one industry and occupation in which people could work, then free trade would indeed force American wages close to Japanese levels if Japanese workers were as good as Americans (and who doubts that?). But modern economies are composed of many industries and occupations. If America concentrates its employment where it does best, there is no reason why American wages cannot remain far above Japanese wages for a long time—even though the two nations trade freely. A country's wage level depends fundamentally on the productivity of its labor force, not on its trade policy. As long as American workers remain more skilled and better educated, work with more capital, and use superior technology, they will continue to earn higher wages than their Japanese counterparts. If and when these advantages end, the wage gap will disappear. Trade is a mere detail that helps ensure that American labor is employed where, in Adam Smith's phrase, it has some advantage.

Those who are still not convinced should recall that Japan's trade surplus with the United States widened precisely as the wage gap between the two countries was disappearing. If cheap Japanese labor was stealing American jobs, why did the theft intensify as the wage gap closed? The answer, of course, is that Japanese productivity was growing at enormous rates. The remarkable upward march of Japanese productivity both raised Japanese wages relative to American wages and turned Japan into a ferocious competitor. To think that we can forestall the inevitable by closing our borders is to participate in a cruel self-deception.

Americans should appreciate the benefits of free trade more than most people, for we inhabit the greatest free trade zone in the world. Michigan manufactures cars; New York provides banking; Texas pumps oil and gas. The fifty states trade freely with one another, and that helps them all enjoy great prosperity. Indeed, one reason why the United States did so much better economically than Europe for two centuries is that we had free movement of goods and services while the European countries "protected" themselves from their neighbors. To appreciate the magnitudes involved, try to imagine how much your personal standard of living would suffer if you were not allowed to buy any goods or services that originated outside your home state.

A slogan occasionally seen on bumper stickers argues, "Buy American, save your job." This is grossly misleading for two main reasons. First, the costs of saving jobs in this particular way are enormous. Second, it is doubtful that any jobs are actually saved in the long run.

Many estimates have been made of the cost of "saving jobs" by protectionism. While the estimates differ widely across industries, they are almost always much larger than the wages of the protected workers. For example, one study estimated that in 1984 U.S. consumers paid $42,000 annually for each textile job that was preserved by import quotas, a sum that greatly exceeded the average earnings of a textile worker. That same study estimated that restricting foreign imports cost $105,000 annually for each automobile worker's job that was saved, $420,000 for each job in TV manufacturing, and $750,000 for every job saved in the steel industry. Yes, $750,000 a year!

While Americans may be willing to pay a price to save jobs, spending such enormous sums is plainly irrational. If you doubt that, imagine making the following offer to any steelworker who lost his job to foreign competition: we will give you severance pay of $750,000—not annually, but just once—in return for a promise never to seek work in a steel mill again. Can you imagine any worker turning the offer down? Is that not sufficient evidence that our present method of saving steelworkers' jobs is mad?

But the situation is actually worse, for a little deeper thought leads us to question whether any jobs are really saved overall. It is more likely that protectionist policies save some jobs by jeopardizing others. Why? First, protecting one American industry imposes higher costs on others. For example, quotas on imports of semiconductors sent the prices of memory chips skyrocketing in the eighties, thereby damaging the computer industry. Steel quotas force U.S. automakers to pay more for materials, making them less competitive.

Second, efforts to protect favored industries from foreign competition may induce reciprocal actions in other countries, thereby limiting American access to foreign markets. In that case export industries pay the price for protecting import-competing industries.

Third, there are the little-understood, but terribly important, effects of trade barriers on the value of the dollar. If we successfully restrict imports, Americans will spend less on foreign goods. With fewer dollars offered for sale on the world's currency markets, the value of the dollar will rise relative to that of other currencies. At that point unprotected industries start to suffer because a higher dollar makes U.S. goods less competitive in world markets. Once again, America's ability to export is harmed.

On balance the conclusion seems clear and compelling: while protectionism is sold as job saving, it probably really amounts to job swapping. It protects jobs in some industries only by destroying jobs in others.

I think this is an unremarkable argument in that is is blindingly obvious. But let's consider what some smart people who understand this but are more torn on the subject now think. Let's consider Paul Krugman's take from a 1990s MIT paper:

. . . One way to answer the demand for harmonization of standards, then, is to go back to basics. The fundamental logic of free trade can be stated a number of different ways, but one particularly useful version - the one that James Mill stated even before Ricardo - is to say that international trade is really just a production technique, a way to produce importables indirectly by first producing exportables, then exchanging them. There will be gains to be had from this technique as long as world relative prices differ from domestic opportunity costs - regardless of the source of that difference. That is, it does not matter from the point of view of the national gains from trade whether other countries have different relative prices because they have different resources, different technologies, different tastes, different labor laws, or different environmental standards. All that matters is that they be different - then we can gain from trading with them. This way of looking at things, among its other virtues, offers an en passant refutation of the instinctive feeling of most non-economists that a country that imposes strong environmental or labor standards will necessarily experience difficulties when it trades with other countries that are not equally high-minded. The point is that all that matters for the gains from trade are the prices at which you trade - it makes absolutely no difference what forces lie behind those prices. Suppose your country has been cheerfully exporting airplanes and importing clothing in return, believing that the comparative advantage of your trading partners in clothing is "fairly" earned through exceptional productive efficiency. Then one day an investigative journalist, hot in pursuit of Kathie Lee Gifford, reveals that the clothing is actually produced in 60-cent-an-hour sweatshops that foul the local air and water. (If they hurt the global environment, say by damaging the ozone layer, that is another matter - but that is not the issue).You may be outraged; but the beneficial trade you thought you had yesterday has not become any less economically beneficial to your country now that you know that it is based on these objectionable practices. Perhaps you want to impose your standards on these matters, but this has nothing to do with trade per se - and there are worse things in the world than low wages and local pollution to excite our moral indignation. . . .

Krugman is not necessarily endorsing these views but he is accepting that they are factually correct. What has Krugman said more recently? This:

Let me spare you the usual economist's sermon on the virtues of free trade, except to say this: although old fallacies about international trade have been making a comeback lately (yes, Senator Charles Schumer, that means you), it is as true as ever that the U.S. economy would be poorer and less productive if we turned our back on world markets. Furthermore, if the United States were to turn protectionist, other countries would follow. The result would be a less hopeful, more dangerous world.

Yet it's bad economics to pretend that free trade is good for everyone, all the time. ''Trade often produces losers as well as winners,'' declares the best-selling textbook in international economics (by Maurice Obstfeld and yours truly). The accelerated pace of globalization means more losers as well as more winners; workers' fears that they will lose their jobs to Chinese factories and Indian call centers aren't irrational.

Addressing those fears isn't protectionist. On the contrary, it's an essential part of any realistic political strategy in support of world trade. That's why the Nelson Report, a strongly free-trade newsletter on international affairs, recently had kind words for John Kerry. It suggested that he is basically a free trader who understands that ''without some kind of political safety valve, Congress may yet be stampeded into protectionism, which benefits no one.''

. . . The point is that free trade is politically viable only if it's backed by effective job creation measures and a strong domestic social safety net. And that suggests that free traders should be more worried by the prospect that the policies of the current administration will continue than by the possibility of a Democratic replacement.

What is Krugman saying here? He is saying that attacks on free trade and trade agreements is scapegoating (like attacks on immigration, legal or otherwise) for failed domestic policies that have caused worker discontent, income inequality, economic hardship and uncertainty.

He argues that of course a politician can not be purely rational and intellectual on this issue but should focus on the issues that can effect real change to the problems besieging America.

In short, free trade is not the problem. The policies of the Bush Administration are the problem. To further demonstrate this, let us consider the attacks on NAFTA. John Edwards falsely claims NAFTA has cost the United States a million jobs:

John Edwards made this claim about the North American Free Trade Agreement (NAFTA): "It's cost us a million jobs." That's a disputed estimate. Other economic studies have produced far lower numbers. The million job figure comes from the Economic Policy Institute, a liberal think tank in Washington with ties to the labor movement. EPI estimated that the growth of exports since 1994 has supported an additional 1 million jobs in the US, while imports have displaced domestic production that would have supported 2 million jobs, leaving a net loss of 1 million. EPI's detractors state that EPI's estimate assumes that NAFTA is to blame for 100% of the growth in the trade deficit between the US and both Canada and Mexico and that it ignores other factors. Whatever the effects of NAFTA, the US has gained nearly 26 million jobs since the agreement took effect on Jan. 1, 1994, according to the Bureau of Labor Statistics.

Consider the CBO Report on NAFTA:

The challenge in assessing NAFTA is to separate its effects from the effects of other factors that have influenced trade between the United States and Mexico. Those factors include the considerable economic and political turmoil that occurred in Mexico in the early post-NAFTA years--turmoil that, for the most part, was unrelated to the agreement--and the long U.S. economic expansion that lasted throughout most of the 1990s. The Congressional Budget Office (CBO) used a statistical model of U.S.-Mexican trade to separate out the effects of those factors and reached the following conclusions:

U.S. trade with Mexico was growing for many years before NAFTA went into effect, and it would have continued to do so with or without the agreement. That growth dwarfs the effects of NAFTA.

NAFTA has increased both U.S. exports to and imports from Mexico by a growing amount each year. Those increases are small, and consequently, their effects on employment are also small.

The expanded trade resulting from NAFTA has raised the United States' gross domestic product very slightly. (The effect on Mexican GDP has also been positive and probably similar in magnitude. Because the Mexican economy is much smaller than the U.S. economy, however, that effect represents a much larger percentage increase for the Mexican economy.)
Some observers look at NAFTA's effects on the U.S. balance of trade with Mexico (the difference between the values of exports and imports) as an indication of the economic benefit or harm of the agreement. The balance of trade dropped substantially after NAFTA took effect and has declined further in more recent years, leading some people to conclude that NAFTA has been bad for the U.S. economy.

However, changes in the balance of trade with a partner country are a poor indicator of the economic benefit or harm of a trade agreement. A better indicator is changes in the levels of trade. Increases in trade--both exports and imports--lead to greater economic output because they allow each nation to concentrate its labor, capital, and other resources on the economic pursuits at which it is most productive relative to other countries. Benefits from the greater output are shared among the countries whose trade increases, regardless of the effects on the trade balance with any particular country. Such effects do not translate into corresponding effects on the balance of trade with the world as a whole; for a country as big as the United States, that balance is largely unaffected by restrictions on trade with individual countries the size of Mexico. Moreover, even declines in a country's trade balance with the world have little net effect on that country's output and employment because the immediate effects of those declines are offset by the effects of increased net capital inflows from abroad that must accompany those declines.(2)

Furthermore, CBO's analysis indicates that the decline in the U.S. trade balance with Mexico was caused by economic factors other than NAFTA: the crash of the peso at the end of 1994, the associated recession in Mexico, the rapid growth of the U.S. economy throughout most of the 1990s, and another Mexican recession in late 2000 and 2001. NAFTA, by contrast, has had an extremely small effect on the trade balance with Mexico, and that effect has been positive in most years.

Besides increasing trade, NAFTA has had a substantial effect on international investment. It has done so for at least two reasons. First, it eliminated a number of Mexican restrictions on foreign investment and ownership of capital. Second, by abolishing tariffs and quotas, NAFTA made Mexico a more profitable place to invest, particularly in plants for final assembly of products destined for the United States. However, it is difficult--if not impossible--to separate the increases in foreign investment in Mexico that resulted from NAFTA from the increases caused by prior liberalization of Mexico's trade and other economic policies. Modeling such investment flows and their effects on the U.S. economy is similarly difficult. Consequently, this paper does not examine NAFTA's effects on investment in any detail but instead concentrates on the agreement's effects on trade.

NAFTA has benefitted all of the countries involved on issues as diverse as economic development, creating markets for American goods, IMMIGRATION (if there are jobs in Mexico, immigration to the US becomes less attractive) and just plain fairness and common good.

Of course, as Krugman states, there are winners in losers in trade, just as there are in all free markets. The losers feel it directly and make considerable noise about their losses. This is their right in a free political system. The winners do not see it or think about it. Consider Iowa:

Iowa's ambivalence is all the more remarkable because the state is on the whole a big winner from global trade. "Iowa, as much as any other state, is on the plus side of the ledger," says James Leach, a 30-year Republican congressman from Iowa who now runs Harvard University's Institute of Politics. "It would be highly ironic if pro-protectionist candidates prevailed in the Iowa caucuses." Trade wasn't always such a high priority: In the 2004 Iowa caucus, Richard Gephardt, the most outspoken Democrat on the issue, attracted so few votes he subsequently pulled out of the race.

The fallacy in the analysis of Jim Leach is that the beneficiaries of free trade do not associate it with free trade policies. Those who have suffered from free trade DO.

The reality is that the populist rhetoric against trade agreements is just more in the base line of Know Nothingism that has historically marred populist movements. This has always been the dangerous side of populism.

There is no rational argument against NAFTA, CAFTA or free trade. There is the emotional populist argument. It is a political reality, as Paul Krugman states, but it is not based on reality.

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    With all due respect, I am curious as to your econ (1.50 / 2) (#25)
    by jerry on Sun Nov 25, 2007 at 01:01:15 PM EST
    background that informs your understanding of this.

    I always find it curious to read what various pundits have to say in fields that seem to be outside their personal experience and research -- often times they go by the common wisdom.

    I have a bunch of degrees but try to restrict my comments to specifically those portions of those fields I actually have some specific knowledge and experience in.  I don't have much knowledge of econ, having taken only 3-4 courses.

    My understanding is that there are many well respected economists that would disagree with you. in part or whole.  Including Krugman, Binder, and including Rodrik all to various degrees.

    Instead of getting into it with you, I will suggest everyone just listen to Yoram Bauman, Ph.D, in particular points 5 and 6.  It's five minutes long, very informative, and based on a paper published in the Annals of Improbable Research.

    (Greg Mankiw's) Principles of economics, translated

    his website with footnotes, explanations, and a coloring book

    Let me ask you something (none / 0) (#26)
    by Big Tent Democrat on Sun Nov 25, 2007 at 01:09:00 PM EST
    How do I know you have a degree in anything?

    This is rank credentialism.

    Do you feel incapable of reading the literature?

    You exhibited this same misguided attitude on the issue of IQ and Race.

    I will not succmb to your appeal to crdentialism.

    Address the argument. Do not tell me how smart you are. Or what piece of paper I need to present to you to be able to make this argument.

    I will not even appeal to the credentials of the people I cite.

    Think for yourself for crissakes.

    Parent

    BTW (none / 0) (#27)
    by Big Tent Democrat on Sun Nov 25, 2007 at 01:10:39 PM EST
    I just cited Binder and Krugman supportig my views.

    Frankly, there is not a respectable economist who disagree on the facts.

    Do you need a degree to read?

    Parent

    What? (none / 0) (#63)
    by ctrenta on Sun Nov 25, 2007 at 08:58:48 PM EST

    BTD says:

    > Do you need a degree to read?

    Wow. I can't beleive I'm reading reactions like this. Don't think you're not making yourself and this site look bad. Jeralyn why do you tolerate his petulance?

    Unreal.

    Parent

    That's not to say you don't have the background... (none / 0) (#28)
    by jerry on Sun Nov 25, 2007 at 01:10:39 PM EST
    I'm just saying, however elitist I am, that I don't know what that background is, so I am not sure you have any credibility in this one particular area.

    And I certainly have none!

    Parent

    Rank credentialism (none / 0) (#29)
    by Big Tent Democrat on Sun Nov 25, 2007 at 01:11:47 PM EST
    I detest it.

    I will not give you any indication of my credentials on this.

    Judge the argument with your own mind.

    Parent

    Judge the argument with your own mind. (none / 0) (#34)
    by jerry on Sun Nov 25, 2007 at 01:27:57 PM EST
    I will not give you any indication of my credentials on this.

    Judge the argument with your own mind.

    Done!

    Parent

    Restricting yourself to a shallow field of (none / 0) (#60)
    by bronte17 on Sun Nov 25, 2007 at 06:40:12 PM EST
    knowledge is regrettable.  A is a wiser man.  And your "coloring book" simpleton rhetoric accompanying your disagreement was rude.

    The blogs have been filled with angst recently over the trade issue. Glad to see you grappling with this A.  

    Parent

    I don't understand your response... (none / 0) (#66)
    by jerry on Sun Nov 25, 2007 at 09:51:10 PM EST
    Did you click on the links I provided?

    I wasn't calling anyone a simpleton.  There really is a comic book (on social security) at the site.

    The site is of the "Standup Economist" a Ph.D economist and stand up comedian whose "translation" of Greg Mankiw has been cited and recommended by every economist of any stripe in the past year, INCLUDING Greg Mankiw.

    His points 5 & 6 explicitly address the issue of free trade and fair trade and how the orthodox and heterodox econ sees it.

    Parent

    Here's my problem (none / 0) (#1)
    by andgarden on Sun Nov 25, 2007 at 11:17:48 AM EST
    Is free trade even really possible? The impression I've gotten has been that the agreements we've entered into were supposed to have been binding on both sides, but in reality, we've just lowered our barriers unilaterally.

    How do we compete with countries that give back VAT? Would we not also have to harmonize our tax policies to have a genuinely free trade?

    In principle I think you're probably right, but getting to the free trade utopia is rather difficult in practical terms.

    Suppose that is what we did (none / 0) (#4)
    by Big Tent Democrat on Sun Nov 25, 2007 at 11:30:51 AM EST
    And it is false to say it BTW.

    But just suppose that is true.

    What you are saying is that a foreign country is subsidizig our consumption at the expense of its own country.

    The data is clear that even unilateral free trade is beneficial to the country offering free trade.

    Read Krugman's MIT report for more on this.

    But the reality is that is simply a lie by those who want protectionism.

    Which does not even work BTW>

    Please read the literature on this subject.

    Protectionism is all emotion, ot even one percent reason.

    It is a political reality but based on utter nonsense. It is Left wing creationism.

    Parent

    This: (none / 0) (#5)
    by andgarden on Sun Nov 25, 2007 at 11:38:05 AM EST
    The data is clear that even unilateral free trade is beneficial to the country offering free trade.
    Is very interesting. I'd be curious to see the literature.

    What did you think of CAFTA? Do you think that the changes made to the Peru agreement that got many more Democratic votes in the House were just window dressing?

    Parent

    Read the Krugman MIT link (none / 0) (#8)
    by Big Tent Democrat on Sun Nov 25, 2007 at 11:47:56 AM EST
    No honest and rational person denies this.

    CAFTA was good. Indeed there are very few bad trade agreements.

    People NOW want trade agreements to address non trade concerns. Well, they SAY they want that. Mostly they just oppose free trade that hurts them.

    The very definition of special interests.

    It is ironic that Mr. anti-Special Interest is the champion on this. He is a total phony.

    Parent

    Reading now (none / 0) (#11)
    by andgarden on Sun Nov 25, 2007 at 11:56:24 AM EST
    Anyone who has tried to make sense of international trade negotiations eventually realizes that they can only be understood by realizing that they are a game scored according to mercantilist rules, in which an increase in exports - no matter how expensive to produce in terms of other opportunities foregone - is a victory, and an increase in imports - no matter how many resources it releases for other uses - is a defeat. The implicit mercantilist theory that underlies trade negotiations does not make sense on any level, indeed is inconsistent with simple adding-up constraints; but it nonetheless governs actual policy. The economist who wants to influence that policy, as opposed to merely jeering at its foolishness, must not forget that the economic theory underlying trade negotiations is nonsense - but he must also be willing to think as the negotiators think, accepting for the sake of argument their view of the world.

    Interesting. I'm not an economist myself, so this is all very enlightening.

    Parent

    Every thinking person knows this (none / 0) (#14)
    by Big Tent Democrat on Sun Nov 25, 2007 at 12:04:43 PM EST
    Can there be countervailing RATIONAL interrests for overriding this central insight? Of course.

    But mostly the resistance is due to special interest parochialism fueling Know Nothingism.

    It is the twin of immigrant bashing.

    Parent

    Perfectly free trade is impossible (none / 0) (#6)
    by roy on Sun Nov 25, 2007 at 11:44:28 AM EST
    But that doesn't mean that freer trade is not preferable to less free.

    Parent
    No such animal (none / 0) (#2)
    by bernarda on Sun Nov 25, 2007 at 11:24:04 AM EST
    "Free trade" may be a good idea in theory -- that is not sure -- but in reality it doesn't exist. It is a phantom, a mirage. So I proudly maintain that "free trade" is not good.

    NAFTA is crap. I may have missed your link to the EPI report, so here it is.

    http://www.epi.org/content.cfm/bp173

    "Despite its name, the primary purpose of the North American Free Trade Agreement (NAFTA) was not to facilitate trade among separate sovereign societies. Rather, it was to promote an integrated continental economy and establish the rules to govern it.

    As a former foreign minister of Mexico once remarked, NAFTA was "an agreement for the rich and powerful in the United States, Mexico, and Canada, an agreement effectively excluding ordinary people in all three societies." It should, therefore, be no surprise that NAFTA rules protect the interests of large corporate investors while undercutting workers' rights, environmental protections, and democratic accountability. Hence, NAFTA should be seen not as a stand-alone treaty, but as part of a long-term campaign by the conservative business interests in all three countries to rip up their respective domestic social contract.

    This report details how this campaign played out in the labor markets of all three nations. It is, of course, not the full and complete measure of the impact of NAFTA. But it is arguably the most important one, because the agreement was sold to the people of each nation on the promise that it would bring large net benefits in better jobs and faster growth. Indeed, supporters claimed the gains would be so large as to more than compensate for the erosion of the average workers' bargaining power and the weakening of citizens' rights to use government to protect themselves against the insecurities of unregulated markets.

    Twelve years later, it is clear that the costs to workers outweighed the benefits in all three nations. The process differed from country to country, and given the greater size and wealth of the United States, the impact there has not been as great as it was in Mexico and Canada. But the overall pattern was similar. In each nation, workers' share of the gains from rising productivity fell and the proportion of income and wealth going to those at the very top of the economic pyramid grew."

    NAFTA is crap. If you have "free trade", it also has to be in labor markets. As it is, goods can travel more freely from Mexico to the U.S. than people can, especially for work.

    Why do goods have more "rights" than people? It isn't because the multi-national corporations make more money that way, is it?

    Post-war Japan and Korea didn't become rich by supporting international "free markets". If the WTO had existed at the time, they would probably still be dirt poor.

    The latest agricultural bill before congress plans to give $26 billion a year in subsidies to American agri-business. That is not a "free market"; one might say that it is socialized agriculture.

    Finally, yes I am a protectionist, a leftwing one if you please.

    The EPI is not only factually challenged (none / 0) (#3)
    by Big Tent Democrat on Sun Nov 25, 2007 at 11:28:13 AM EST
    It is illogical.

    Unless you believe that development does not create jobs.

    Which is delusion.

    Parent

    illogical? (none / 0) (#7)
    by bernarda on Sun Nov 25, 2007 at 11:45:02 AM EST
    Just what is illogical? Your saying so doesn't make it true. Try at least to respond to one single point I made.

    As to "development", define what you mean by that.

    Also, I posted the EPI link because it was mentioned in the article. People should at least know what Edwards was talking about.

    (sorry if this appears more than once. i have tried to post it but it doesn't appear).

    Parent

    Please put your links (none / 0) (#9)
    by Jeralyn on Sun Nov 25, 2007 at 11:50:37 AM EST
    in html format, using the link button at the top of the comment box. Long URL's skew the site which requires me to delete the entire comment. Thanks.

    Parent
    The EPI's argument is utterly illogical (none / 0) (#10)
    by Big Tent Democrat on Sun Nov 25, 2007 at 11:50:59 AM EST
    It claims there are NO winers, only losers in trade.

    That is illogical. UNLESS you believe that economic development creates ZERO jobs.

    SOMEBODY is making the goods. If the US lost jobs, they went SOMEWHERE.

    As for the EPI, John Edwards relied on its bogus calculation of job loss as a result of NAFTA. The CBO Report proved it was nonsense.

    When you cite some facts and ADDRESS the ones presented, then we can talk.

    But frankly, as always in trade discussions, the protectionists can not argue this on the facts as they do not support their dishonesty.

    I do not write on trade for this very reason.

    There is no true discussion, just dishonest demagoguery.

    My last comment to you.

    Parent

    One fact (none / 0) (#39)
    by bernarda on Sun Nov 25, 2007 at 01:52:46 PM EST
    Still opinions. Give me one fact.

    Parent
    The CBO report (none / 0) (#46)
    by Big Tent Democrat on Sun Nov 25, 2007 at 02:46:10 PM EST
    Can you not navigate the data?

    Parent
    Wow (none / 0) (#64)
    by ctrenta on Sun Nov 25, 2007 at 09:02:13 PM EST

    > There is no true discussion, just dishonest demagoguery.

    OK, this is it. These are rotten comments to make. Jeralyn, BTD, you really need to talk to him.

    Parent

    "Free Trade" (none / 0) (#12)
    by Deconstructionist on Sun Nov 25, 2007 at 11:58:35 AM EST
     is an ideal that does not and probably cannot exist. If I had to choose between "free trade" and autarky, I'd settle for free trade, but that is not the choice. As our choices in the real world involve issues of what we trade with whom under what conditions, little insight is provided by advocating "free trade," "fair trade," "protectionism" or any other label and we need to focus not on abstract theories but on the perceived benefits and costs of specific trade policies and specific trade agreements.

      One of the first things any intelligent discussion must consider is that trade policy does not exist solely to promote or restrict trade or even more broadly to achieve economic goals. Trade policy is also an instrument of strategic foreign policy. Markets for our goods and services and access to the goods and services of other nations are surely paramount concerns, but they are not the only ones.

      To really evaluate a trade relationships we must look to how well it achives ALL of its objectives and consider all of its costs. If, for example,  one of the objectives of trade with a given nation is to promote its economic developement and governmental stability in the belief that serves our long-term strategic interests we can't measure the trade policies' effectiveness merely in terms of trade balance and related objective economic factors. It might well be worth a loss of domestic production and jobs, and not only  a net outflow of capital but an actual reduction of it  to achieve certain political objectives.

      On the other hand,in other circumstances  even a net increase in production, jobs and  domestically available capital in both countries might not be worth the costs in all circumstances.

      Would more trade with Nazi Germany have been a good thing even if it enriched both countries? Would more trade with Latin America possibly be a a good thing even if it came at a economic cost to us if if it helped create conditions there that contributed to "democracy and statibility?"

    I'm curious (none / 0) (#13)
    by Big Tent Democrat on Sun Nov 25, 2007 at 12:02:42 PM EST
    how trade with Nazi Germany popped into your head.

    Any agrement that lowers trade barriers is unquestionably good for US trade.

    Of course there can be other considerations that override that one but they would be NON-trade related.

    There is not an honest and rational person that denies it.

    It could be that you are worried about protecting some set of jobs and that you are willing to cost the American People billions in order to protect that special group.

    And in reality, that is what ati-trade agreement movements are about - advocating for the interests of certain discrete groups over the interests of the American People as a whole.

    It is the very essence of serving special interests.

    Parent

    It "popped" (none / 0) (#70)
    by Deconstructionist on Mon Nov 26, 2007 at 07:45:12 AM EST
    into my head because it is probably both the best known and most salient example to illustrate the point I was making.

     Your second statement misstates the real issue. The real issue is not what is "good for US trade." I don't think anyone who understands would frame the issue that way regardless of their politics. some might say the issue is what is good for the US; some might say it's what is good for the poor abroad; some might the issue is how it affercts something or someone else. I don't think anyone would say the question about trade policy  is whether it is good for trade because that requires making a premise the conclusion.  

      to make a meaningful argument you actually have to explain why trade is good. You also have to explain why more trade is always better thasn less trade. If we just conclude more trade is the best thing  then, of course, any policy increasing trade is by definition good. but, that only holds for those who unthinkingly accept the self-imposed definition.

      You also implictly argue that it could never be wise, rational and moral to "cost the US billions" by protecting some special interest. I think some people might actually believe that MANY things are worth a cost of billions of dollars. How many people might think a 10% (or larger) reduction in GNP would be a reasonable price to pay to assure all a living wage, eradicate poverty, provide health care, preserve the environment, eliminate war, or some other "special" objective?

     

    Parent

    Why trade is good (none / 0) (#71)
    by Big Tent Democrat on Mon Nov 26, 2007 at 09:42:59 AM EST
    I think it is outlined quite well in the post.

    Do you find youself unconvinced?

    As for the rest, I do not argue that it would NEVER be wise, I argue let's be HONEST about what is going on here.

    As for what the policies MIGHT do, explain that is what we are trying to do then and explain how the policy you espouse does that.

    That is not what is done. People argue that free trade is BAD. Without telling the truth of what they mean. It is bad FOR THEM.

    Parent

    Yes, I am entirely unconvinced (none / 0) (#72)
    by Deconstructionist on Mon Nov 26, 2007 at 10:37:10 AM EST
     that more trade is always an unqualified "good."

      I do think that more often than not the benefits of more trade outweigh the costs of more trade. That, however, is essenatially a worthless  opinion when it comes to evaluating any specific agreement or poliy.

    Parent

    More trade IS always good, but not for the economy (none / 0) (#73)
    by jerry on Mon Nov 26, 2007 at 11:31:32 AM EST
    More trade is always good in a narrow but important manner precisely because of its non-economic impacts, that is, in helping any two group of foreign people interact, learn, and in many ways control or moderate the behaviors of the other group.

    Economically, trade is not always good.  Trade can hurt one partner economically.  In fact, trade can leave ALL partners worse off economically.

    (Perhaps I am wrong to say that more trade is always good because of the non-econ impacts.  If you have trade that persistently leaves on partner worse off, I bet they get real pissed off over time.)

    The simple and very quick proof of this is in the youtube link I posted way above, but the guy I posted to gives a simple, longer, and mathematical proof of this at his website, which I also posted way above.

    Parent

    A more timely question (none / 0) (#53)
    by Wile ECoyote on Sun Nov 25, 2007 at 03:31:36 PM EST
    would be:
    Would more trade with the National branded socialism of Venezuela be a good thing even if it enriched both countries?

    Parent
    Another question (none / 0) (#15)
    by andgarden on Sun Nov 25, 2007 at 12:06:41 PM EST
    accepting for the sake of argument that unilaterally lowered borders are a universal good, are there not legitimate policy reasons to tie, say, environmental standards, to trade agreements. Where else would we have the leverage to ask other countries to impose such standards. Krugman's answer appears to be no, but saying that we can't talk about anything but trade in the context of a trade agreement is unconvincing to me.

    Like Krugman (none / 0) (#16)
    by Big Tent Democrat on Sun Nov 25, 2007 at 12:19:03 PM EST
    I think it is a inefffective, even dangerous, approach.

    But I find it refreshing that soemone will argue that. Mostly those are phony arguments for people (and I mean unions and the like) who feign concern when all they care about is blocking trade agreements. they did not give a hoot about it when they were for domestic content legislation

    But of course by the logic you are suggesting, EMBARGOES make good sense.

    Who among those "fair traders" favor the Cuban EMBARGO? I dare say NONE. Proving the phoniness of their concern.

    Parent

    But what of the 90s Iraqi embargo? (none / 0) (#18)
    by andgarden on Sun Nov 25, 2007 at 12:25:09 PM EST
    Lots of people thought that was a good idea. What about Zimbabwe today?

    Is it not legitimate to say "we, as a nation, find your system of government and human rights record so abhorrent that we will not do business with you"?

    The counterexample is, indeed, Helms-Burton. But is that a type of embargo that could work? If not, what are our other options? Regime change through military force? (Yugoslavia vs. Iraq?) Do we just have to suck it up and accept that we can do nothing? That seems fundamentally illiberal to me.

    Parent

    How about the Japan embargo in the 30s? (none / 0) (#19)
    by Big Tent Democrat on Sun Nov 25, 2007 at 12:27:51 PM EST
    It is an interesting question.

    Parent
    Indeed. (none / 0) (#20)
    by andgarden on Sun Nov 25, 2007 at 12:33:11 PM EST
    But I will accept your premise that withholding free trade is a political/strategic act, not a legitimate trade policy.

    Parent
    Not a TRADE based trade policy (5.00 / 1) (#22)
    by Big Tent Democrat on Sun Nov 25, 2007 at 12:52:48 PM EST
    Legitimacy is not at issue.

    Parent
    Half a brain (none / 0) (#40)
    by bernarda on Sun Nov 25, 2007 at 02:01:29 PM EST
    Big tent democrat doesn't make sense as usual.

    He believes in "free trade" but also in embargoes?

    Of course he is so irrational it is difficult to understand what he might mean.

    Parent

    Half a brain (none / 0) (#45)
    by Big Tent Democrat on Sun Nov 25, 2007 at 02:45:30 PM EST
    I was discussing those who oppose the embargo and support "fair trade."

    Since I oppose both, the congitive dissonance is yours, not mine.

    Parent

    You lost me with one line (none / 0) (#17)
    by Dadler on Sun Nov 25, 2007 at 12:23:12 PM EST
    "A country's wage level depends fundamentally on the productivity of its labor force, not on its trade policy."

    Utter and complete nonsense.

    Wage levels depend on NOTHING more than the desire of employers to have a stable society.  This notion that money is some living thing that ebbs and flows based on some kind of organic process within itself is beyond absurd.  Money is worthless but for people's confidence in it.  It takes a lot of delusion and denial to think that the conifidence of people in money increases when they are forced to compete with foreign workers who can make much less for much longer.

    The entire argument about trade is as spurious as any going.  

    I'll repeat: the ONLY thing that gives money value is human thought.  And when you force people all over the globe to compete for basic needs by making all kinds of trinkets and other crap (which is mostly what free trade is about --very little of what we produce and trade in is actually necessary to our survival aside from food) then guess what?  People don't have faith that money is anything more than the carrot on the stick that is pulled further and further away from them.

    We still can't, for all our freedoms, comprehend that the creation of a stable world depends on nothing more than generosity.  As long as we think we must play a rigged game to survive, then we're doomed to the imagination bereft paradigms that are leading us to a very bleak future.  Nations should be independent first, interdependent second.  We should be encouraging local production and use.  Anything else is more of the same hegemonic circus and environment destroying b.s..

    You act as if one most only (none / 0) (#21)
    by masslib on Sun Nov 25, 2007 at 12:43:35 PM EST
    be absolutely in support of free trade or fair trade.  There are innumerable shades of gray. Indeed, even in most free trade agreements we see that the market is not left unfettered.  South Korea limits US auto imports, Canada limits US produce imports.  I think there is no good argument to oppose a global market, however the way we've dealt with the US losers of the expanding market has been poor.  I think it will be unions and environmental groups, however, as they continue to globalize, that will be the force for improved labor and environmental standards in the developing world, not governments.

    And why are they left unfettered? (none / 0) (#23)
    by Big Tent Democrat on Sun Nov 25, 2007 at 12:54:16 PM EST
    On TRADE policy only, it is black and white.

    But trade policyt is effected by other concerns.

    Mostly it is affected by Know Nothing, special interest concerns.

    the ones folks on our side do not like to talk about. Unions.

    Parent

    Fettered (none / 0) (#24)
    by Big Tent Democrat on Sun Nov 25, 2007 at 12:54:43 PM EST
    I mean.

    Parent
    Yes, I agree. I only meant (none / 0) (#31)
    by masslib on Sun Nov 25, 2007 at 01:13:39 PM EST
    we are not dealing within a context where there is totally free trade as it is. I do think there I also think we have to do a better job helping the trade losers in the US.    

    Parent
    Both true (none / 0) (#37)
    by Big Tent Democrat on Sun Nov 25, 2007 at 01:34:07 PM EST
    and irrelevant to my point in this post.

    Parent
    And, I also do think it appropriate (none / 0) (#32)
    by masslib on Sun Nov 25, 2007 at 01:23:43 PM EST
    that we ensure that american producers are allowed the opportunity to sell their goods in countries with which we've entered into trade agreements.

    Parent
    What is fundamentally (none / 0) (#30)
    by tnthorpe on Sun Nov 25, 2007 at 01:12:40 PM EST
    flawed in your argument is your idea of trade.

    While social dislocation associated with capital mobility is apparently the way of the world, --indeed the poor shall always be with us is what those with money tell us--politically responding to the social effects of trade is both irrational and stupidly emotional.

    So, objecting to the Jack Welch's of the world who want to find the lowest wages, least regulation, whatever the environmental consequence or social costs is 'irrational' because it interferes with 'trade', but asserting the priority of property over democracy and people isn't? This is why trade needs to be regulated, though certainly not abolished. It's about social equity, which even Henry Ford understood. Trade is as political as it gets and no one should labor under the delusion that there is an ideologically-neutral position on trade.

    Further, you say nothing about what sort of jobs are replacing the lost manufacturing jobs in steel and auto factories, for example. Pointing to a broad category of job creation tells nothing about wages, benefits. Though, the rising disparity of incomes and wealth in America might, but then that doesn't fit in with your free trade triumphalism.

    I utterly reject your framing of the debate as one between protectionism and trade. What we're seeing on a global scale is the sort of uneven development that Robert Brenner talks about, which Marx noted as integral to capital expansion.  In RB's book, he argues that older fixed capital maintains itself at its technological level, while newer plants become more efficient through technological innovation: "the combination of ever more advanced technology and ever less skilled labor" making up for transit costs to target markets. Paul Krugman queries "How does globalization affect the location of manufacturing and gains from trade? At high transport costs all countries have some manufacturing, but when transport costs fall below a critical value, a core-periphery spontaneously forms, and nations
    that find themselves in the periphery suffer a decline in real income. At still lower transport costs there is convergence of real incomes, in which peripheral nations gain and core nations may lose." [Quarterly Journal of Economics 1995, 110.4]

    Point is, global trade agreements are about managing the tendency toward overproduction as they are about anything else. It's far from irrational to object to policies that immiserate and dispossess, as is the case with Mexican peasant farmers, for example.

    Is it a blog-thing to shy away from complexity in favor of intellectually constricted false dichotomies? The more blogs I read the more I see this lame practice, and frankly, I think bloggers who indulge in such tactics are making a poor case for their arguments and their emerging medium.

    Shying away from complexity? (none / 0) (#35)
    by Big Tent Democrat on Sun Nov 25, 2007 at 01:32:04 PM EST
    Due respect, you describe your comment.

    There can be many justifications for "regulating" trade.

    Can we honestly discuss them?

    Do you accept the economics of trade as I present it? If you do, then we can move to part 2 of this discussion.

    Most "fair traders" do not.

    How about addressing that?

    Parent

    due respect (none / 0) (#38)
    by tnthorpe on Sun Nov 25, 2007 at 01:50:48 PM EST
    I find your response typical of free trade triumphalists.

    No, I don't accept your framing of the issue at all. It's free market Hegelianism that doesn't persuade me in the least.

    Parent

    Then we can not move on to Part 2 (none / 0) (#42)
    by Big Tent Democrat on Sun Nov 25, 2007 at 02:34:25 PM EST
    How do you propose to refute my thesis?

    Your original comment chided me for not discussing OTHER aspects.

    LEt's discuss the aspect I DO discuss.

    Parent

    My interpretation of them? (none / 0) (#36)
    by Big Tent Democrat on Sun Nov 25, 2007 at 01:33:25 PM EST
    Let me ask you a question, can you read English?

    If you can, then how in blazes can you argue that Blinder and Krugman do NOT support my thesis?

    Seriously, are you really unable to read?

    Alan Blinder: WSJ and WAPO (none / 0) (#41)
    by jerry on Sun Nov 25, 2007 at 02:21:57 PM EST
    I can't tell when your quote from Blinder was written.  That's one thing that really irks me about many websites.  GRRR!

    But in the spring, lots of people were talking about Blinder and Free Trade and Fair Trade.  That's why I said that I am not sure he would agree with you.

    Blinder says he's not for protectionism.  Fair Traders are not for protectionism either.  Fair Traders are for fair trade, that is, not providing the wrong incentives to industries and governments through the use of subsidizing inefficient behaviors.

    Fair Traders aren't trying to protect jobs by saying, let's tack on a tariff on automobiles to protect Detroit.  Fair Traders say that we shouldn't subsidize foreign manufacturers by ignoring the costs of pollution, worker safety, and living wages that we basically demand of our local manufacturers.

    That's not industry protection.  If a foreign manufacturer can provide worker safety, is not polluting their environment, is not using child labor and providing a living wage, then hell, competition is fair and good.

    But if they are failing to do that, then what is happening is we are subsidizing their products at the cost of our own ability to manufacture.

    It's the same argument for carbon taxes in the United States so that we have a fair competition in the United States between oil and other forms of energy production.

    Anyway, onto Alan Blinder who says he is a free trader, just like Dani Rodrik, and who says he is worried about outsourcing, just like Dani Rodrik, and he says he is trying to save free trade from itself, just like Dani Rodrik.

    Is Blinder a Free or Fair Trader?  Beat's the hell out of me.  I am just not certain that he is the free trader he is or was made out to be in your clip.

    Same goes for Krugman, but double.

    today Mr. Blinder has changed his message -- helping lead a growing band of economists and policy makers who say the downsides of trade in today's economy are deeper than they once realized.

    Mr. Blinder, whose trenchant writing style and phrase-making add to his influence, remains an implacable opponent of tariffs and trade barriers. But now he is saying loudly that a new industrial revolution -- communication technology that allows services to be delivered electronically from afar -- will put as many as 40 million American jobs at risk of being shipped out of the country in the next decade or two. That's more than double the total of workers employed in manufacturing today. The job insecurity those workers face today is "only the tip of a very big iceberg," Mr. Blinder says.

    Free Trade's Great, but Offshoring Rattles Me

    By Alan S. Blinder
    Sunday, May 6, 2007; Page B04

    I'm a free trader down to my toes. Always have been. Yet lately, I'm being treated as a heretic by many of my fellow economists. Why? Because I have stuck my neck out and predicted that the offshoring of service jobs from rich countries such as the United States to poor countries such as India may pose major problems for tens of millions of American workers over the coming decades. In fact, I think offshoring may be the biggest political issue in economics for a generation.

    When I say this, many of my fellow free-traders react with a mixture of disbelief, pity and hostility. Blinder, have you lost your mind? (Answer: I think not.) Have you forgotten about the basic economic gains from international trade? (Answer: No.) Are you advocating some form of protectionism? (Answer: No !) Aren't you giving aid and comfort to the enemies of free trade? (Answer: No, I'm trying to save free trade from itself.)

    Parent

    And? (none / 0) (#43)
    by Big Tent Democrat on Sun Nov 25, 2007 at 02:36:26 PM EST
    Explain to me how that contradicts his previous writings?

    He seems to emphatically deny it.

    Parent

    Yes, he does seem to emphatically deny it (none / 0) (#47)
    by jerry on Sun Nov 25, 2007 at 02:48:07 PM EST
    Just as fair traders deny that they are opposed to free trade too, and just as fair traders deny that what they are engaged in is protectionism.

    Apparently you don't believe the fair traders, why do you believe Blinder?  If you believe Blinder, and he says he is a free trader and not asking for protectionism, how come you don't believe the fair traders?

    Parent

    Because I read what he wrote (none / 0) (#48)
    by Big Tent Democrat on Sun Nov 25, 2007 at 02:53:58 PM EST
    which I just quoted to you.

    Do you read the links you provide?

    Parent

    Near as I can tell, by reading (none / 0) (#49)
    by jerry on Sun Nov 25, 2007 at 03:19:36 PM EST
    DeLong, Krugman, Rodrik, and the links that DeLong provides, the common view today is that Krugman and Blinder are coming around on free vs. fair trade.

    I think DeLong himself is a lot more wobbly on NAFTA and has said so.  (Though perhaps for different reasons.)

    Certainly Blinder's two articles caused a big hue and cry and regardless of his statements that he is a free trader till the end, lots of people questioned his sanity or questioned his commitment.  Just as you question the fair traders that say they are not for protectionism.

    And fair traders change (as in the population of fair traders change) over time.

    When I got my MBA, I was pretty much a free trader too.  That's what is taught in our ivory towers.  And so I understand and agree that industry protection, and protectionism is not a good thing.  Which is why I was not an industry protectionist then.

    But my actual real world experience as an engineer, along with my micro-econ understanding of incentives, along with my understanding and support of the carbon tax leads me to today's fair trade positions: we are in a race to the bottom, destroying all of the wage, health, retirement, safety, vacation, environmental protections that our fathers and grandfathers literally died for.  And we're doing that because our system is providing the wrong economic incentives, because we allow our higher costs that we see as a reasonable cost of production forced to compete with the lower costs of productions of populations that do not get the benefits of worker safety, living wages, environmental protection, 40 hour weeks, health care, etc.

    That's a subsidy we provide, not a tariff we charge.

    Fair trade is about stopping those subsidies by recognizing the externalities.

    I understand little of it beyond seeing jobs in my occupation wither over 20 years and the four courses I took getting my MBA and beyond reading DeLong, Krugman, Rodrik, and others (*) on a daily basis and try to glean what I can out of their jargon.  (Which is what I was doing when apparently you felt I should have been reading the race/iq blogs.)

    * Black, Sawicky, Drezner, Cowen, Crooked Timber, Calculated Risk, you know, all those guys.

    Parent

    Delong? (none / 0) (#52)
    by Big Tent Democrat on Sun Nov 25, 2007 at 03:27:08 PM EST
    The Rubin defender?

    Dude, do you read these people?

    Sawicky definitely. And Stiglitz is the leading economist in that school.

    And? They also do not deny what was written.

    they argue for other reasons, the optimal efficient trade policy is not the right one.

    See, you never got my point.

    The point here is let's move past the ignorqance on trade and discuss the REAL reasons why you oppose free trade.

    Some people have good ones worth discussing.

    You decded to cite Krugman and Blinder. Silly of you.

    Parent

    Actually, you cited Blinder.... But... (none / 0) (#54)
    by jerry on Sun Nov 25, 2007 at 04:07:01 PM EST
    You cited blinder with an old reference, I brought you up to date on the current state of Blinder, and even though it's clear that many people now understand he is not the free trader he once was (which was my point) you have to force his newer views into your old frame of reference.

    But more astonishingly, this is just like the iq/race thread.  I tell you, complete with links, exactly why I have come to the conclusion I have come to, and you still stand there and say project some agenda of your own on me.

    Last time, I was a racist, and so was everyone else who thought the various questions weren't settled yet and worth looking into, regardless of any of their statements or behavior.

    This time, you have me, contra to any post I have made, into still not willing to tell you my real reasons.

    I've given you everything you've refused to give me, my reading list, my "credentials", citations, my experience, and you don't like that you can't force me into your neat little boxes so you refuse to believe what I have written.

    So let's see the score:

    Blinder, you believe although everyone else tells you different, and even reading his article should tell you different.

    The fair traders you don't believe, though their rhetoric and behavior matches their statements.

    Me, who you can actually engage in a conversation with, you don't believe.

    Stop playing e-psychiatrist BTD, you're not very good at it, and it's a disingenuous way to argue.

    Parent

    When I read the fair traders (none / 0) (#50)
    by jerry on Sun Nov 25, 2007 at 03:20:46 PM EST
    I read that they are not for protectionism, and they're not!  Why don't you believe that?

    Parent
    Oy (none / 0) (#51)
    by Big Tent Democrat on Sun Nov 25, 2007 at 03:24:20 PM EST
    Because they support trade barriers.

    Did Blinder? No. He expressly said he did not.

    Honestly, I hope you are better at your job than you are at reading articles.

    Parent

    Indeed (none / 0) (#44)
    by Big Tent Democrat on Sun Nov 25, 2007 at 02:44:20 PM EST
    Blinder now is in sync with Krugman:

    What else is to be done? Trade protection won't work. You can't block electrons from crossing national borders. Because U.S. labor cannot compete on price, we must reemphasize the things that have kept us on top of the economic food chain for so long: technology, innovation, entrepreneurship, adaptability and the like. That means more science and engineering, more spending on R&D, keeping our capital markets big and vibrant, and not letting ourselves get locked into "sunset" industries.

    In addition, we need to rethink our education system so that it turns out more people who are trained for the jobs that will remain in the United States and fewer for the jobs that will migrate overseas. We cannot, of course, foresee exactly which jobs will go and which will stay. But one good bet is that many electronic service jobs will move offshore, whereas personal service jobs will not. Here are a few examples. Tax accounting is easily offshorable; onsite auditing is not. Computer programming is offshorable; computer repair is not. Architects could be endangered, but builders aren't. Were it not for stiff regulations, radiology would be offshorable; but pediatrics and geriatrics aren't. Lawyers who write contracts can do so at a distance and deliver them electronically; litigators who argue cases in court cannot.

    But even if we do everything I've suggested -- which we won't -- American workers will still face a troublesome transition as tens of millions of old jobs are replaced by new ones. There will also be great political strains on the open trading system as millions of white-collar workers who thought their jobs were immune to foreign competition suddenly find that the game has changed -- and not to their liking.

    That is why I am going public with my concerns now. If we economists stubbornly insist on chanting "Free trade is good for you" to people who know that it is not, we will quickly become irrelevant to the public debate. Compared with that, a little apostasy should be welcome.

    Like me, and Krugman, Blinder understands the failure of the Bush policies on non-trade issues is the problem. I MUST ask again, did you read my post?

    Parent

    Uh Armando... (none / 0) (#62)
    by ctrenta on Sun Nov 25, 2007 at 08:55:47 PM EST

    I think you can conduct yourself better than that. Talk Left can do without your zingers and quite frankly, that's not something I expect from this site.... or from a lawyer with your background.

    Please show respect for people you disagree with (no matter how ill-informed they are).

    Parent

    Whoa (none / 0) (#65)
    by ctrenta on Sun Nov 25, 2007 at 09:07:52 PM EST

    Let me ask you a question, can you read English?

    Seriously, are you really unable to read?

    Wow. Hey, go ahead and disagree with him all you want but let's stay away from Bill O'Reilly reactions BTD. It does readers no benefit to react to us like that.

    Parent

    Small Problem (none / 0) (#55)
    by jarober on Sun Nov 25, 2007 at 04:22:42 PM EST
    "George Bush pulled the US out of the Kyoto treaty, which requires 36 industrial nations to cut greenhouse emissions by at least 5 per cent from 1990 levels by 2012. The US president says Kyoto unfairly burdens rich countries while exempting developing ones such as China and India."

    The US has never been a party to the Kyoto Treaty.  During the Clinton presidency, Clinton decided not to submit it to the Senate after a 99-0 vote that made it clear it wouldn't be approved.

    Bush has done no more - or less - about Kyoto than Clinton did.  He's followed the same course, just with fewer soothing words to make the media and the left believe that "something is being done".

    Perhaps I'd support NAFTA (none / 0) (#56)
    by Alien Abductee on Sun Nov 25, 2007 at 04:41:10 PM EST
    if I lived in the US. I don't know. My perspective on this makes it hard for me to know how to discuss this here.

    My opposition to NAFTA comes from living in Canada and enjoying the higher standard of living that exists here for the vast majority of the population, and a government that defends the quality of life of its citizenry. A good life doesn't consist entirely (or even mostly) of being able to buy cheap shoes and TVs.

    The impact of free trade agreements doesn't stop at buying and selling. To make those the focus to the exclusion of other concerns requires downgrading everything else that ISN'T buying and selling, i.e., the ability of people to control the nature and quality of their local environment (not just in the ecological sense).

    Capital is free to move about freely and instantly for its' controllers' advantage. Workers and other citizens are not, and are increasingly trapped by restrictions on work and movement. They become captives within a system that allows global corporations to freely shift costs and benefits wherever they wish to their own advantage and no one else's.

    NAFTA has led to a cascade of effects. Pressure from the US govt and commercial interests about the difficulty of dealing with different regulations in different provinces has led to draconian and nonconsultative legislation like TILMA, which lets companies sue local governments over any regulation that "impairs or restricts" investment, trade, or labour mobility - thereby overriding citizens' local control of their own quality of life.

    Canada is under pressure to sell bulk water. Once/if it does it will lose under NAFTA the right to be able to control its export of water and potentially then even to regulate the quality of its own drinking water or related environmental effects without having to compensate any corporation that wants to be able to freely pollute water supplies.

    Might makes right in the end no matter what the law says, and the US only seems to want to play by the law when the law benefits it, otherwise it's quite happy to simply ignore legal rulings and act like a thug. There have been multiple rulings against the US that it continues to ignore in its endless softwood dispute with Canada, in which the US is trying to force Canada to do things its way, to manage its resources in the same  fashion it does or else be penalized.

    Canada's generous social programs like universal health insurance are in for similar treatment in the near future.

    "We do not hear about nakedly protectionist domestic content legislation anymore." We should, where the benefits for the average citizen are shown to outweigh the costs, instead of looking at the aggregate. If most of the costs fall on the citizens and most of the benefits fall on the global corporations, it's like saying the average income between you and me and Bill Gates is a billion dollars a year.

    I especially like (none / 0) (#59)
    by tnthorpe on Sun Nov 25, 2007 at 04:53:32 PM EST
    the last line.

    Parent
    I suppose what it comes down to (none / 0) (#61)
    by Alien Abductee on Sun Nov 25, 2007 at 07:13:13 PM EST
    is being in favor of protectionism where there's a massive imbalance between the economic might of the parties to a trade deal. Where the parties are roughly equal in economic clout but different, say the US and the EU, it seems the benefits may well flow the way it's discussed in this post and the articles cited.

    Where one party has massively more clout economically than the other though, it's not so simple or benign as theory would have it. It becomes just another instrument of coercion, of control and the exercise of power through economic means.

    Citizens aren't organized the way industry groups are to apply the pressure needed to protect their interests where these are in conflict with commercial ones, and "trade" becomes part and parcel of the whole fabric of social life under these agreements, overriding citizens' normal political means of influence and control.

    If there were any indication that US policy were turning toward vastly improving the social safety net, it wouldn't be such a problem, at least for more well-off countries like Canada. I'm not sure it's ever the proper template for trade with developing countries. It never allows them to properly develop for their own societies' domestic needs.

    I believe in rational economic nationalism, control of entry at borders, and immigration policies designed to support the needs of the nation (with additional categories for political and economic refugees as deemed to be affordable for the country).

    Parent

    From Paul Krugman today (none / 0) (#74)
    by tnthorpe on Mon Nov 26, 2007 at 05:58:40 PM EST
    Monday, November 26, 2007Listen to the show
    Cool the globalization rhetoric
    Globalization is turning into a hot-button issue for both Democratic and Republican presidential candidates. But commentator Paul Krugman says its effects on the U.S. economy are overblown.
    Listen to this Commentary
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    TEXT OF COMMENTARY

    KAI RYSSDAL: A funny thing's happening on the way to the Democratic presidential nomination. The Wall Street Journal pointed it out the other day. Iowa voters are worried about the after-effects of globalization. So worried that the major Democratic candidates are working overtime talking down free trade. Globalization is turning into a hot-button campaign issue. Republicans are having their problems, too.

    But commentator Paul Krugman says, its effects on the U.S. economy are overblown.

    PAUL KRUGMAN: I've been on the road a lot lately, talking to audiences about my hopes for a great revival of middle-class America, and I almost always get asked about whether such hopes make sense in an age of globalization. Is it really possible to make working Americans better off, when they have to compete with workers around the world?

    Yes, it is. The truth, is that international trade is less important, for good or for evil, than most people suppose.

    Let's start with the idea that globalization makes it impossible for American workers to earn good wages. The facts say otherwise. All of the world's advanced nations have to compete in the same global economy. Yet America's combination, of soaring incomes at the top and stagnant wages for most workers, is unique.

    We're told that unions, once a key support for wages, have become obsolete in the modern world. Yet the collapse of the union movement in America hasn't been matched elsewhere in the advanced world, even in our neighbor Canada. About 30 percent of Canadian workers are union members, compared with only 12 percent of workers here.

    And some of the benefits workers in other advanced countries take for granted are, if anything, competitive advantages in the modern world. For example, the Canadian auto industry benefits greatly from the fact that health care is provided by a national insurance program, rather than being a cost of production.

    So do we have to be protectionist to make workers' lives better? No. All the evidence says that you can be a full participant in the global economy while still paying good wages.

    On the other side, however, protectionism itself isn't as serious an issue as some economists would have you believe. The most recent estimates of the International Trade Commission show that the total cost to the U.S. economy of all the protectionist measures currently in place is only $3.7 billion a year -- less than one-thirtieth of 1 percent of GDP.

    So here's what I have to say about globalization: cool the rhetoric. It's a lot less important than you think.

    RYSSDAL: Paul Krugman's a columnist for the New York Times. His latest book is called "The Conscience of a Liberal."
    -----------
    For something that is supposedly an unmitigated good, PK offers a tepid endorsement at best.

    Parent

    Hot button (none / 0) (#75)
    by Alien Abductee on Mon Nov 26, 2007 at 08:49:02 PM EST
    Judging by the reaction to this diary here and on Docudharma - 100% vociferous disagreement - and an awful lot of what average people (i.e., non-experts) are writing on other left-leaning sites about free trade agreements and globalization, that's good advice from Krugman.

    Even if Armando is right about people's ignorance of economic theory, they're reacting to something. Maybe it's true that they could be brought around on the issue and that it's a matter of not understanding the whole picture. If you look at the polling on it it seems to indicate more that people aren't against freer trade per se, they just want to take it slower and more selectively. They're against how it's being implemented because they see the harm to themselves and their communities. It's not impossible that people will accept sacrifices like that if they know there's benefit in the long run, but obviously even the case for that just hasn't been made.

    I'm much more aware of Canada-US aspects of NAFTA than of the US-Mexico situation, but it seems like a misnomer to in any way shape or form even call it a "free trade" agreement. It's an agreement to integrate economies, with all the social dislocations that implies (at least for Canada, with 1/10th the population and economy).

    Parent

    To put it simply (none / 0) (#57)
    by tnthorpe on Sun Nov 25, 2007 at 04:46:28 PM EST
    "Free trade is good." It is a qualified good with the benefits of trade being very unevenly distributed across societies and within societies. Sassia Sasken has written on how globalization is concentrating power in executive branches of gov't across the globe. The rise of CEO pay is an example of what she's referencing. The unevenness can be mitigated by regulation to a degree, but such regulations aren't simply "protectionism."

    Fair trade is not protectionism by another name. It's a movement that wants to establish a more equitable distribution of social goods as a consequence of global trade. Equity in social capital would call for limiting environmental damage, providing education, sanitation, in short the rudiments of a civil society. It's not about a Marxist dream of a class-free society, but about the encouragement of the growth of a robust public sphere of which trade is an integral part. Democracy and capitalism aren't synonyms.

    If you had a definition of "good" perhaps it would help. If by that you mean there is a general benefit, for example to Mexican consumers as a whole even while Mexican farmers are forced off of the land: or to American consumers even as its rust belt expands, I would disagree. As the opposition leader in Costa Rica said, "If Nafta has been such a success, then why is the U.S. building a wall along the border with Mexico?"

    The fact of the matter is that NAFTA has immiserated hundreds of thousands of small farmers in Mexico. It has the potential to do more harm even as gross measurements such as GDP rise. Krugman recognizes that addressing the social dislocation attendant on trade is necessary, not because he thinks trade is bad, but because failure to do so may derail trade altogether. I do think that sacrificing huge groups of people to the altar of free trade is precisely what Hegel had in mind when he wrote of "history as the slaughter bench at which  the happiness of peoples, the wisdom of states, and the virtues of individuals have been sacrificed" [Reason in History (1953) p.27)]. Objecting to inequity is not the same as opposing trade. I have no crystal ball for the future, but I see no compelling reason not to attend to the suffering of those in the present, especially not on the basis of such bloodless abstractions as GDP growth.

    I would find your argument more persuasive if you could account for the Jack Welchs of the world who do use globalization to promote a race to the bottom. I find nothing in your argument that even acknowledges that as an issue, which is a serious deficit.

    Finally, the need to open markets is less about the value of the enterprise itself, i.e. "Free trade is good," as it is about capital's enduring tendency to overproduction, which was noted by Marx in the Grundrisse, and the Manifesto and is a staple of economic theory. Overproduction here is what is making it impossible for Mexican farmers to survive there, and in short forces export-based economies to run entirely roughshod over import substitution strategies. Further, such agricultural overproduction has come to depend dangerously on crop monoculture and genetically-modified seeds. It seems reasonable, for example, to limit the intrusion of copyrighted seeds into peasant farming economies for economic, cultural, and ecological concerns.

    Sorry to reply at such length, but the issue of globalized trade is a lot more than pro or con.

    this was meant to be a reply (none / 0) (#58)
    by tnthorpe on Sun Nov 25, 2007 at 04:48:45 PM EST
    to BTD's post #42

    Parent
    WTO rules screw the poor (none / 0) (#68)
    by bernarda on Mon Nov 26, 2007 at 03:08:24 AM EST
    Besides the cases mentioned above, 76 developing countries with trade agreements known as Cotonou are about to get shafted by the EU partially because of arbitrary WTO "free trade" rules.


    ACP Countries

    "At stake are the millions of jobs and thousands of companies in 76 of the poorest countries in the world that depend on exports to the EU. Kenya's horticultural industry, for instance, which lands beans on your plate and carnations on your dinner table. It's a sector worth $700m in foreign exchange to Kenya, but come January, Kenya could face a 10% to 20% hike in tariffs on all its exports to the EU, and that could be sufficient to bankrupt some of its most successful export companies, carefully nurtured through aid programmes - including those of the UK. It could be a story replicated across the globe from Lesotho to Namibia, from Papua New Guinea to the Pacific island of Vanuatu, from the Caribbean to Mozambique. The commission would stand accused of slamming the first tariff increase in more than 40 years on some of the least developed countries in the world."

    Ironic, "free trade" rules to cause an increase in tariffs on imports from poor countries. There are Economic Partnership Agreements that turn out to be neo-colonialism.

    "There are three big concerns on EPAs. First, every developed country has used tariff protection in its history to develop industry, but EPAs restrict that capability and could unleash a surge in European imports that could wipe out fledgling industries such as Kenya's dairy sector, as well as undercut prices of agricultural products. Second, governments themselves stand to lose a major chunk of their revenue that comes from tariffs; for instance, Zambia would lose $15.8m - the equivalent of its annual HIV/Aids budget. EU assurances that there would be aid to compensate only underline how this would increase dependency on aid. Third, the most complex and most important issue of all is how EPAs will affect regional trade. If you can get cheap widgets from the EU, why bother importing from your neighbour in Africa or the Pacific? UN studies have indicated that EPAs could lead to contraction in exactly those low and medium technology industries that are the basis for successful industrialisation."

    Parent

    Wow, immiserated really is a word (none / 0) (#67)
    by jerry on Sun Nov 25, 2007 at 09:54:42 PM EST
    Who new? (Okay, apparently you did.)

    immiserate

    im·mis·er·ate (ĭ-mĭz'ə-rāt') pronunciation
    tr.v., -at·ed, -at·ing, -ates.

    To make miserable; impoverish.

    [New Latin immiserāre, immiserāt- (translation of German verelenden, to sink into misery : ver-, causative pref. + Elend, poverty) : Latin in-, causative pref.; see in-2 + Latin miser, wretched.]
    immiseration im·mis'er·a'tion n.

    yeah it is (none / 0) (#69)
    by tnthorpe on Mon Nov 26, 2007 at 03:57:19 AM EST
    too useful these days though.

    Liked your links to Blinder et al above. I'm still trying to understand this whole contentious field, and found some very useful material at Paul Krugman's homepage. He at least explains instead of arrogantly patronizing, which is why he is such a good teacher on such a complex topic.

    Even (some) free traders are realizing that you can't just expropriate the livings of huge swathes of people and declare a general victory because some statistic embraced by the dismal science goes up.

    Parent

    How could you write (none / 0) (#76)
    by Alien Abductee on Tue Nov 27, 2007 at 01:56:08 PM EST
    this:

    With today's surrender by Democrats on Roberts and the NEXT SCOTUS nomination, we have now gone back in time.

    We are reentering the period between 1900 to 1937 in terms of the Constitution, though with some nods for modernity....

    I will focus on the only cure - a new FDR-like political revolution. that's what ended the previous Lochner Era.

    and approve of Federalist Society strategies to restore Lochner-era property rights through the back door using these agreements?

    I don't get it. I just don't get it.

    Free Trade (none / 0) (#77)
    by Kaviraj on Sat Dec 01, 2007 at 10:15:54 AM EST
     The so-called `free market'.

    This entire idea and all its consequances is determined and dictated by Big Business - firsst of all the banks, oil, media, pharmaceuticals, technology - to create a so-called Free Market, in which they are the only ones to sell their goods to everyone in all Countries and States. The true meaning of a Free Market is the availability of the best and cheapest products for all people. Each individual is supposed to have freedom, which is anchored in the Constitution. However, there are some obstacles to this goal. We shall enumerate them one by one.

    1. The State is that institution of society, which interferes with the Free Market through the direct excercise of coercion or the granting of privileges, backed by coercion. They do this in the form of tax, which is that form of coercion or interference with the Free Market in which the State collects tribute - the tax - allowing it to hire armed forces to practice coercion in defense of privilege and also to engage in such wars, adventures, experiments, `refoms,' etc., as it pleases and sees fit, not at its own cost, but at the cost of its subjects.

    2. The Constitution is that declaration of the rights of free men, which opposes that freedom by granting the State the right to tax them; to coerce them into accepting privilege and/or draft them into an armed force, to exert coercion, war and other adventures as marked above.
    3. The Judiciary is that institution of society, which interferes with free individuals through the form of direct coercion and force. It is hidden in the form of privilege, granted in the interests of corporations, as opposed to the interests of the subjects of the State, which the judiciary is supposed to protect.
    Privilege comes from the Latin privi, private, and lege, law. It is an advantage, granted by the State to an individual or a corporation and protected by its powers of coercion. It amounts to a law for private benefit.

    1. Usury is that form of privilege or interference with the Free Market in which one State-supported group monopolises the coinage and thereby takes tribute in the form of interest, direct or indirect, on all or most economic transactions. Which brings us to Landlordism, which is that form of privilege or interference with the Free Market in which one State-supported group `owns' the land and thereby takes tribute in the form of rent from those who live, work, or produce on the land. All of course backed up by coercion and force, so it is unavoidable.

    2. Tariffs are that form of privilege or interference with the Free Market in which commodities produced outside the State are not allowed to compete equally with those produced inside the State.
    Capitalism is that organisation of society, incorporating elements of tax, usury, landlordism and tariff, which thus denies the Free Market, while pretending to exemplify it.

    6. There are conservatives, liberals, socialists, communists, Marxists, Leninists, etc. Conservatism is that school of capitalist philosophy, which claims allegiance to the Free Market, while actually supporting ususry, landlordism, tariff and sometimes taxation. It is a form of Capitalism, like all the ones we named.
    Liberals follow that school of Capitalist philosophy, which attempts to correct the injustices of capitalism, by adding new laws to the existing ones. When the Conservatives pass a law, which creates privilege, the Liberals pass another law, which is supposed to modify privilege, leading the Conservatives to pass another, more subtly worded law, recreating privilege. This goes on till everything not forbidden is compulsory and anything not compulsory is forbidden.

    1. Socialism is the attempted abolition of all privilege, by restoring power entirely to the coercive agent - the State - which is behind the granting and maintenance of privilege. This converts Capitalist Oligarchy into State Monopoly. That amounts to white-washing a wall by painting it black. Communism, of whatever persuasion, is a form of State monopoly and thus Socialism in another form - mutton dressed as lamb.

    2. Democracy is that form of State organisation, that adheres in name to free elections, but coerces the voter, by making voting compulsory, or by adding the votes of the non-voters to those of the largest parties. Elections are the dummy by which the subjects are lulled into the sleep of promises. The time of rule is the rude awakening to the reality of coercion, taxes, landlordism, usury, and the fraud of electoral promises.

    3. Anarchism is that organisation of society in which the Free Market operates freely, without taxation, usury, landlordism, tariff, or other form of coercion or pivilege. The Right Anarchists predict that in the Free Market people would voluntarily choose to compete with each other, while the Left Anarchists predict they would voluntarily cooperate more often than to compete.

    4. We are being hoodwinked into this World Trade Organisation, which is the biggest threat to the Free Market and the largest Organisation of society that uses taxation, coercion, usury and landlordism, to keep us all enslaved to their idea of business.

    5. The entire idea of ownership of that which you cannot take along at death is utterly ridiculous. Just imagine - I go into the forest and take something - a tree - which is not mine to take and then have the audacity to demand gold or silver in return. That gold or silver was found on the ground or extracted from ore, also found by others. It belongs to the earth, yet we take it and declare privilege over the land where it was found and use force to keep others of `our property'.

    6. Revolution is anarchy taking power. Most revolutionaries were anarchists. Lenin, Stalin and Trotski were communist in name only - especially Stalin. His idea was to coerce the population and by using force, he ceased to be an anarchist. This is the problem all anarchists face, for it is a seemingly unsolvable riddle - a paradox. Once anarchy has power, it ceases to be anarchy, because it enforces an idea. Anarchy's goal is to do away with coercion. It seeks to do this by political means and these ideas require majority vote. Anarchism is opposed to rule by majority, yet for that to happen, the majority must agree to do it that way. Anarchism is really a self-defeating exercise, for the conundrum of selfrule cannot come about without all seeing the need for its general acceptance.