I think that, in general (not necessarily here), people take an absurdly simplistic view of a very complex subject.
There are many, many, people who consider that when a country can no longer compete economically with the world at large to produce some good or service, that the obvious and logical answer is to deny the rest of the world the opportunity to sell that good or service locally.
Yet this is very rarely a sensible solution. If implemented you get one, single, advantage: Some people continue to be employed in a non-competitive industry.
Outweighing this you have two main disadvantages:
Your trading partners will retaliate by blocking your exports to them. Whilst the net monetary result of this may be nil, it means that you have simply shifted the non-viability to some other industry.
Your domestic users of the good or service that you have protected will now have to pay a higher price than they would have to in an open market which means that their industry will no longer be internationally competitive.
So to protect one industry, you have screwed at least two more!
And that’s why virtually all governments are desperate to avoid trade wars.
And if you think: “Well, let’s just stop all international trade”, that means that every single industry that was using goods or services that could more economically be sourced abroad will now be forced to use more expensive goods and services sourced locally. And that means that all the goods and services produced locally will get even more expensive which means …
It would be a vicious circle that would see hyper inflation as wages rose to offset more expensive products which would see the products become even more expensive.
And that’s why you never virtually never hear an opposing view to the idea that international trade is a good thing from anyone who has even a basic grounding in economics.
Japan experimented with economic isolation after initial contacts with Europeans. They probably offer us the best real world example of why that strategy doesn’t work. They were so overwhelmed by the technological superiority of the “Barbarians” who showed up in the mid 19th century that they completely revamped their economy and became a world power in just a few decades.
The US could probably fare better than the Japanese, since we are a larger geographic land mass with more natural resources and more people, but it is always, always, always better to have access to more and varied raw materials, goods and ideas than fewer.
As some of us have said in other threads, the idea that free trade is good is akin to evolution being the best explanation for the diversity of life on earth. Thinking that isolationism is the key to prosperity is akin to being a Young Earth Creationist. There is no “controversy” to be taught about either evolution or free trade.
To put it bluntly: While isolationism might save American manufacturers of clothing, it would screw American manufacturers of airplanes and medical devices. Since, currently, Americans are much better at making medical devices than they are at making clothing (from an economic efficiency standpoint), this makes no sense.
Free trade does not exist. The countries we trade with do not practice it. Try and sell a car in China , India or japan. They have tariffed us out of competition. Other countries protect the jobs and industries of their citizens.
The concept sounds good ,but it has not been tried except by us because we don’t care about protecting American jobs and wage structures.
All good stuff about the advantages of free trade. But how do you address the problems we are facing. Do you think that we really have a ‘free trade’ situation where the US has the same access to foreign markets as they have to ours? Does ‘free trade’ include selling our resources as well as our products? I don’t mean selling ore, I mean selling our technology, or unenforceable licenses. Does it include importing products that are a danger to the public but are not subject to the regulations we place on domestic products?
Instead, American politicians have cared about providing the best possible standard of living for their citizens. My guess is that even a moderately poor American lives (and eats) better than a middle-class person in those countries.
Where do you get the idea that the US doesn’t export to China…or Japan?? Japan is our number 3 export partner and China is our number 4 (and rapidly growing). We don’t export cars to China, granted but…well, so what? We export computers/software, electronics, transportation, farm and heavy machining equipment, chemicals, and a whole host of other things.
And our market with the Chinese is growing. IIRC it’s something like $40-50 billion a year and projected to double in the next decade…at least.
A point of clarification: it does make sense, in certain circumstances, to protect industries vital to national security, from time to time. Although we mostly buy cheap steel from China, Korea, Taiwan, and India, it makes some sense to have a domestic capability as well, especially if we need to go on a carrier-building binge to thwart the dragon’s advances, probably over Taiwan. We don’t want to be in a position where we have to count on supplies from Russia et al in that situation, and steel mills have huge barriers to entry (ie, you aren’t going to put up a steel mill and get it producing in 90 days).
We do actually protect some industries. Agriculture, for instance. We also have put tariffs on things (Bush, for instance, had put steel tariffs in place at one point IIRC…a uniformly bad move, though ironic considering the folks in this thread who are for protectionist measures). I think there are some tariffs and other protections in place concerning hardwoods, for instance, that the Canadian’s (our number one trading export partner, IIRC) take exception too.
It’s good to look at the world with the blinkers on, isn’t it.
Check out US rules on procurement of a lot of military hardware.
The US diplomatic service isn’t run by a bunch of complete muppets.
You can bet your life that if there’s something the US cannot export to some other country because of restrictions of one sort or another then the US will have at least the same value of compensating restrictions.
You can bet your life that if there’s something the US cannot export to some other country because of restrictions of one sort or another then the US will have at least the same value of compensating restrictions.
Similarly, if there’s something that the US cannot block from country X you can bet your life that there are things that the US exports that country X cannot block.
Again, neither the US diplomatic service nor its trade negotiators are a bunch of muppets.
It counts when we’re comparing the economies with and without trade.
This whole thread is based on our beliefs and your argument has no more (or less) facts than mine. If we agree that the market seeks efficiency then we have to conclude that the current trade status is more efficient than no trade. (If that wasn’t the case, why are companies throwing money out the window to do trade?)
We’ll focus on clothing (we’ll pretend that American manufacturing could immediately ramp up and produce cloths previously made in China). Clothes made in the US will be more expensive than those made in China (otherwise we’d buy American-made clothes). That means a large chunk of people’s income goes to clothes, which means less money for luxuries like boats and manicures. Boat companies and manicurists lay off workers because fewer people are buying their goods/services, meaning less money in the economy. The economy won’t crash (some of those manicurists will be making shirts instead) but because the overall efficiency of the market has gone down, so will the economy.
Probably not violent agreement, becuase I think that your argument for prices rising is only half an argument. You seem to be completely ignoring -or dismissing- the notion that wages might be similarly effected by the movement of manufacturing to America. And the fact that a goodly number of manufacturers would rather search for that ‘sweet spot’ between maintaining current profits and losing the vast majority of their customers (which is explicitly what you say when you say that there’d be a huge hit to the average American’s standard of living), than just allow themselves to go bankrupt.
You seem to be completely ignoring these realities - comparative advantage is all well and good, but it’s not the sole reason that we have cell phones, televisions, and shirts. And as long as you fail to address these realities, either conceding them or presenting an argument that companies would be literally unable to make a profit without exploiting cheap foreign labor, I cannot agree that you have made a case for your position.
I don’t think this is even the argument being made.
Doubtlessly, some American companies would benefit from isolationism. But many would be destroyed. Boeing, for instance, and all its domestic suppliers would be utterly crushed, perhaps maintaining a shell of a business to keep US aircraft in the air with spare parts, but would certainly not be the company they once were.
This isn’t a case of “well, prices go up but jobs come back so it all evens out.” It would not all even out. Some jobs would come back but quite a lot of current domestic jobs would vanish, and those people would be forced to seek work in sectors that aren’t as comparatively effective. The Boeing engineers, office folks, managers, and workers put out of work by isolationism now have to find work in fields for which they are less suited and which the U.S. economy isn’t as good at. Your extra dollar gained making Dockers is losing you a buck thirty in the airplanes you’re not making anymore.
Who says that companies would be unable to make a profit without exploiting cheap foreign labor? And who says that cell phones, TVs, etc only come from foreign labor and would never be produced domestically in the OP’s scenario? Again, it seems as though you are only interested in knocking down strawmen…
The hit to the standard of living occurs because those goods that were able to be produced and sold cheaply (while still profitably) overseas now will be priced much higher, relative to the average American wage. Companies will ‘not allow themselves to go bankrupt’, as you put it. They will price their products at a level where they still a) make a longterm profit, b) can sell a reasonable amount, and c) in all liklihood, this price will be higher (relative to the standard American wage, which remember will certainly rise in this scenario) than those products cost today.
This means that less Americans can afford them. Which means that the American standard of living will suffer. Frankly, for an economist, this is like arguing the sky is blue.
Well isolationism is probably a good way to foment revolution, but protectionism or even a mild form of mercantilism would not be particularly harmful. Back when Japan was eating our lunch, people floated similar ideas and I forget who said it but if there was a trade war, we would win but noone would be better off.
“Protectionism” is harmful. How harmful it would be would depend on how much of it we did. Saying it wouldn’t be particularly harmful is like saying bleeding isn’t particularly harmful. You don’t have to bleed all that much before it becomes pretty damn harmful.
Because I I think that you’re pulling “c” from thin air, and without it your entire argument deflates. Especially since your conclusion explicity contradicts “b” to some lesser or greater degree.
If those companies could make their goods more cheaply in the US, they’d already been doing it. Forcing companies to produce goods in the US has to raise costs and thus raise prices.
