I’m not sure how big a factor this would be even if things were as the article says, since roughly 2/3 of all Japanese cars sold in the US are made in the US, but I’m not seeing how this is an unfair business practice. It sounds to me like both domestic and imported cars have roughly the same amount of taxes imposed on them. Aren’t most US goods produced for export taxed differently?
Life for the domestic Japanese consumer sucked during the days of heavy Japanese protectionism. It’s not something I’d be rushing to embrace.
Beyond that, it’d break any number of international agreements. Hell, Japanese protectionism broke any number of agreements, but we will willing to turn a blind eye at the time since we wanted to strengthen their economy.
Specific to the VAT… The fact that other countries are increasingly moving to consumption taxes instead of income taxes and taxes on production means that it would be smart for the U.S. to do the same thing. This is not an argument for protectionism, it’s an argument against it. If the lack of a VAT puts the U.S. at a competitive disadvantage, it’s similar to erecting trade barriers. But ultimately, if the VAT results in an imbalance so great that trade breaks down, that’s a trade barrier. And that’s a bad thing.
I’ve brought this up in other threads - the U.S. is becoming an outlier with its tax system. Where other countries are moving taxes out of the production chain, flatting their tax structures, and moving taxes to consumption, the U.S. is moving in the opposite direction. You should be lowering your corporate income tax, lowering your top tax brackets, and instituting more sales taxes to make up the difference.
The U.S. has developed a consumption-driven economy in part because the government has biased the field towards consumption. It has a current account deficit because U.S. policy rewards importing more than exporting. In the U.S, you can get tax breaks for consuming certain things (mortgage interest deductions, rebates for certain types of cars, etc). And the U.S. has the highest corporate taxes of any major country. The status of the U.S. as the safe haven for world currency allows it to borrow at lower interest rates than anyone else, which encourages increased borrowing.
All of these factors helped create the mess that exists now. They also cause trade imbalances. But they are not an argument for protectionism. Throwing additional protectionism into the works would only make the problem worse.
Aside from your excellent examples, I can offer another one: New Zealand farming. New Zealand had very protectionist policies along the lines of what ITR Champion is arguing for. It was believed that New Zealand’s farming was part of the culture, and that it couldn’t compete on its own against huge agri-businesses elsewhere, so it was decided that it was important to protect the New Zealand farmer with subsidies, price floors, and other interventions.
Farmers were given subsidies for fertilizer. So farmers over-fertilized, and polluted the rivers.
The New Zealand government gave out farm subsidies to sheep farmers based on the acreage of land that the sheep occupied, so farmers started putting sheep on land that was ill-suited to them, resulting in poor quality sheep and poor land use.
The New Zealand government set a guaranteed minimum price for sheep, with the government making up the difference if the world price was lower. The price was set per pound. And, feed was subsidized. So farmers started raising fat sheep that no one wanted to buy. The government was forced to buy the sheep and convert them into tallow.
This system continued, and as New Zealand farming grew less and less competitive, the demand for ever-more subsidies and protections increased. People who talked about getting rid of all the subsidies were thought to be crazy - why, New Zealand’s farmers were having trouble competing even with the subsidies! Take them away, and the farm industry would completely collapse.
But then New Zealand had a financial crisis and had to restructure its government, and farm subsidies ended. What happened? Some initial pain, followed by farmers being forced to compete on global markets. They improved their practices, increased efficiency, set the right balance between weight and quality of meat for sheep, stopped polluting their rivers, and only used land that made sense to use. New Zealand farming recovered, and became stronger than ever. New Zealand veal is now considered very high quality and commands high prices.
In fact, farming in New Zealand increased as a percentage of GDP after the subsidies were removed, and New Zealand is now one of the only countries where farming has maintained pace with other industries in terms of share of GDP. Protectionism in New Zealand was a disaster.
My favorite story, as told by Steven Landsburg from “The Armchair Economist,” is The Iowa Car Crop.
Yeah, mine too. That’s basically where I got it from. It’s a great analogy.
This is an excellent point. The USA in many ways has become too averse to change and Value Added Tax, the metric system and other such things which are desirable cannot be implemented. Europe seems much more willing to make the effort to make needed changes. VAT was a huge improvement over the complex system we had in Spain. Huge. But I cannot see the USA making the change because it is seen as foreign and complicated and because Americans just will not allow their politicians to lead them in these things. In the end the politicians have to pander to old ladies who want nothing to do with adapting to new needs.
One aspect that is a mess in the EU is agricultural subsidies and they need to be stopped. The whole thing is a waste of money and a source of corruption. People grow things nobody wants for the subsidies. The whole thing stinks and it needs to be stopped.
USA couldn’t control protectionisn properly any way. They still pay farmers not to grow corn here. Dumb. Politicians should be able to respond to change, if they are going to do something correctly.
again, the US auto industry is a special case. every assemnly line job supports about 7 external jobs-parts suppliers, salesmen, etc. If we allow the indusrry to die, we will have an immediate effect upon the dollar-our trade deficit will skyrocket. of course, we can finaqnce our imports by selling our country (which is what is happeneing). The fact is, we have an industry which is capable of building the cars people want. they just need some limited help to get through a rough patch.
Why can’t we outsource our lawyers to india?
How so? What makes it immune to the laws that govern the rest of the economy? Every industry is a special case in some way or other but they all obey the laws of the market.
This is true of every industry. Every industry buys from other industries and in turn sells to other industries.
Nonsense. As has been said, there are other automobile manufacturers in America. Protecting one manufacturer is directly harming the other one which is doing a better job. Terrible decision.
Why not? You don’t think some paralegal work could be done from India? I would not be surprised.
I could make a lot of answers to this, but the main point is as follows. The laws we have in the United States are not “onerous”. They are generally just and reasonable, though obviously with some exceptions. We have laws regulating pesticides because we want our environment to be clean, healthy, and safe. We have minimum wage laws because we believe that all working people should achieve a certain standard of living. We have laws outlawing child labor because we believe that child labor is morally wrong. And so forth.
Companies in other countries are not bounded by our laws. They can do things that we judge to be immoral. They can exploit child labor. They can pay their workers ten cents and hour. They can pollute the environment. This is what provides a significant portion of their competitive advantage. Their “efficiency” is really immorality. They do things that are wrong, and because of these wrong things they can produce goods at lower prices than companies that manufacture in America.
Of course some follow Sam Stone in saying “Why do I care?” Personally, I care because I care about what’s right and what’s wrong. The question of protectionism vs. globalization is not strictly an economic question, as I made clear earlier. That’s why I don’t accept your demand that we listen only to economists.
And where does this end? You want to enact tariffs on Chinese goods because they don’t have a minimum wage? France has a higher minimum wage than you, should they enact tariffs on American goods because they consider your minimum wage to be unethically low?
Their efficiency isn’t “really” immorality. It’s just efficiency, that in your opinion isn’t restricted by laws making for a more ethical environment. They disagree.
You don’t seem to understand what would happen if you had your way. If you implemented these tariffs, other countries would retaliate with their own. American workers would lose their jobs because their company is reliant on exports to, say, France. They’re no longer as efficient as the French company, and they go bust. And so on, until the entire world has an incredibly inefficient local economy, and we’re all a whole lot more poor.
And I only said we should listen to economists on economic matters. Globalization is undeniably an economic benefit. If you want to argue shooting oneself in the foot economically for an ethical reason, you can of course do so without consulting any economists.
I may have sided with libertarians on a couple occasions in the past but I really don’t view myself as one. I classify myself as a distributist. I have read some of O’Rourke’s columns, though not that particular book. I find him generally nasty and arrogant, and not at all convincing.
Currently I am a teacher, but I’ve worked a decent variety of jobs in my life. That includes working for big companies, small companies, and non-profits, and there’s no question in my mind that the big companies were the pits. My most memorable experience was working at a hotel run by the Aramark Corporation. They tried to screw the employees over in every possible way: underpaying, cutting hours, lying about benefits, charging hidden fees for travel and uniforms. All of the managers treated the employees with outright contempt, and the company tried to micromanage what we did in our spare time.
Yet I don’t build my impression of big corporations from my personal experiences, but rather from history and the news. Large corporations have always treated their employees disgracefully. If they have a chance to cheat employees out of promised wages, or save money by cutting corners on employee safety, or earn money by any other unethical means, they will do so. It has happened thousands of times, for centuries, all across the globe. The only way to prevent it from happening is by government intervention.
I do too. That’s why I think protectionism is one of the greatest evils currently bedeviling the third world, and that the protectionist’s notion of ‘right and wrong’ is twisted and perverse. Your morality seems to stop at your country’s border. You’d rather protect a local person’s $30/hr job than see someone starving to death in Africa be able to make a meagre living making 50 cents an hour.
Protectionists want to impose first-world environmental and labor standards on 3rd world countries, knowing damned well that this has the effect of cutting them off from world trade completely. Africa is destitute, and yet isn’t allowed to compete on world food markets because America and the EU subsidize their wealthy farmers to allow them to undercut the poor Africans just trying to stay alive. That’s evil.
Protectionists like to cling to high-minded ideals about ‘fair’ trade and protecting workers and the environment, but really what’s at the heart of it is a reactionary attempt to maintain what they’ve got at the expense of those who are trying to climb up to the same level through hard work. And in the meantime, they’re willing to sacrifice the very freedoms that got their countries where they are today - the freedom to trade with people to grow the wealth of the nation.
So sorry, you don’t get to claim the moral high ground here.
Because I question whether those who are employed in third-world sweatshops are finding it as great as all that. Frankly I don’t meet with any of those people in person. I doubt you do either. We’re limited to what a handful of journalists and researchers choose to tell us. I find that those who have a pro-trade attitude before they go to Asia to investigate the conditions generally come back with glowing reviews about how trade is improving everything. Those who have an anti-trade attitude generally are less optimistic about the situation. So who’s right? I’d guess the real situation varies quite a bit. The third world is a big place. No doubt some areas have improved due to globalization while others have gone downhill. I can point with certainty to some signs that it’s not all sunshine and roses. In some third world countries the people have voted out pro-trade governments and replaced them with anti-trade ones. Bolivia, Ecuador, …
You could try, you know, actually doing some research instead of guessing.
From the New York Times
You find the same story throughout the 3rd world. So-called ‘sweatshop’ jobs are in huge demand. People line up by the thousands trying to get work in them. Even in Bhopal India after the Union Carbide accident, there were protests to keep the factory open, because the jobs were desired so much.
This is not hard information to find. What you need to understand is that as bad as ‘sweatshop’ conditions are, they are infinitely better than the alternative for many people in 3rd world countries. Alternatives like climbing through dangerous, filthy garbage piles looking for things to sell, or subsistence farming with your bare hands in the hot sun 14 hours a day in an attempt to get enough nourishment into your body that you can survive to do it again the next day. Or, in the case of the women who are predominantly hired in textile sweatshops, the alternative is prostitution.
To people doing those kinds of things, the thought of sitting in front of a sewing machine 12 hours a day and earning twice the national income to do it is a dream. One that you would apparently like to take away from them.
I’ve met plenty. Like the folks who cleaned up our garden the other day. They want work, they don’t really give a shit about the conditions. If it pays, they’re in. The alternative for them is as Sam said, begging or looking through rubbish dumps or some other joy. These people are on the whole good people who just want a job to better themselves and their families. Many of them, especially the immigrants, are the among the nicest people I’ve met. You think they give a shit about minimum wages? They want a wage, any wage.
And you want to deny them it, so you can keep your cushy first world lifestyle without bothering with competition. As I said, so bloody sad.
Here’s an alternative take on sweatshop labor, as quoted from a lawsuit filed against Wal-Mart in international court. Here’s how a teenage girl in Bangladesh explained her experiences:
No doubt you folks will soon explain to me why this girl’s experience of being slapped and whipped constantly throughout a 12-hour day “is a dream”, and why it’s “sad” that I don’t want to see more of this sort of thing.
The Wal-Mart heirs make half a billion dollars each year for sitting around on their duff all day. They do this largely because the corporation has waged war against producers in the United States and has forced production to move to third-world countries, where they abuse, exploit, and torture workers to the maximum of human endurance. What I seem to be hearing is that they deserve to be praised for doing this.
Frankly, Discordia, I do not believe that the people of the third world have chosen you as their spokesperson.
Absolutely, those sweatshop jobs are shitty. But if people are lining up to get them and if raising their wages would make them uncompetitive, those sweatshops will close down and all that will be left will be combing the trash heaps and prostitution. I take that back. We could give them green cards.
FWIW,
Rob
Well then, I’ll leave it to you to explain why such people are lining up by the thousands to get those jobs, then?
For that matter, could you explain how industrialization in England took off? The conditions in the factories were even worse, since they didn’t have any modern conveniences. And yet, once industrialization started, people left the fields in droves to find work in the factories. They did so freely. Can you explain that? Do you think those people would have been happier if, say, an advanced alien race came down and prevented them from doing that, in the name of social justice?
It’s also interesting that the evidence that people greatly desire these jobs comes from fairly dispassionate observations such as those of journalists at the New York Times, but observations to the contrary tend to be dredged up by lawyers trying to sue Wal-Mart or by anti-globalization organizations with an axe to grind. Taking their word for for it is kind of like accepting tobacco safety data from RJR Reynolds.