Trump’s Tariffs and Trade

I have a piece in The Spectator on-line covering this tortured issue.  In it, I note

The action was not taken on anti-dumping grounds but under national security provisions, which are anchored on ‘domestic production needed for projected national defense requirement’

It does however cover a much wider range of products than previous goods covered under this (relatively rarely used) provision.  Moreover the President’s tweets and other remarks have suggested it has anti-dumping and anti-“fair trade” rationales, both of which are almost certainly spurious.  Even more so is the use of trade measures to favour allies like Australia and, worse still, to punish those nations that have a trade surplus with the US.

The World Trade Organisation allows exceptions to new tariffs when national security is at stake.  But other countries need to accept the merits of the action.  According to the New York Times, if the World Trade Organization rules against the United States, the Trump administration will have to decide whether to reverse its decision or go up against the organization. If the United States ignores or withdraws from the group, it could precipitate a breakdown in global trading rules and a new era of global protectionism.  Perhaps so but such ominous statements have made in response to earlier ill-judged measures that have turned back freedom of commerce but done so only temporarily.

Like every other economist, I fully support free trade and a dismantling of all barrier to trade both as a means of lowering costs to consumers and to ensure that capital is directed into areas that offer the best returns and hence highest levels of productivity and future wealth.  However there’s this anomaly

Finally, although free trade brings advantages to all and to the country that dismantles its tariffs, there is only one country, Hong Kong, that has actually achieved high living standards by relentlessly pursuing the policy.  In the nineteenth century, US tariffs were the immediate cause of the Civil War, while Germany and Japan prospered with them even before China, India and other countries adopted protective walls behind which their domestic industries grew.  Of course, the Soviets and countless centrally planned economic foundered on high tariffs accompanied by other measures and none of these success stories could have been possible without low levels of regulation.  But the issue is complicated.

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97 Responses to Trump’s Tariffs and Trade

  1. red breast

    “Like every other economist, I fully support free trade and a dismantling of all barrier to trade”

    “EVERY other”? Or am I being ignorantly pedantic?

  2. stackja

    Hong Kong works harder?

  3. max

    “But the issue is complicated.”

    because of self interest

    “Suppose, if that amuses you, that the foreigner inundates us with all sorts of useful commodities without asking in return — that our imports are infinite and exports nil. I defy you to prove to me that we should be poorer on that account.”
    Frédéric Bastiat

  4. max

    to save our electricity bulb producer and electricity company producer we should ask government to stop the sun from shining.

  5. Singleton Engineer

    “…none of these success stories could have been possible without low levels of deregulation.”

    Should the final word read “regulation”?

  6. egg_

    AFAIK all of our wind turbine towers are made from imported cheap Chinese – steel full of impurities – which will corrode internally.
    Nice scam.

  7. pbw

    But the issue is complicated.

    Surely not!

  8. Ƶĩppʯ (ȊꞪꞨV)

    “Suppose, if that amuses you, that the foreigner inundates us with all sorts of useful commodities without asking in return — that our imports are infinite and exports nil. I defy you to prove to me that we should be poorer on that account.”
    Frédéric Bastiat

    even great minds are wrong every now and then.

    Exporting cash for goods is a recipe for long term bankruptcy.

  9. So it would seem that tariffs on their own aren’t necessarily a problem, but ‘other’ measures that a country applies along with tariffs can cause/contribute to many problems. So it is complicated?

  10. Alan Moran

    Singleton Engineer. Oops and thank you!

  11. H B Bear

    Finally, although free trade brings advantages to all and to the country that dismantles its tariffs, there is only one country, Hong Kong, that has actually achieved high living standards by relentlessly pursuing the policy.

    This tells you all you need to know about free trade in the real world.

  12. This tells you all you need to know about free trade in the real world.

    And Hong Kong has ranked as one of/the most expensive city to live in for a long time.

  13. bollux

    Free trade can never work unless all countries exploit their comparative advantage to the full, and throw open their borders. China has cheap labour, Australia no longer has cheap energy but everyone still wants $60 an hour. China has no welfare to speak of, we are swamped by it. Free trade? Give me a break.

  14. Irreversible

    Interesting how people give in to the intrusive hand of government, in this case falling for “national security” red herrings. Trump will disc0ver that the Chinese have more trumps in their hand and will play them out to the end. He, on the other hand, will drop his pants at the first sign of risk to his ego.

  15. H B Bear

    And Hong Kong only worked because it was the defacto gateway into China for western countries for much of the time,

  16. struth

    You’re dead right.
    It’s more complicated than just Tarrifs.
    There was no such thing as free trade going on before the Trump Tariffs and it most certainly is a tortured issue.

  17. Let’s try a different angle.
    I’m hopping on a boat to go over to China so that I can stand there and look at this from a Chinese perspective.

    In 2000, her GDP was US$1.2 Trillion.
    In 2017, her GDP is US$12.2 Trillion.
    Per capita GDP in 2000 was US$959 (no typo)
    Per capita GDP in 2017 was US$8,836 (no typo)

    Millions have been lifted from poverty. Each year, more millionaires are created in China than anywhere else in the World.
    Yet…YET China does NOT engage in Free For All Trade. She has more restrictive trade practices, both overt and covert, than any of her First World trading partners.
    She also manipulates her currency by pegging the Renminbi to the US$.

    Convince the Chinese that they are doing this all wrong.
    Convince Joe the out of work American boiler maker that trade is equally good for both trading nations.

  18. Fat Tony

    When economists pontificate, I look at the world’s economies and recall the old saying:

    “The proof of the pudding is in the eating”

  19. Pyrmonter

    The circle has closed and the right has become the left, recycling the nonsense of Ha Joon Chang and the New Listians. They say liberalism is dead; when commentators like AM adopt that reasoning, they’re probably right. The actual Austrian Austrians – they who pointed out the nonsense of the German Historical School – must be rotating slowly in their graves.

  20. Driftforge

    Like every other economist, I fully support free trade and a dismantling of all barrier to trade both as a means of lowering costs to consumers and to ensure that capital is directed into areas that offer the best returns and hence highest levels of productivity and future wealth.

    Interesting shibboleth.

  21. Pyrmonter

    To you New Listians:

    (a) how has any government solved the knowledge problem / socialist calculation problem to work out which industries are ‘winners’?

    (b) having chosen your winner, how have they resolved the domestic political economy problems of protection: that the value accrues to the industry, not consumers?

    (c) who suffers from foreign protection: the rest of the world or the foreign jurisdiction that ‘protects’?

    (d) (wearily pre-empting the inevitable) Cite one documented example of sustained, real-world international trade predation in which a protectionist government has reaped monopoly rents from successfully eliminating competitors. OPEC tried, and even it – with the backing of several terror states – hasn’t succeeded.

  22. classical_hero

    Baa Humbug, only if you’re connected to the Chinese Communist Party have you seen tangible increases in wealth. It’s not really been organic growth and eventually it will run out of steam like every other planned economy. China could be growing in a better way to go grow, but eventually it will end.

  23. Driftforge

    Baa Humbug, only if you’re connected to the Chinese Communist Party have you seen tangible increases in wealth. It’s not really been organic growth and eventually it will run out of steam like every other planned economy. China could be growing in a better way to go grow, but eventually it will end.

    Wistfully hopeful that the dogma is correct in spite of ongoing, sustained evidence to the contrary.

  24. Ƶĩppʯ (ȊꞪꞨV)

    To you New Listians:

    (a) how has any government solved the knowledge problem / socialist calculation problem to work out which industries are ‘winners’?

    (b) having chosen your winner, how have they resolved the domestic political economy problems of protection: that the value accrues to the industry, not consumers?

    (c) who suffers from foreign protection: the rest of the world or the foreign jurisdiction that ‘protects’?

    (d) (wearily pre-empting the inevitable) Cite one documented example of sustained, real-world international trade predation in which a protectionist government has reaped monopoly rents from successfully eliminating competitors. OPEC tried, and even it – with the backing of several terror states – hasn’t succeeded.

    you are taking an extreme opposite to argue against tariffs on china. Nobody is saying we should move to central planning or monopoly rents.

    THe facts are China is a hostile, communist dictatorship with a new emperor for life. China has stolen trillions of dollars of IP and uses it with its cheap labor to hollow out competing industries.
    CHina uses its surplus dollars to buy influence globally and to undermine the influence of the West. China has become increasingly belligerent towards the west with its new found influence.

    The simple fact is China needs to be punished for its misdeeds. And if that means that China is going to be forced to wear the effects of its steel overproduction then that’s a small step in the right direction.

  25. classical_hero
    #2660264, posted on March 14, 2018 at 10:37 am

    Baa Humbug, only if you’re connected to the Chinese Communist Party have you seen tangible increases in wealth.

    Oh c’mon. You can’t possibly deny that hundreds of millions have benefited and benefited greatly. The evidence that tens of millions travel to cities to partake in this great growth can’t be ignored.

    It’s not really been organic growth and eventually it will run out of steam like every other planned economy. China could be growing in a better way to go grow, but eventually it will end.

    Eventually? In the mean time, the 5 year old Chinese kid in 2000 is now a 22 year old middle class adult with a tertiary education most likely received from a Western nation.
    At the same time, the 45 year old boilermaker from Hokey Palokey Pennsylvania has been out of work for years, no chance of becoming a computer programmer and wracked by prescription drugs due to depression.

    Eventually? Eventually the Sun will engorge Earth. Eventually indeed.

  26. Egg;

    AFAIK all of our wind turbine towers are made from imported cheap Chinese – steel full of impurities – which will corrode internally.
    Nice scam.

    And here’s me thinking that steel had to meet certain grades/specifications for engineering stuff.
    So the Chinese have been fraudulently passing off shit steel as being up to a standard when it is not?

  27. Tel

    Of course, the Soviets and countless centrally planned economic foundered on high tariffs accompanied by other measures and none of these success stories could have been possible without low levels of regulation.

    Did the Soviets actually have high tariffs? I thought it was basically impossible to import anything.

    Not sure the concept of a tax on imports makes much sense when there are no imports, and also the government owns everything and tells you what to do all the time.

  28. Colin Suttie

    “So the Chinese have been fraudulently passing off shit steel as being up to a standard when it is not?”

    Some Chinese mills have indeed been doing this for at least the 20+ years I’ve been in engineering.
    Forged certificates are not unheard of, for example on one project I worked on, the certificates for materials to be used in an extremely high pressure / low-temperature application were forged – the failure would likely have been catastrophic if the forgery hadn’t been detected just in time.

  29. struth

    THe facts are China is a hostile, communist dictatorship with a new emperor for life. China has stolen trillions of dollars of IP and uses it with its cheap labor to hollow out competing industries.
    CHina uses its surplus dollars to buy influence globally and to undermine the influence of the West. China has become increasingly belligerent towards the west with its new found influence.

    The simple fact is China needs to be punished for its misdeeds. And if that means that China is going to be forced to wear the effects of its steel overproduction then that’s a small step in the right direction.

    You won’t get any traction with this.
    Blinkers are on.

    There hasn’t been an economist explore free trading with protectionist and corrupt communism with tentacles into other government’s nations and supported by the U.N. by hobbling those nations from competing.
    The Chinese can throw free and fair trade out the window, cheat and corruptly become a virtual monopoly supplier, and defenceless trade and no retaliatory action against them and the global socialists supporting them, is called free trade to our resident theorists.

    I am starting to believe that it relates to the differences libertarians and conservatives have when it comes to rule of law.
    But to accept criminal activity and to keep trading with it, is basically supporting a black market.
    Because that is what buying Chinese is.
    Theorists have no concern why those things on the black market are cheaper, or what the intentions are of those suppliers.
    A bow tie wearer wrote something down and it is therefore one of the ten commandments of ecomomic success.
    God wrote though shalt not kill.
    So do nothing when the Enemy goes to chop your economic head off.
    They’ll lose in the long run, the bow tie wearing, economic lord hath written.

    We need real world observation now.
    Not gutless wankers screaming from their theory books and blinkers.

    So again I ask.
    Was there free trade before the Trump pro western Tariffs?
    Is it fine to buy the stolen TV from the criminal down the pub because it is cheaper, and therefore theory being theory, you should be free to do that?

    Will a theorist, specifically answer just yes or no to those questions?

  30. And here’s me thinking that steel had to meet certain grades/specifications for engineering stuff. So the Chinese have been fraudulently passing off shit steel as being up to a standard when it is not?

    That happens all the time. Australian companies that have products made in China have to have representatives on site all the time to ensure that materials used are to the required specifications. You would need to do the same with raw materials if you want to ensure that the material meets design specifications.

    I was discussing this years ago with a Holden or Ford engineer (can’t remember which company) and they were making brake assemblies in China at the time. The company had to send engineers to China and watch them like a hawk because they were predisposed to use non-compliant materials at every opportunity because it was cheaper. The Australian Army had to do likewise with some of their trailer manufacturing.

    Remember the recent issue with Chinese supplied electrical wiring: https://www.smh.com.au/national/faulty-electrical-cabling-in-40000-homes-may-start-failing-next-year-20150226-13plo9.html? Yeah, that conformed to Australian standards.

    If China can pass off crap materials, they will.

  31. Ƶĩppʯ (ȊꞪꞨV)

    Washington is targeting Chinese high technology companies to punish them for China’s investment policies that effectively force US companies to give up their technology secrets in exchange for being allowed to operate in the country along with other allegations of intellectual property theft.

  32. Tel

    Eventually? In the mean time, the 5 year old Chinese kid in 2000 is now a 22 year old middle class adult with a tertiary education most likely received from a Western nation.
    At the same time, the 45 year old boilermaker from Hokey Palokey Pennsylvania has been out of work for years, no chance of becoming a computer programmer and wracked by prescription drugs due to depression.

    This is exactly why it’s worth taking a look at the weaver riots of 1826 in Lancashire.

    Point is that the introduction of power looms made labour MORE PRODUCTIVE, and as an immediate consequence the wages of weavers went DOWN DRAMATICALLY. The reason of course is that the businesses running power looms had a large pool of experienced weavers to employ from, while the market price of their finished product dropped significantly (greater supply of cloth pushed the demand curve down into low prices). All the weavers still using hand looms were no longer profitable, forcing them to either upgrade to a power loom (for those who could afford it) or seeking employment (for those who could not).

    So this economic story about “wage rises must be exactly linked to worker productivity” does not work for an industry that becomes automated. As least not immediately.

    Eventually, the pool of weavers got smaller, as they either starved, or moved to other occupations. Today we enjoy extremely cheap cloth compared with most of history, and all of it made by machines. Thus, the share of the profit shifted from the person working to the person who owns the machine, and labour is available in other industries to do whatever else needs to be done.

    There’s another related economic question, which makes this even easier to understand:

    Suppose pigs eat corn and the price of corn suddenly goes up, what happens to the market price of pork?

    The answer is that the price of pork goes down in reaction to the rise in price of corn, then pork prices gradually to up again if the corn price stays high, to settle (eventually) into a new equilibrium at a higher price than to start with.

  33. struth

    And here’s me thinking that steel had to meet certain grades/specifications for engineering stuff.
    So the Chinese have been fraudulently passing off shit steel as being up to a standard when it is not?

    They most certainly have.

    What do you people think has been happening?
    What rock have you been hiding under?

    Even when it comes to transport, we are getting trailers dumped cheaply on our shores that fall apart.

    Many dumb bastards in the transport industry had that same mentality.
    Oh, they wouldn’t be allowed to sell them here if they were shit, ADR’s and strict Australian Quality control wouldn’t allow it.

    BUUZZZ….wrong.

    It’s called corruption.
    What don’t you get?

    ADR’s are there to make Australian manufacturing obsolete, and to be able to be applied to importers our socialist rulers haven’t done deals with.

    The standard of Chinese tractors I was picking up from the Brisbane docks have to be seen to be believed.
    They hadn’t even trimmed the excess windscreen rubber off, bits lose, wire without conduit, and weighed so poorly it was dangerous to load on a drop deck.
    Steering and brakes were woeful.
    This is precisely the point I am making.

    They are winning through corruption and bribes to pricks like Dastyari, support through the strangulation of the west via the U.N., and our own accomplice socialists.
    It’s as corrupt as hell, but we should keep buying from them because….. cheap!!!!!!
    You theory falls down when you realise they are fast becoming a monopoly, and it won’t be free trade then, as it isn’t now.
    Waking people up to Chinese and U.N. corruption, is a very very good thing.
    Remember, you are siding with people like Max, cut and paste theorists who have NFI, and as he proves, can only regurgitate someone else’s words, as that’s all he knows about the world.

    FMD.

    The fact that these tariffs are not universal, should tell you all you need to know.

  34. And here’s me thinking that steel had to meet certain grades/specifications for engineering stuff.
    So the Chinese have been fraudulently passing off shit steel as being up to a standard when it is not?

    I used to think I was naive about certain people, but the dishonesty of some still takes me by surprise.
    I find it difficult to believe someone would fraudulently sell steel for a bridge that wasn’t capable of supporting the required load.
    It gives me something to be surprised about every day.
    I agree with the ?Roman idea that if you built a wall for someone, and the wall fell down and killed one of their family, then one of yours would be killed as punishment.
    But then I think the penalty for treason of being tied in a sack with a rooster and a dog, then chucked in the Tiber to have them tear you apart as they drowned, harsh but fair.

  35. max

    trade always balance.

    I get something you get something.

    budget and trade accounts are different beast

    “Annual income twenty pounds, annual expenditure nineteen pounds, result happiness. Annual income twenty pounds, annual expenditure twenty one pounds, result misery.”

  36. struth

    I used to think I was naive about certain people, but the dishonesty of some still takes me by surprise.
    I find it difficult to believe someone would fraudulently sell steel for a bridge that wasn’t capable of supporting the required load.
    It gives me something to be surprised about every day.

    The commo’s win because of our inherent decency.
    We cannot conceive of their tribal evil.
    We really can’t.

  37. Tel;

    The answer is that the price of pork goes down in reaction to the rise in price of corn, then pork prices gradually to up again if the corn price stays high, to settle (eventually) into a new equilibrium at a higher price than to start with.

    Doesn’t the price go down in relation to cost of feed, not as a reaction to the feed cost, but because farmers can afford less feed so they put more pigs on the market?
    A subtle difference, but IIRC that was one of the first things to happen when the crops did poorly in command economies.

  38. max

    Friedman, paraphrasing 19th-century economist Henry George, said:

    “In time of war, we blockade our enemies in order to prevent them from getting goods from us.
    In time of peace, we do to ourselves by tariffs what we do to our enemy in time of war.”

    Tariffs may be good politics, but they are bad economics.

  39. max

    Trump vs Friedman – Trade Policy Debate

  40. Struth;

    What do you people think has been happening?
    What rock have you been hiding under?

    It’s called corruption.
    What don’t you get?

    Remember, you are siding with people like Max, cut and paste theorists who have NFI, and as he proves, can only regurgitate someone else’s words, as that’s all he knows about the world.

    FMD.

    Hey!
    Go fuck yourself, mate.

  41. max

    Milton Friedman debates a protectionist

  42. max

    Tariffs are a way of complaining about getting goods and services too cheaply. Please charge us more!

    Protectionism is, as Albert Jay Nock accurately stated, “the robbery of the domestic consumer by the domestic manufacturer.” The protectionist wants to use state violence to prevent people from making deals with manufacturers and retailers from outside the United States who sell products that are cheaper and/or better than those produced domestically.

  43. RobK

    So the Chinese have been fraudulently passing off shit steel as being up to a standard when it is not?
    If the new Perth Children’s Hospital is any indication: the main contractor John Holland was bought by Chinese interests. It is a year or two over schedule. There were problems with asbestos in cladding panels and lead in brass potable water fittings leaching lead into the water supply….many thousands of non complient fittings.

  44. struth

    trade always balance.

    I get something you get something.

    budget and trade accounts are different beast

    “Annual income twenty pounds, annual expenditure nineteen pounds, result happiness. Annual income twenty pounds, annual expenditure twenty one pounds, result misery.”

    You can almost see the eyes roll as the dribble hits the keyboards.

    You theorists, this is how you appear to others.

    Max is yours, and you are Max.
    Can you not see the error of your ways?
    Do you want to end up like this?
    Blubbering cut and paste theory dribblers, fearing grown up, real world decisions?
    This world is not black and white, and one theory doesn’t cover the universe.

  45. max

    “the US running record deficits”

    how is trade balance between california and texas ?

    how is trade balance between You and Walmart ?

    should we employ some bureaucrat to start counting that ?

    “Suppose, if that amuses you, that the foreigner inundates us with all sorts of useful commodities without asking in return — that our imports are infinite and exports nil. I defy you to prove to me that we should be poorer on that account.”

  46. Cynic of Ayr

    Like every other economist, I fully support free trade and a dismantling of all barrier to trade both as a means of lowering costs to consumers and to ensure that capital is directed into areas that offer the best returns and hence highest levels of productivity and future wealth…
    I suppose that’s all well and good, until the day comes – if it ever will – you start thinking about your own country, your own people, rather than another country and people.
    It’s not a nice thing to do, to advocate for the reduction in your own country to enhance another.
    As far as Like every other economist, that’s bullshit! None of you can agree on anything, because your profession is an airy-fairy, pie-in-the-sky thought process, with a million answers to the same question.
    None of you make anything to sell, yet you still insist on telling others how to do it.

  47. struth

    Hey!
    Go fuck yourself, mate.

    I’ll only apologise if you were being sarcastic.

  48. Roger.

    But the issue is complicated.

    Is that economist speak for we’re not playing on a level field?

  49. RobK

    The Paris agreement and CO2 targets are a trade disgrace.
    Many other UN agreements are also a trade disgrace. These deals make a mockery of the concept of comparitive advantage and religate economics to a cloak and dagger affair with no bearing on the theoritical mechanics of trade. The more convoluted it becomes, the more it plays into the hand of those proposing a one world government solution managed by technocrats.

  50. MPH

    Nations don’t produce; nations don’t consume; individuals do. A country could run a trade surplus and still have poverty if one particular export industry was highly productive. You can’t look at the aggregate in these things, you have to look at the increment/margin.

  51. This free trade talk is beginning to sound like the open borders talk; both are supposedly good for the economy and country, with no downsides whatsoever.

  52. RobK

    “Suppose, if that amuses you, that the foreigner inundates us with all sorts of useful commodities without asking in return — that our imports are infinite and exports nil. I defy you to prove to me that we should be poorer on that account.”
    You describe the ultimate welfare state.
    A caged animal might fit this senario, or a powerless godess. In any case it is a utopian fantasy of no practical value. Enjoy your free lunch.

  53. mh

    The cost of Trump’s tariffs

    Michael McLaren chats to The Australian’s Economic Correspondent, Adam Creighton.

  54. RobK

    how is trade balance between california and texas ?
    Moderated by duely elected federal and state governments with the power to tax and legislate. These arguments are becomming weird.

  55. max

    Professor Friedman clarifies the motives of protectionism and explains why free trade policies benefit the masses. (1978)

  56. RobK

    how is trade balance between You and Walmart ?
    I take it this is a US grab, in which case “you and Walmart” are operating in the same jurisdiction of state and federal governments democratically elected.
    The UN equivalent has no such jurisdiction over players. Internation Agreements are generally not law and have no formal consequence. You are sadly misunderstanding international obligations on trade by conflating them with trade within a jurisdiction. There is no valid comparison.

  57. RobK

    “In time of war, we blockade our enemies in order to prevent them from getting goods from us.
    At the risk of stating the obvious; this is to maximize our comparative advantage by reducing any advantage the enemy may have gained from our production. Its useful if you produce a lot of important stuff.
    In time of peace, we do to ourselves by tariffs what we do to our enemy in time of war.”
    Again, at the risk of stating the obvious; we do this to make our economy less prone to trade embargo in time of war or other risks involved in too much dependency on a foreign power. It has to do with the abilty to protect sovereignty.

  58. struth;

    I’ll only apologise if you were being sarcastic.

    Of course I’m being sarcastic, dumbarse.
    Now go for a frigging run along Cottesloe Beach with Arky and Monty.
    Bring your own defibrillator because Arky doesn’t give a shit.

  59. struth

    Of course I’m being sarcastic, dumbarse.

    Well then, I humbly and sincerely apologise to you.

    Ooh, that hurt.
    I’m going off to sulk.

  60. Nato

    That was a really helpful and informative article. Could I just quibble with one word in the introduction? It’s INTERESTING but how is it IMPORTANT to us down under?
    Let THEM do what THEY want. If I understand your position correctly, they are the ones who will suffer for it anyway.
    I am genuinely puzzled by your language, here.

  61. RobK

    Max,
    to save our electricity bulb producer and electricity company producer we should ask government to stop the sun from shining.

    I doubt we produce a light bulb any longer. The government has devised a work-around for the sun shining for our electricity producers by subsidizing wind and solar electricty generation. It is funding the subsidy by placing a massive tariff on coal. Tell me again how tariffs are counter productive. I fully agree. Friedman is right in an ideal world.

  62. Being obstinate and stupid is no way to go through life son.

    https://youtu.be/mkoPq5AOCOA

    A nation trading with other nations is no different (in principle) than an individual trading with other individuals.
    A person sells his skills and labour to another and receives some money for it.
    He then spends that money with others.
    If he manages to spend less than he earns selling his labour, he gets to save a little. We applaud and encourage that. ALL economists agree saving a little of your earnings is good economic sense.
    A person who continually spends more than he earns, goes into debt. That debt has to be serviced. If that person continues to rack up the debt, ALL economists agree that this is not sustainable.

    A nation sells stuff they’re good at making and gets paid for it.
    They then spend that money with other nations buying stuff they’re good at making.
    If a nation spends less than it earns, they accumulate foreign reserves in their treasury.
    If a nation spends more than it earns, their foreign reserves are depleted. In order to keep trading, it has to offer treasury notes and bonds to foreigners. That’s called debt and it has to be serviced.

    Debt accumulated by individuals…bad, bad BAD BAD.
    Debt accumulated by nations…meh!, no biggie. You can do it forever.

    There are 4 ways to bring back the money that’s left your shores.
    1-) Issue debt and service it. (Well hello America)
    2-) Sell assets like mines, buildings, ports etc etc (Well hello Australia and Canada)
    3-) Somehow sell more stuff, even if you have to use your economic clout to convince your trading partners they should buy more from you. (Well hello Trump)
    4-) Get your trading partners to make some of their stuff in your country so that you buy less from them even if you have to use your economic clout to convince them. (Well hello again Trump)

    1 and 2 have been used for a long time. Real life evidence suggests these are not working too well. Stagnant growth, stagnant wages, falling labour participation rates, growing debt growing welfare etc etc. (Well hello The West).
    Trump is now trying 3 and 4. Will it work? Don’t know. Some of us think it might and is worth trying. (He has already convinced some manufacturers to relocate to America.)
    Others say 3 and 4 violate their textbook theories even though they can’t offer any real life evidence to support their theories.

  63. RobK
    #2660450, posted on March 14, 2018 at 1:42 pm
    Friedman is right in an ideal world.

    Friedman maintained that a nations currency always came back because it couldn’t be used domestically by others.
    He didn’t discuss and was never challenged on the US$ being a foreign reserve currency, hence didn’t have to come back. It could be used between other trading nations and kept in treasury vaults as reserves just like gold.
    At mo, annually $800B in US currency doesn’t come back. This is not sustainable.

    I’m open to be convinced it is sustainable and not a long term problem, but no one has shown evidence to support this.

  64. Arky

    Free trade might be fine.
    If we had spent the last few decades getting ourselves competitive.
    But haven’t you dumbarses noticed that we have had socialists, fabians and lunatics in charge?
    Government is 40% of the economy and rising.
    Trade unionists moved from the industries they helped kill into collaboration with state governments on great big infrastructure ripoffs.
    Don’t you silly people see them as you drive from your inner city homes to your universities?
    Hint: good working men never used to wear florescent pouf pink and stand about under a self descriptive sign saying “SLOW”.
    You’re going to pay for it one way or another.
    You might as well pay the extra for Australian made and enjoy the reduction in risk of having some creep break into your house, smack you on the head with a hammer and root your labrador.

  65. Arky

    The sooner your philosophy takes into account the fact that there are people within our walls actively trying to destroy the joint, the better.
    Policies that keep the maximim number of citizens productively employed and out of universities, all the more the betterer.
    There is a reson why the left kept blithering on about “the clever country”.
    You were idiots to fall for it.

  66. struth;

    Ooh, that hurt.
    I’m going off to sulk.

    Take your defib with you.

  67. Arky

    I know what you’re thinking.
    “If we hold this course long enough, the country goes bankrupt, the social welfare state ends, and we get to tell everybody, ‘We told you so”.
    What a stupid, lazy idea.

  68. RobK

    Baa,
    I agree. Also, along the same lines, China has pulled off it’s economic miricle at the expense of the west’s comparitive advantage (patents etc) whilst maximizing its own advantage (cheap labour, conditions etc) and using the “free” market to trade. It is this inbalance that now needs to become more balanced.

  69. struth

    I Believe in the free market.
    There isn’t one.
    The theory doesn’t hold against corruption and criminality.
    Pure and simple.

  70. Ellen of Tasmania

    “Suppose, if that amuses you, that the foreigner inundates us with all sorts of useful commodities without asking in return — that our imports are infinite and exports nil. I defy you to prove to me that we should be poorer on that account.”
    Frédéric Bastiat

    “Shikwati: … for God’s sake, please just stop.

    SPIEGEL: Stop? The industrialized nations of the West want to eliminate hunger and poverty.

    Shikwati: Such intentions have been damaging our continent for the past 40 years. If the industrial nations really want to help the Africans, they should finally terminate this awful aid. The countries that have collected the most development aid are also the ones that are in the worst shape. Despite the billions that have poured in to Africa, the continent remains poor.”

    (http://www.spiegel.de/international/spiegel/spiegel-interview-with-african-economics-expert-for-god-s-sake-please-stop-the-aid-a-363663.html)

    “One could imagine that many factors have kept sub-Saharan Africa poor — famines, civil wars. But huge aid flows appear to have done little to change the development trajectories of poor countries, particularly in Africa. Why? As we spell out in our book, this is not to do with a vicious circle of poverty, waiting to be broken by foreign money. Poverty is instead created by economic institutions that systematically block the incentives and opportunities of poor people to make things better for themselves, their neighbours and their country.”

    (https://www.spectator.co.uk/2014/01/why-aid-fails/)

  71. RobK

    Ellen,
    Yes, both good articles.

  72. Do y’all remember Trump reciting the Lady and the Snake poem?

    https://youtu.be/7JJOzN-UUMg

    Gather around children and theoreticians who live on unicorn farts, let me tell you the story of Utopia and Narnia.

    Utopia and Narnia were neighbouring nations who didn’t trade. Closed economies.
    Then one day, the Utopian economics professor said to the Utopian King, “Why don’t we trade with the Narnians. We’ll sell them apples which we can grow as much as we want but they don’t produce, and they can sell us pineapples, which we don’t produce at all.”

    The King said “Why should we sell them apples when all they have is Narns as their currency, we can’t use Narns in Utopia.”
    The Proff said “We’ll take their Narns and use them to buy their pineapples. My old dusty economics theory books call this Reciprocal Trade.”
    The King asked “Why would they want to trade with us, they’ve hated us forever?”
    Proff replied “It’s mutually beneficial. Our apple industry grows and their pineapple industry grows the same. Apple growers love you and the Narnian pineapple growers love their King. Win win.”

    So the Utopians and the Narnians held months long negotiations in far off exotic places and finally came up with the Utopian Free Trade Agreement.

    And so the trading began. The pineapple growers and apple consumers of Narnia saw that this was a good thing and cheered.
    The apple growers and pineapple consumers of Utopia saw that this was a good thing and cheered. Everybody prospered.

    Then one day, under strict instructions from the Narnian King, some Narnian traders approached the Utopian apple growers and made them an offer. “Come and produce your apples in Narnia, the King has promised to subsidise you to the tune of 50%. More profits for you and you can export your apples back to Utopia nice and cheap for we have a Utopian Free Trade Agreement.”
    The Utopian apple growers cheered.

    In the coming months and years, Utopian apple growers sacked their workers and shut down their orchards. They produced apples in Narnia and exported them back to Utopia. “Free Trade is good, Free Trade is good” they chanted.

    The former workers of the apple orchards were very upset. They complained to the Utopian King. Fearing an uprisal, the King told them not to worry, he would provide them with a safety net and help them relocate to other apple orchards or retrain them as workers in pineapple juice factories.
    But those apple orchards were struggling because of the cheap imports from Narnia, and soon they all shut down. Pineapple juice was also being imported from Narnia on the cheap so even those factories shut down.

    Utopians were very angry. They implored their King to stop this bad trade or at least slow it down with tariffs and quotas.
    The King consulted his cucumber sandwich munching, leather patch cardigan and sandals wearing metrosexual pooffo pinko economics professor.
    “What about these tariffs the people want me to impose? The Narnians are cheating.”
    “Oh no” said the professor, “look, right here in this musty old economics theory book it says tariffs bad, quotas bad, trade good.”
    “Why is trade good with those lying cheating thieving Narnians? Look at the destruction they’ve wreaked on the apple industry.”

    “But that’s just the apple people. Look at all the joy in the eyes of people who love cheap apples and pineapples. We now have pineapple juice we never had before. We have pineapple sex toys we never had before. Frankly, I was getting tired of those apple sex toys.”

    “I have to pay welfare to all the out of work apple people, and I’m paying all the salaries of the service sector because there are no more apple producers to tax to cover their salaries. I’m running out of money. Where will I get more money to pay welfare and the thousands of teachers and professors and addiction counsellors in our new ‘you beaut’ service economy?” asked the King.

    “I hear the Narnians have plenty of money, maybe they can lend us some” quipped the professor as he gently twisted the pineapple that was deep up his metrosexual pooffo pinko arse.

    So what happened next, what happened to Utopia you might ask.
    Utopia doesn’t exist you fvckwit.

  73. RobK
    #2660476, posted on March 14, 2018 at 2:15 pm

    Baa,
    I agree. Also, along the same lines, China has pulled off it’s economic miricle at the expense of the west’s comparitive advantage (patents etc) whilst maximizing its own advantage (cheap labour, conditions etc) and using the “free” market to trade. It is this inbalance that now needs to become more balanced.

    I would argue, one of the (unspoken) comparative advantages of China is its state sponsored cheating, manipulating and theft.
    Cheap labour? There are countless millions of cheap labour in South East Asia as well, yet they haven’t done near as well as China. They’ve done well, but not near as well.
    There are also hundreds of millions of cheap labour in Africa. They haven’t done near as well as China either.

    I’d argue it’s partly because of China’s comparative advantage in cheating, manipulating and theft. China is big enough and ugly enough to bully.

  74. Tel

    At mo, annually $800B in US currency doesn’t come back. This is not sustainable.

    I’m open to be convinced it is sustainable and not a long term problem, but no one has shown evidence to support this.

    At some stage the USD will fall in value until they cannot buy foreign goods anymore. If this happens gradually in a controlled manner then it all balances up and sweet.

    If the USD loses value “whoosh!” in an afternoon and people start to panic then we have a big problem… but we all think that’s unlikely, don’t we?

  75. Tel

    I would argue, one of the (unspoken) comparative advantages of China is its state sponsored cheating, manipulating and theft.

    The WTO has about a thousand procedures to support reporting this and going through the formal process. Then if you get the nod you can impose sanctions as formal retaliation.

    Trump couldn’t be bothered with any of that… I’m guessing he probably doesn’t know how to hire a lawyer, that would explain it.

  76. struth

    The WTO has about a thousand procedures to support reporting this and going through the formal process. Then if you get the nod you can impose sanctions as formal retaliation.

    Are you seriously suggesting a formal protest to the WTO will stop what is happening in regards to buying pollies and the U.N. role in this?

    Then if you get the nod you can impose sanctions as formal retaliation

    Bureaucrat approved is fine?
    How does that help your pure economic theory?

  77. Tel
    #2660578, posted on March 14, 2018 at 3:59 pm

    At mo, annually $800B in US currency doesn’t come back. This is not sustainable.

    I’m open to be convinced it is sustainable and not a long term problem, but no one has shown evidence to support this.

    At some stage the USD will fall in value until they cannot buy foreign goods anymore. If this happens gradually in a controlled manner then it all balances up and sweet.

    If the USD loses value “whoosh!” in an afternoon and people start to panic then we have a big problem… but we all think that’s unlikely, don’t we?

    I’d agree with you normally Tel, but the US $ hasn’t fallen nor is it likely to. The Chinese Renminbi is pegged to the US $, half of the trade imbalance is with China precisely because the Chinese don’t allow the US $ to fall compared to the Renminbi.
    The Japanese have been manipulating their currency to be at or about 100 Yen to the dollar for years and years now.
    The EU does QE to keep the Euro weaker than otherwise it would be. So much manipulation.

    With so much US $ and treasury notes in reserve vaults, it’s not in any ones economic interest for the $ to fall. That’s like having a vault full of gold and the gold price drops. Loss of value.

    There is though a security implication when foreigners have so much of your currency and treasury notes and bonds.

    That’s why I never argue for Australia to have tariffs or quotas. If we go too deep into balance of payments, our dollar drops in value and we recover. Market based and all good.
    The US just doesn’t have that full market based luxury. Unless I’m missing something?

  78. Tel

    Look at this graph of US$ Renminbi exchange rate for the last 5 years.

    https://www.exchangerates.org.uk/USD-CNY-exchange-rate-history.html

    The Renminbi was steadily devaluing until a little over 12 months ago. Then it started to revalue again steadily. At about the time Trump won office.

    Now this is pure speculation on my part, but I’d say the Chinese took Trump’s threats about reciprocal trade seriously and are revaluing gradually, hoping Trump doesn’t do anything drastic.

    That 10% revaluation thus far has the same effect as 10% tariff. US imports from China 10% more expensive, exports to China 10% cheaper.

    If the Renminbi was floated unrestricted, it would be around 2:1 instead of 6.3:1 The trade deficit would correct itself as it’s supposed to under WTO theory.

  79. struth
    #2660594, posted on March 14, 2018 at 4:24 pm
    Bureaucrat approved is fine?
    How does that help your pure economic theory?

    What a fine question.

    Let me see if I can answer for the cardigan wearing perfessers.

    “Well you see, when Brussells says it’s OK, China gets scared, weally weally scared and they stop playing silly buggers.”

    Trump didn’t wait for the globalist bureaucrats, he did it anyway. They’ll stop playing silly buggers now.

    “But no no no, the 12,000 pages of FREE trade rules forbid it. Prices go up and hurt the peeples if Brussells doesn’t authorize it.”

  80. Baa Humbug, I have not read all the comments here but I can oppose one of your arguments and also Freidman’s argument. Look at at electricity pricing. Solar and wind are subsidised but the government (both federal and state). Then the electricity market is forced to buy first from solar and wind through legislation and with renewable certificates and other means. It is not a free market. Similarly, with goods from say China (but you can put in other countries). It is only to some extent a free market in democratic countries that allow free trade. China subsidies its industries which are mostly state (province controlled), they control the exchange rate, they determine the maximum pay rate, they they do not allow unions or workers to go on strikes, they do not allow foreign competitors to set up in their country, they steal technology (ie they do not pay royalties for technology, patents etc) They restrict movements in their country so competitors can learn what they do. The Romans and Greek used slave to give them advances over others. USA was founded on slavery. Some middle eastern countries still use slavery. The North Koreans use something close to slavery. Socialism, dictatorships, communism etc are about a small group of elites controlling masses for their own good. Democracy and free trade and wealth creation go together but there are always groups that want gain control. Australia has become less democratic since federation, The USA has become less democratic in the last 40-50 years. The Brexit vote was a move by the majority to take back power from the elites in Europe but seems to be failing. The vote for Trump was a hope to move away from the socialism of the elites.

  81. John Smith101

    Winston Smith
    #2660294, posted on March 14, 2018 at 11:07 am
    And here’s me thinking that steel had to meet certain grades/specifications for engineering stuff.
    So the Chinese have been fraudulently passing off shit steel as being up to a standard when it is not?

    It is more than just China, Winston.

    The tariffs are a national security issue. Steel for an infrastructure rebuild or military hardware needs to be of the highest quality. Ditto aluminium. Military projects made from inferior grade steel, for instance, weakens US defenses and assists potential enemies.

  82. Just in case it hasn’t been noticed, I believed the steel fraud thing wouldn’t have happened because why wouldn’t a company building a billion dollar project not do quality control of the materials?
    Surely the insurers and financiers would have required some level of standard verification?

  83. RobK

    Winston,
    I mentioned the Perth Children’s Hospital earlier. The main contractor JohnHolland is now owned by chinese interests.
    For the Oz;
    It is the latest in a litany of problems for Perth Children’s Hospital, which was due for completion in 2015 but has been plagued by issues including lead contamination in the water supply, asbestos in roof panels and non-compliant fire doors.”
    http://www.theaustralian.com.au/news/health-science/perth-childrens-hospital-water-puts-kids-at-risk/

  84. Tel

    “It is the latest in a litany of problems for Perth Children’s Hospital, which was due for completion in 2015 but has been plagued by issues including lead contamination in the water supply, asbestos in roof panels and non-compliant fire doors.”

    Just rewrite the standards to require a fireproof ceiling and radiation proof water supply.

  85. Rob MW

    The action was not taken on anti-dumping grounds but under national security provisions, which are anchored on ‘domestic production needed for projected national defense requirement’

    I would have thought, with hand on heart, that the US would have been much better off, rather then steel tariffs, just to get the Chinese to build their navel ships, tanks and artillery and jet fighters for them. Of course, the Taliban have the cheapest guns from Pakistan, big bucks to be saved there/sarc

    Theorising free trade zealots are having trouble acknowledging and defining the necessary caveats on the word ‘free’ when associated with trade. Which country in the world is a puritan of the text book free trade theory ?

  86. hzhousewife

    Surely the insurers and financiers would have required some level of standard verification?

    Their actuaries will have made accommodation for these facts long time ago.

  87. I don’t think that I’m asking this the right way.
    Winston picks up a Seagate Hard Drive. There are standard compliance stickers all over it. The product must comply with these standards to be sold in Australia.
    So surely the Australian Standards people have inspectors that randomly check these products, and in the case of steel, make sure the standards are met?
    Or do they just trust the manufacturers after they have bought the licence to maintain standards?
    Because that looks like what is happening – and from the responses here it seems that most know the standards aren’t being met, but no one is demanding they be checked.

  88. Ƶĩppʯ (ȊꞪꞨV)

    The main contractor JohnHolland is now owned by chinese interests.

    If we catch criminal proceeds of crime we confiscate them. what’s the difference here?

  89. struth

    I don’t think that I’m asking this the right way.
    Winston picks up a Seagate Hard Drive. There are standard compliance stickers all over it. The product must comply with these standards to be sold in Australia.
    So surely the Australian Standards people have inspectors that randomly check these products, and in the case of steel, make sure the standards are met?
    Or do they just trust the manufacturers after they have bought the licence to maintain standards?
    Because that looks like what is happening – and from the responses here it seems that most know the standards aren’t being met, but no one is demanding they be checked.

    Some people couldn’t see how the FBI could be so corrupt either.

    I am not having a go at you Winston, but the corruption around that sort of stuff is relatively simple to see how it would happen.
    And it does.
    It’s hard for people with a life spent in the west to fathom it.
    That’s why it happens.
    The political picks that run our departments , run our departments.
    Ordinary inspectors/personnel do as they are told, or don’t do what they are told not to do.

    Oh, and demand all you want……………………………..

  90. RobK

    Tel,
    Just rewrite the standards …

    Im sure they have. (I have been involved in tthe commissioning of a large hospital, but not this one).
    The problem with the lead was finding the source. The problem with many standard compliences is which subcontractor or supplier is at fault. All of it takes time and costs the state.

  91. It is clear that some here do not understand standards. There is no requirement for specifications to refer to standards unless there is a requirement in legislation. The standards board has no inspectors to ensure that standards are met. It is upto suppliers and contractors to ensure that specifications are met. often there is no check. If there is a failure then investigations may check if the supplies and contractors have complied with specifications. They can be sued but often it is not possible to find who is at fault It could be a dodgy contractor who swapped good materials with poor materials. There are many crooks in the system. Sometimes it is union members who can be bribed. Of course there can be “paper mistakes” or “language translation” which states something is not of the standard as originally specified in contracts. If governments are involved always think first that there has been a public sector stuff-up particularly if union members are involved. The stuff ups of course can be deliberate with some foreign companies which have an agenda and know that they will not be held to account because of international relations.

  92. cementafriend
    #2660642, posted on March 14, 2018 at 5:10 pm

    Baa Humbug, I have not read all the comments here but I can oppose one of your arguments and also Freidman’s argument.

    Thanx for the response Cement, but I don’t see which of my comments you are opposing. I agree with what you’ve said in your comment.

    I usually copy paste the comment or part thereof that I’m responding to.
    maybe you point out what I’ve said that you oppose?

  93. OK.
    Last post on the issue
    We have Standards which are not being enforced and no one is responsible for checking them.
    Why have the standards in the first place? Close down Standards Australia and save the money.

  94. max

    Milton Friedman on Trade Balance and Tariffs

  95. Tel

    I would have thought, with hand on heart, that the US would have been much better off, rather then steel tariffs, just to get the Chinese to build their navel ships, tanks and artillery and jet fighters for them. Of course, the Taliban have the cheapest guns from Pakistan, big bucks to be saved there/sarc

    There’s always been some disconnect attempting to apply free trade theory (based on the idea of voluntary peaceful transactions) to the production and distribution of military equipment, which is fundamentally built for the purpose of non-voluntary non-peaceful activity.

    If I use my gun to hold people up on the highway and take their gold, that’s not free trade, that’s robbery.

    If I rent my gun to you, while you do the robbery and pay me the rent out of your loot, that somehow makes me a free trader and it’s all voluntary… little bit sleight of hand.

    Even weirder when it comes to pricing of the so called “externality” in as much as I might sell a gun to someone who wants it for self defense and this person keeps it for 50 years, cleans it, does a bit of target practice but never actually uses it in anger. Absolutely zero “externality”. Then I could sell an identical gun to some ISIS loon who immediately jumps on a boat and sails off to create huge “externality”… but the gun is the same. So now we need to calculate the price of the customer we sell to, which is just way too difficult, and the entire concept has been thrown out.

    This is one of the reasons I was pissed when Tony Abbott got into the business of gun-running with the Australian government distributing weapons to “moderate” terrorists in Syria. Hopefully a few more people understand the issue now.

  96. max

    Free Trade and the Steel Industry

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