Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
The Challenge of Free Trade: How Does One Side Win When Everyone Cheats?
I used to be a believer in Free Trade. No matter what, I thought the trade policy of America should be that there are no limits whatsoever to trade. If the other side had all sorts of restrictions, it did not matter, because it was always better for Americans on the whole to have total free trade. Why did I believe this? Because learned people said it was so, and that was good enough for me.
However, as I have aged, I have grown more an more uncomfortable with the idea that one side trading free and the other side putting up restrictions is always best for the most Americans. It is counterintuitive, to say the least. For instance, how can it be better for me as an American, that American farmers cannot sell their goods in the EU so that EU farmers are protected? How does that help Americans as a whole, exactly, when American farmers have to compete on an uneven playing field? Less competitive EU farmers get the benefits of higher prices, while American farmers have to run even leaner. How does that help the average American?
From a security standpoint, the US armed forces are buying electronics from one of our two rivals. I cannot imagine that the Chinese government is using this to spy on us somehow, but setting that aside, if we went to war with China, where will get the parts? It makes no sense to outsource a strategic industry to another nation. At least to me. I am sure it makes 100 percent sense to the Free Traders. All Free Trade, no matter what, all the time. Nothing is zero-sum, everything is win-win, even when the other partner is a geopolitical rival. Germany should not worry if it is dependent on Russia for its power, because that is the best way to get power, and if the whole Germany power industry goes down, well, that is just free trade to Russia. No worries.
So, I no longer believe in Free Trade at all times. If you are a free trader, I’d love to have my mind changed.
Published in General
I’ve seen articles from “Sundance” before on Breitbart News and they always strike me as conspiratorial. I don’t generally trust political pundits who hide behind fake names.
@jamielockett: so I guess you are happy losing elections, doesn’t matter whether it’s chicken or egg, as long as Trump keeps on winning :)
Careful you don’t burn yourself on that straw man.
The issue of China gaining access to military secrets and other important technology has been brought up repeatedly on this thread, the last time it was brought up, you responded with an eye roll. If free traders plan on continuing to respond to these concerns with eye rolls, and instructions to read more Hayek, then I don’t think Trump will have a problem.
There has not been one shred of evidence offered that China has obtained our military technology due to trade.
Well, there is a widespread belief that the two are related: if you want to win people over to your side, it is on you to prove that the two things are not related, and it is also on you to outline how we will stop China from obtaining military technology. If you are unable or unwilling to do this, then Trump will win the next election. That is all I am saying. Not saying you are wrong, just saying.
As is evident from this thread trying to reason someone out of a belief they did not reason themselves into is a fools errand.
Ok, like I said to begin with, it sounds like winning elections isn’t much of an interest for you, fine with me :)
How about for illegal campaign contributions to “Lolita Island” Billy-Bob Clinton? Or does that not count as trade?
https://capitalresearch.org/article/flashback-bill-clinton-gave-china-missile-technology/
That sounds shady and I think we should prosecute the people responsible. I don’t see why the rest of America should be taxed because the Clintons are crooks.
Is this how you intend to win elections? Serious question.
Your answer to a question of policy is to discuss electioneering? Should we cater to the bad policy preferences of Americans to win elections? There’s an easy path to victory for anyone willing to tell Americans whatever they want to hear – that doesn’t make it right. Where does that get us? I’m not a politician so I don’t have to win an election, I advocate for the policy positions I think are correct.
“There has not been one shred of evidence offered that China has obtained our military technology due to trade. “
That’s laughable.
At the very least, without American trade, the Chinese economy would not have been able to expand anywhere near like it has and would not have be able to afford it’s current military spending. It’s stolen our technology left and right all of which help to constitute military might, and it’s market manipulation of key technology sectors like chip making have allowed it to control far too much of the world technological production. So much so that far too much of our military technology is actually produced in China. It’s penetration into American markets and Universities have greatly aided it’s spying on our military and our military contractors. China has sought to control the flow worldwide of raw materials, which directly affects our nation’s ability to sustain and build our military dominance. It’s economic dominance brought about by trade has allowed China to gain military facilities around the world that directly threaten us like China’s secret space control listening base that was built in Argentina that so alarm defense officials. China has also funded ISIS terrorist threats in our hemisphere from places like Venezuela all gained through wealth acquired through trade.
One has to wonder why all you “free traders” are so willing to sell out our country?
Another question is what kind of free markets are you suggesting? Is it one where anything and any kind of Robber Barron behavior goes like thievery, murder, spying, market manipulations and the classic intimidations of organized crime are allowed just to gain market dominance? You must approve of all those things if you want to defend the current trade regime with China.
Straw man argument. Try better.
Judithann, I ask in all seriousness about this. Can you tell me where free trade with China leads to military secrets and important technology being passed to a foreign state? Are there military secrets that are floating around the private sector, which are somehow being traded with China? How exactly will this occur?
Also, and more importantly, the thread is about tariffs. Can you explain to me how a tariff on some imported good (such as steel or grain) will protect our government against military secrets falling into the hands of the Chinese?
Let us stipulate – and I am willing to stipulate for the purposes of this conversation – that it would be a bad thing for military secrets and important top-secret military technology to remain, well… secret. How is that threatened by the elimination of tariffs or by free trade?
This is not an example of free trade. Nobody on this thread is arguing that the Clintons haven’t behaved illegally (Clinton foundation, anyone? Pay to play?). Literally nobody. But the same question applies. Do you think that a tariff would stop a corrupt government agent from sharing secrets? It seems to me that the criminal law is far more appropriate for dealing with these issues than trade restrictions.
In all seriousness, though. How would tariffs eliminate illegal campaign contributions?
I think you might have misstated that.
Not necessarily tariffs. Could be an outright ban on things. Example law: “The US Military may not purchase any microchips in any of it’s systems which have been assembled overseas.” That’d be a violation of free trade.
Your first argument is that American trade has resulted in the entire world becoming richer. Yes, you are correct that if we can keep every country except the US in third-world status, there will be far fewer threats to us. Of course, that may also not be true… what sorts of countries become violent? Generally (think North Korea) desperate ones. Prosperous countries tend to look more toward trade and cooperation in order to become even more prosperous.
Your second argument is that China has stolen technology from us. Well, that’s a difficult one. Have you ever seen generic brands in your grocery stores? These are all examples of “stolen” technology. The minute you release something for public consumption, people begin looking for ways to create more of that thing, more cheaply. China doesn’t just do it – so does malt-o-meal. But this is how the economy works. It is what allows products to become more widely available, and, believe it or not, it encourages innovation and growth.
Your third argument is conspiracy theory. Maybe plausible, maybe not. But it is not supported by any evidence. Take a look at Venezuela (or Cuba); these problems are somewhat self-limiting because the “robber baron” approach virtually always leads to poverty.
Your last arguments are pure ad hominem. If you’d like to argue that my theories (the time-tested and observable theories of Adam Smith, et.al.) are wrong, feel free to make that argument. But if you want to call me a sell-out or a traitor, you need to assume that I also believe my theories to be wrong but that I wish to pursue them anyway, out of some unidentified hatred of our country, or what? Are you making that argument?
I would refer your question to @unsk, who knows far more about this than I do. I will say though, Ryan, that whenever this subject comes up, you seem to be very unconcerned about China having access to our military technology.
Suppose I should say I don’t have an example. Haven’t been tracking these things much. Not feeling compelled to get out the google machine to win an internet argument.
Right, and the free traders on this thread do not seem to understand that they lost the last election. If they want their policies to prevail, it’s on them to address concerns, and it’s on them to provide evidence that we are wrong. If they cannot or will not do that, then they will lose. But they don’t seem to get that, which is why I distrust their opinions on everything now, including free trade.
Because it hasn’t been proven that China has gained access to our military technology through trade.
“Also, and more importantly, the thread is about tariffs. “
Er, no Hammer, this thread is about cheating on Free Trade. Also manipulation of that free trade for destructive purposes.
From Economist Charles Hughes Smith:
Stripped of lofty-sounding abstractions such as comparative advantage, trade boils down to four Darwinian goals:
All the blather about “free trade” is window dressing and propaganda. Nobody believes in risking completely free trade; to do so would be to open the doors to foreign domination of key resources, assets and markets.
Trade is all about securing advantages in a Darwinian struggle to achieve or maintain dominance. As I pointed out back in 2005, the savings accrued by consumers due to opening trade with China were estimated at $100 billion over 27 years (1978 to 2005), while corporate profits expanded by trillions of dollars.
In other words, consumers got a nickel of savings while corporations banked a dollar of pure profit as sticker prices barely budged while input costs plummeted.
As longtime correspondent Chad D. noted in response to my essay on capital flows, restricting trade may be one of the few ways smaller nations have to avoid their resources and assets being swallowed up by mobile capital flowing out of nations with virtually unlimited credit (the US, the EU, China and Japan).
Protecting fragile domestic industries with tariffs has a long history, including in the US, but the real action isn’t in tariffs: it’s in the bureaucratic tools to limit trade and the soft and hard power plays that secure cheap resources while denying access to those resources to geopolitical rivals.
The bureaucratic means of restricting imports have been raised to an art in Japan and other export-dependent nations: there may not be any visible tariffs, just bureaucratic sinkholes that tie up imports in red tape.
Then there’s currency manipulation, for example, China’s peg to the US dollar. What’s the “free market” price of Chinese goods in the US? Nobody knows because the peg protects China from its own currency being too strong or too weak to benefit its export-dependent economy.
Those bleating about “free trade” are simply pushing a Darwinian strategy that benefits them above everyone else. US corporate profits have quadrupled since China entered the WTO; is this mere coincidence? No: global corporations arbitraged labor, credit, taxes, environmental/regulatory and currency inputs to dramatically lower their costs (and the quality of the goods they sold credit-dependent consumers) and thus boost profits four-fold in a mere 15 years while tossing the hapless consumers a few nickels of “lower prices always” (and lower quality always, too).
Losing an election does not change whether or not a policy is right or wrong. If Bernie Sanders was to win the Presidency would that invalidate all of capitalism? It is difficult to address concerns when the blame is laid at the foot of the wrong thing. So trying to explain why people are wrong in their perceptions in the only option left. For that we are told “You just want to lose elections” – which is a rather tiresome nonsequitur.
ok – I really do feel as if I’ve addressed this several times, but I will wholly admit that I very often think I’m being perfectly clear, and upon further reflection, I realize that I was not.
If our government develops top-secret military technology, I do not believe that it should be anything other than top-secret. I opposed Obama’s Iran deal, and I tend to be pretty hawkish about our military in general.
That said, what I’ve been trying to convey on this thread is that I do not oppose the spreading of technology in general via trade. In other words, I would assume that when Apple sells an iPhone to someone, that technology can be used or studied or copied. That’s the way technology works; even with war, when the first castle attacked another castle with a trebuchet, it’s enemies immediately gained a knowledge of the weapon, and warfare simply advanced. That’s not necessarily good, but it is also unavoidable. I wouldn’t say that we should stop Apple from producing new iPhones because we know that some suicide bombers figure out how to use that technology to harm us. I would, however, support military action or police action to deal with illegal activity.
What I haven’t seen in this thread, from you or from Unsk or from anyone else, is any sort of example of how free trade might lead to the dissemination of military secrets. These things don’t exist in the private sector, and they are not traded. The thread began as an assertion that the free market doesn’t work, and that tariffs are necessary to somehow create fairness. I’ve demonstrated, as have others, that this belief is misguided, and that the desired outcome is not met, but the economy is overall damaged by tariffs.
The military secret issue is a bit of a distraction. Nobody is advocating that our military outsource production of top-secret technology to China, and there is no example of this either happening or even being envisioned. So when you mentioned “technology,” I was envisioning every day technology, like cellphones or computer chips, or trebuchets…
The only reason we would outsource production of anything is because someone else can produce that thing more efficiently than we can; inherent in that is the requirement that they already know how to do so. If they don’t know how to do it, then they couldn’t possibly do it more efficiently, and we wouldn’t outsource.
So no – we shouldn’t share secrets, I agree with that. I am explicitly stating that I agree with that. But that doesn’t mean anything with respect to tariffs…
Perhaps I wasn’t clear enough: I didn’t say that you want to lose elections. I just said that would lose elections, because you either can’t make your case or can’t be bothered. Apparently, it’s enough for you to be right: whether the policies that you consider right are ever actually implemented is not your concern. That is the vibe I am getting, not just from you, but from all the free traders on this thread.
You keep saying that we are wrong: you need to prove beyond any doubt that we are wrong, with hard evidence. But either you can’t do that, or you can’t be bothered. I don’t understand why someone who is so unconcerned with winning elections would spend so much time on a political website, but to each his own.
Hank, I haven’t thought of this as an internet argument at all. I think it is an important issue. Trade is important, and Smithian economics (i.e. free trade) has made us incredibly prosperous. We have a disturbingly large swath of the right, currently, buying into an idea that has historically been advocated by trade unions and left-wing politicians (and is currently advocated by Bernie Sanders, et.al.), which is that protectionism can somehow do anything other than damage our economy and create entitlements.
I’ve been sympathetic to the proposition that it might be used as a mode of intimidation, but I went to great lengths to explain why I find that to be a poor strategy.
A further argument has been made that protectionism is necessary to protect military secrets, and I am happy to entertain that argument, but only within the limited scope of that argument. In other words, it is clear that farm subsidies and taxi medallions do not have any impact on military secrets. Steel tariffs, alcohol tariffs, and sugar tariffs do not have any impact on military secrets. So, the fear of dissemination with respect to military secrets is very clearly not a justification of tariffs in general, correct? That’s why I asked what sort of tariffs might be required to protect military secrets. Maybe I would support some limited form of protectionism if it could be demonstrated that the national security issue really did outweigh the economic cost. But that would require that we, in the very least, identify the sub-market in question, right?
I hope we can agree that tariffs, as a general rule, are like taxi medallions and farm subsidies. They do protect, to be sure. They protect a particular industry – as I said, a localized and observable benefit, with a cost that, though far greater, is spread out and unobservable (at least directly). That is no different from welfare, and it may be justified on the exact same terms as welfare. (it’s only .02$ for a thousand people, but it’s creating a livable wage for one, and isn’t that worth it?)
What I’m wanting to do is keep our topics straight. We need to discuss tariffs in general, in general terms that apply to all tariffs. If people want to move on to individual exceptions and justifications (caring for the poor, for instance), that’s ok, but we have to define those things before we can discuss them, otherwise we find ourselves using military secrets to defend corn subsidies, and that doesn’t make any sense.
They don’t? The military manufactures all it’s own microchips?
Lemme give you an example real quick. There’s a British company, Cambridge Mechatronics. They’re an engineering firm. They realized that the current optical image stabilization in cameras is messy and labor intensive to produce, so they invented a better way. They use something called shape-metal (changes shape when you apply a current) to design an optical image stabilization that is smaller and higher quality than you can manage with the previous method.
They’re an engineering firm, not a manufacturing one. They licensed the technology to my company (Hutchinson Technology Incorporated), who already has expertise in manufacturing flex metal circuits. In return for the license to manufacture and sell their technology we pay them royalties on things sold, and they can go about inventing new and interesting things.
The point is, we didn’t know how to manufacture these things before they came calling. We knew how to etch a hole in this bit and plate copper traces on that bit, but we couldn’t have gotten into the SMA-OIS (shape-metal alloy optical image stabilization) market without their intellectual property.
Now imagine that we set up our own line of SMA-OIS which uses the technology that we licensed, only we call it something else and claim that it’s all our own, not having to pay royalties. What do you think they would say? “That’s not cricket” or some other Britishism meaning it’s not fair. Providing us with their intellectual property has allowed us to cheat in a way that we couldn’t without their designs. [Again, strictly hypothetical. We have done no such thing. Feel like I should disclaim that again because it’s a real example.]
Okay so the case has been made on this thread by multiple people. Perhaps it is unconvincing to you, if so I’d like to know what specifically you find unconvincing so I can address it.