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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
The question I was answering was “Do you expect the military to buy foreign made microchips?” And the answer I provided was “I wouldn’t put it past them.” A law that says “only buy American components for military hardware” wouldn’t prevent mind-boggling stupidity, but it’d head off that particular variant.
This is why drugs are sold cheeper around the world. It does happen. Governments run helathcare and set prices. This means Americans, where prices are not controled, bear the burden of the development costs.
I think the the American government should do something to off set that. It does not have to be tarrifs. YOu keep acting as if tarffis are all I am calling for. I want the other nations punished for ripping our companies off.
Your Free Trade does not do that. This is a clear case of us getting hurt, and you have no solution to propose at all.
ok – but that’s not a foreign government forcing people to buy a product elsewhere, that is the market shifting to the most efficient producer. How is that a problem?
That may be true – our government is intensely stupid. That’s why I don’t support giving them control of our economy…
Also – I’m still having a hard time finding the problem. Why is it bad to use foreign-made microchips? I never said that our military wouldn’t – I only said that a government contractor is unlikely to make a faulty product in order to save a buck. If foreign-made microchips were unsafe or unreliable, they would not be the only producer in the market. People don’t want faulty products. That opens up a huge opportunity for some company to make reliable products, and that is exactly what would happen.
Alright, let’s take this angle.
We know that other countries aren’t engaging in free trade. Either through the theft of intellectual property or through holding tariffs, both official and effective, themselves.
We’d be better off if they played fair. They’d be better off if they played fair. How do we convince them to play fair?
Depends on the circumstance. Whatever works inlcuding sancitons.
Alright, so this is a pretty big shift of topic. Yes, I agree that our health-care system is totally messed up. Frankly, it is SO messed up because it is not a free market. There is no meaningful price signaling, and there are so many regulations that companies are beholden to our government rather than consumer demand.
We already have generic drugs. The reason drugs are cheaper overseas is not just because IP is getting stolen, it is because our congress has determined that US consumers value “quality control” above all else. It is partially because our laws are so complex that it takes years to get anything approved by the FDA. It is, in part, because of the intense cost of R&D by companies and the need to recoup those costs in order to turn a profit.
Can you think of any suggestions that would remedy this situation? Do you think our government should subsidize pharmacy companies in order to pay for their research and development and then put price caps on drugs, or allow the importation of foreign-made domestic drugs, or allow for generic US companies to mass-produce drugs? This is very similar to the arguments for universal health care. In that case, the entire public is subsidizing drugs, not simply the people who use the drugs and pay higher prices. I’m not saying there is no merit to it, maybe it’s a good idea to spread that cost in some way. But again, it’s not a problem with the free market – I thought your post was about no longer believing that the best economic system is a free market?
It’s not about playing fair or not playing fair. We would be better off if there were global free markets, strong laws, democratic republics, and greater prosperity. How do we encourage all of those things? The simple answer is that we cannot.
When foreigners have tariffs, they are taxing their own population to prop up local producers. This hurts them. I suppose, on some level, it limits us, through opportunity cost. But that is no different from anything else (lack of demand, local preferences, etc…). Our businesses can determine for themselves whether it is more profitable to compete in foreign markets, to focus on domestic markets, or to shift its resources elsewhere. If foreign tariffs result in us importing all of one particular good, then that is (as Friedman said) foreign aid bestowed on us. If they then raise their prices, other companies will take advantage of that opportunity. That’s how the market works.
As far as IP is concerned, it’s not a matter of “fair” or “unfair.” We have patent laws in order to encourage innovation. But we haven’t always had patent laws. People come up with ideas because of the short-term benefit, and those people continue coming up with ideas. Innovation occurs because people want to solve problems, or create new products, or enhance their comparative advantage. Once innovation happens, and a product is released, it is subject to copycats. As I said, we encourage innovation by making it more profitable w/ patents – maybe we shouldn’t. There are arguments to be made in favor of eliminating IP laws. That would be an interesting discussion.
But there are all sorts of natural checks on that sort of thing. Generally, the first producer of something will be the best producer of that thing, for a time. This more than compensates him for his innovation. People don’t want to buy the eyephone, they want the iPhone. We don’t need laws for that – apple isn’t special just because it innovates, it is special because of the way it produces and markets.
(continued…)
(… continued from #428)
But lastly, this whole thing about “fairness” and “unfairness” with respect to intellectual property… ideas are not property, plain and simple. Anyone can independently come up with ideas and you don’t have any more right to them than the next guy. The fact that ideas become public domain actually enriches us all greatly. Back when I was in high school, nobody had cell phones. They were SUPER expensive. But many companies joined in the fray, began making them faster and cheaper, and now people on welfare still afford to have smartphones. Everyone benefits from this.
Far as it goes I’m in favor of loosening the intellectual property laws, but not doing away with them entirely. I hope you’ll excuse me if I don’t argue that point on this thread.
I’m not seeing the problem.
This is what I get for clipping my quotations. Click through your name up there and read the original comment to which you were responding.
I assure you I read your entire comment. I’m still not seeing what the issue is here. That looks like a natural shift towards low cost producers based on market mechanisms and comparative advantage.
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Yeah, no, that’s not the one. I was responding to your question, which was originally directed at Mr. Stephens. Quoting that bit (and still snipping previous comments. If you want to follow them back you’re free to.)
Far as it goes, I think I’ve argued the national security side plenty in this thread. Don’t think I’ll be continuing on that line.
I think I linked to this earlier. This was not illegal but Extremely damaging ‘free trade’ to our national security and Sinosphere regional stability as well. Here is a money shot fromthe linked article.
While I find this quite troubling I’m at a loss to see how it is connected to trade.
Really?
Hughes and Loral exported something to China; something that compromised our national security. How is it not connected to trade?
“But you were dressed provocatively” or “Aren’t you worried you’re dressed provocatively?” is something young women hear all the time. Especially from conservatives. If a prude like me heard it growing up, when I simply wished to avoid dowdiness, in a free country like the US, it must be depressingly common. Also, “What if people are drunk?”
We conservatives make a very big deal about the fact that expecting young women to take reasonable precautions is not the same as victim-blaming. Well, if that’s true for young women, why not also for businesses?
Nobody here feels good about a firm getting its IP stolen. But does the firm have the autonomy to take risks, and the responsibility to take reasonable precautions, or not?
Ideally, there would be no fraud, just as ideally, there would be no rape. Rape is not something entered into freely, either. And yet we who are conservatives accept the world feminists want, where it is enough to teach men not to rape, rather than to teach women to take commonsense precautions against rape, is a fantasy world.
Sure, we could try to teach men not to rape, just as we could try leverage on places where IP is not secure to teach them to better respect IP, but we couldn’t count on the lessons working perfectly. So we also have to expect potential victims to be willing to take some precautions. That doesn’t mean it’s ever right when victims are victimized, but that the world is no utopia, and therefore part of autonomy is the responsibility of prudence. This is like Conservatism 101, at least when it’s applied to women who might literally be raped rather than to firms whose IP might be metaphorically raped.
The range of opinion here, alone, makes this unhelpful in understanding. Especially right now…
Sure, but again, them being an idiot isn’t an excuse for China to victimize them.
Believe it or not, one point of treaties like TPP was to help businesses recover losses from foreign governments if those governments facilitated IP theft. Now, maybe TPP was bad for other reasons, but that goal of TPP was one reason TPP was touted by its proponents as opening up markets.
[double post]
Wait, are you seriously suggesting that there *isn’t* widespread agreement among conservatives that young women have to expect that the price of their autonomy is assuming some risk, which they should bear prudently? Because it seems to me that is one value uniting *all sorts* of conservatives, no matter what else they might disagree on.
There is widespread agreement among conservatives that everyone has to assume some risk as the price of their autonomy; but if a man leaves his car open and ends up getting robbed, it doesn’t put the entire country in danger. If a woman walks home by herself and ends up getting raped, it doesn’t put the entire country in danger. When Hughes and Loral made exports to China that put national security in jeapordy, they endangered the country: if such companies are not willing to act in the best interests of America, then sooner or later they will lose some autonomy, as well they should, if they are putting all of us in danger.
Speaking of bridges that can’t be built.
Whoever said that “free trade” resolved criminal activity? Is there anyone that has been arguing for free trade as a solution to murder? Theft and murder are not an indictment against free trade – and criminalizing those activities do not make trade any less free. I honestly don’t understand where you’re going with this.
Midge, I honestly had no clue to what you were actually referring; let alone that your reference was to female autonomy and risk. “We conservatives” is the sort of corporate singular that could well imply homogeneity of thought in general. Hence, my generally-focused comment. Of course, I concur with your premise, as you’ve clarified it.
As it happens, they did lose some autonomy. They incurred fines and extra monitoring. But… what do you mean by “such companies”? Are “such companies” all American companies? All American companies doing business overseas?… And who decides when “such companies” are “not willing to act in the best interests of America”?
Rocket launching is at least ballistics, something that has a pretty obvious relationship to weaponry. But a lot of other things — metals, microchips, security or even entertainment technology — could have military uses. Where is the line to be drawn, then? Current rhetoric suggests that where the line has been drawn previously just isn’t good enough, so where should it be?
What business should be forbidden with potential hostile powers to prevent them from learning information threatening our national security? Was it a mistake to engage in any trade that, say, helped Chinese technology advance beyond rickshaws and coolie hats? That is, do Americans owe it to America to avoid business with foreigners which might lead to foreigners’ technological advancement, in case that advancement were someday used against us? And how high a price should Americans be willing to pay to prevent foreigners from acquiring technology they might someday use against us?
I disagree in part. However, even stipulating the point, how do you get from there to tariffs?
Here a little something for all you China loving Free Traders: From Tyler D at Zerohedge:
“Leave Immediately or You Will Pay” China Sends Radio Warnings to Philippines”