Tag: trade

Trade and Immigration After Brexit


Border control chaos at Heathrow airport's terminal 5, LondonNo matter what happens next, last week’s stunning “Leave” vote on Brexit has permanently disrupted the status quo ante. Both the Conservative and Labour parties are facing major leadership changes; Conservative Prime Minister David Cameron has resigned, and Labour’s Jeremy Corbyn has been besieged by his shadow cabinet for his tepid support of the Remain option. Stock markets worldwide continue to tumble and the British pound has taken a beating. The Sunday New York Times lead story took a somewhat hysterical tone when it announced that the Brexit vote “is already threatening to unravel a democratic bloc of nations that has coexisted peacefully for decades.” And the strong supporters of Remain are now determined, it seems, to predict the worst, perhaps in the hope that Great Britain will take the opportunity to “reconsider” its decision in light of the global economic hit that occurred the day the Brexit vote was announced.

As I recently argued, the Brexit vote was complicated, given the pros and cons on both sides. But now that the voting has occurred, the correct response is to put the fear-mongering aside and to think hard about the two major issues, so central to the Brexit debate, which will continue to vex Britain and the EU — trade and immigration. On this score, it is important to realize that those two issues are distinct. The argument for free trade is pretty clear — but with the much murkier issue of immigration, it is virtually impossible to come up with a knockdown argument in favor of either fully open or fully closed borders.

Let’s start with free trade. Here, the basic economic principle of comparative advantage works with equal force in both domestic and international markets. The most efficient form of production comes through a division of labor in which all parties provide those goods and services at which they are, relatively speaking, better at producing than anyone else. Thus, even if nation A were better than nation B at all forms of production, it hardly follows that nation B should remain idle. Instead, it should produce in that area in which it has the smallest disadvantage relative to nation A. So long as trade between the two nations remains open, both nations should on balance be better off than they would have been if each kept tariff walls high against any imports. The mutual exchange produces higher outputs across the board, and thus fuels growth in both nations. The principle is scalable, so that the more nations that come to the table, the greater the gains from trade, in both the international and domestic arenas. The substantive goal is to make the borders among sovereign nations porous.

Ben Sasse on “The Crisis of Political Vision”


Though it takes him a while to complete the wind-up — the real substance begins at 7:45, but what precedes it is charming and substantive — Senator Ben Sasse recently spoke on how both parties’ domestic agendas are woefully out of date (the Democrats by a century, the Republicans by mere scores of years). Give it a listen and give us your thoughts.

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Anecdotes are powerful things. There is a reason why whoever happens to be delivering it, the President always has people in the galleries during the State of the Union. Anecdotes make things personal, the help to drive your point home. They are also pretty useless at reflecting the broader reality. We have heard in these pages […]

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Producers Are Consumers, Too


In debates on trade, it’s a sure inevitability that some free-marketeer will defend cheap imports on the grounds that they make goods more affordable to American consumers. This is, so far as it goes, absolutely true. But the equally inevitable retort from trade-skeptics that cheap flatscreen TVs are no good to those without jobs is also true, at least so far as it goes. Both sides, unfortunately are missing a critically important point: Most American manufacturers are also American consumers, and in a very significant way.

Just last month, our own Skipsul provided an eye-opening example of this in his piece “I, Circuit Board,” which detailed how his automotive electronics manufacturing company relies on a web of supply chains that stretch across half the world, starting with raw materials, and proceeding through a series of intermediate products that culminate in a single consumer good. And the less expensive a given input for Skip, the more money he has to put to other uses, whether it be lowering prices, improving his product, hiring new workers, increasing wages, or giving him enough cash on hand to pursue his hobbies or further upgrade his Ricochet membership. (Just sayin’. Hey, we’re an American employer, too!)

Is the US Really Getting “Trumped” on Trade? A Q&A with Claude Barfield


china_hong_kongTrade and trade partnerships hit the American public in a big way this past summer in the form of the Trans-Pacific Trade Partnership, with voices on right and left chiming in on a deal positioned as President Obama’s NAFTA. Signed this past February, it included 12 nations representing 40 percent of the world economy.

But China – one half of the world’s two economic superpowers — wasn’t part of the TPP, and Donald Trump’s campaign trail emphasis on failed American deal-making seems to stoke popular fears that trade with that country hurts the American worker. So did “trade [make] America great,” as one CEO opined in the WSJ? “Are Trade Agreements Good for Americans?” Is America losing a trade war that will see China crowned the world’s strongest economy?

On my Ricochet podcast, I chatted about all this with Claude Barfield. Before coming to AEI, he was on the faculties of Yale and the University of Munich, and worked at the National Journal; in the Department of Housing and Urban Development; the Senate Governmental Affairs Committee, and as a consultant to the office of the US Trade Representative. he is the author of multiple publications and has a Ph.D. from Northwestern University.

The Amazon Theory of Protectionism


For years, Walmart was the model of efficiency for the retail business. The true genius behind the world’s biggest retailer was not the superstore, or the cheap goods from China, but logistics. Walmart established what was perhaps the best distribution network in the history of mankind: an interconnected web of manufacturers (yes, some in the USA), warehouses, and trucks that moved goods from one point to another with astonishing efficiency. Coupled with advances in computer technology that gave them real-time data on stock levels, Walmart pioneered a way to use its trucking network as mobile warehouses, able to restock stores quickly with the goods that were most in demand. This allowed them to reduce their warehouse footprint, expand their retail presence, satisfy their customers, and make billions of dollars.

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Who is more arrogant and annoying, Donald Trump or Paul Krugman? A Hobbesian choice to be sure, but I’d say Krugman every time. Of course, the media would uniformly disagree, as can be seen in the reaction to Trump’s economic ideas, The bizarre optimism in Donald Trump’s theory of the economy.  Like Krugman, much of what Trump talks […]

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Yet Another Theory of Trump


Here’s another theory of Trump. Well, it’s not really a theory, more just a set of disparate observations. I’ve broken it into chunks so you can tell me which parts you agree with, don’t agree with, and why:

  1. Trump means ratings. Trump means pageviews. Trump means advertiser sponsorship. The media (very much including Ricochet) deserves a large share of the blame for the Rise of Trump, in so far as it’s driven by relentless competition for profit. The media gave Trump a massive amount of free publicity, not realizing — because the media is part of a clueless elite — that Trump was not just an entertaining bonanza for ratings and a guaranteed-clickbait diversion, but a serious political candidate who spoke to and for a very significant number of their fellow Americans.
  2. The opening of the ownership of broadcast channels, cable, and satellite to private investors has changed our civic culture, and not for the better. It did not result in a competition to provide informative news coverage to a civic-minded public. It resulted in just what you’d expect: competition, period — and thus a race to the bottom for ratings. The result was the creation of a mass culture of empty commercialism and short attention spans unconnected to deeper spiritual, moral, or civic values. Shopping channels, infomercials, product placement, and reality TV gave rise to a population fascinated, even obsessed, with consumer brands, products, celebrities, and super-celebrities. The Rise of Trump or someone like Trump was, in this culture, inevitable.
  3. The Internet, likewise, failed to meet its potential as an instrument for communicating conservative political ideas, traditional and religious values, and democratic civic mores. Only media outlets with well-established brand names and an already-large audience, or huge financial resources, have been able to enter the Internet media market and draw the attention of the public in significant numbers. The profit model of major media and their portals (Facebook, Google) is based on selling goods. The audience is no longer captive — as it was in the time of newspapers and the broadcast cartel — and thus there’s ferocious competition to amuse it and keep it from switching to another channel or clicking on another site. The media has severely cut back on news reporting and analysis; what little reporting they do is often based on press releases from corporations and lobby groups, foreign and domestic. (The number of people who work in PR now vastly exceeds the number who work in investigative journalism.) There’s a massive focus on providing shows and websites that are immediately attractive to audiences and advertisers: sex, sports, violence, and comedy, rather than detailed and informative reports about complex trade negotiations, the budget, tax reform, or health care.
  4. Advertisers don’t, generally, like programs and websites with complexity and disturbing reporting that interferes with the “buying mood.” They seek programs, themes, and stories that lightly entertain and fit in with the spirit of the primary purpose of program: selling their products. (Thus people are far more likely to read about restaurants and vacation destinations abroad than elections or deeper geopolitical trends.)
  5. Western elites, political and economic, understood the fall of the Berlin Wall as a vindication of free-market capitalism. The victory was so complete and so overwhelming that regardless of evidence, this elite has blindly assumed free trade to be always and everywhere benevolent and even democratic (although exceptions are allowed when private firms need subsidies and bailouts). The mainstream media, which is part of this elite, internalized this ideology.
  6. The steady encroachment of marketing and advertising into every aspect of our lives displaced both religion and the political public sphere, replacing it with a shallow consumer culture unsuited to thoughtful, democratic participation. Increasingly, we live in a world of virtual communities built by advertisers and based on consumer demographics.
  7. Whereas once we lived in a world of physical communities, sharing a social life and common concerns with our fellow citizens — of all classes — increasingly we live in virtual communities that may superficially be political, but whose chief purpose is to buy and sell goods, not to create or service the public political sphere and a healthful democracy.
  8. This social sorting has been accompanied by geographic sorting: Increasingly, we literally have no idea how the other half lives. They don’t live in our neighborhood; they don’t watch the same television, and we don’t even talk to them on the Internet. In fact, we deliberately “unfriend” people who don’t share our view of the world. (This helps to account, for example, for the massive disjunct between the Ricochet primary and the real primary.)
  9. Non-stop entertainment (including sports) doesn’t just help to sell goods. It is, even if inadvertently, a vehicle for the transmission of the elite class’s political ideology, as well as the contemporary equivalent Roman circuses. It diverts the public from politics, reinforces the beliefs of the elite class, and creates political apathy — until the dam breaks.
  10. The public has nonetheless been aware that it has been working harder with stagnant or declining incomes; it has inadequate medical care at high cost, and education is the pathway to the elite class — but education is increasingly unaffordable, and the culture of our educational institutions increasingly bizarre. It knows that things are done in their name all over the world, often involving their sacrifice or that of their families, but not, seemingly, to their benefit. Few understand our foreign policy or its history, because the media provides almost no substantive information that would help them place any of it in context. Neither does our educational system. The media does not see providing this information as its key responsibility. Its key responsibility is to shareholders and advertisers.
  11. Case in point: NAFTA. Substantial American majorities opposed NAFTA. Only the elite favored it. But media editorials, news coverage, and “experts” overwhelmingly reflected elite preference. The “experts” repeatedly intoned that the benefits of NAFTA were obvious and understood by all qualified authorities, and that only demagogues and “special interests” were opposed to it. (The “special interests” who were the losers included lower middle-class white males.) The media dealt with the awkward fact that polls showed steady majority opposition to the agreement mainly by ignoring it or occasionally suggesting the public was uninformed and didn’t recognize its own interests.
  12. The lower-middle class, white men in particular, has been under siege in the United States for the past several decades, adversely affected by the deflationary policies of the 1980s, corporate downsizing, globalization, and the government’s support of, or indifference to, the damage being done to them. While this class experienced significantly diminished wages and benefits, more onerous working conditions, and greater insecurity, a “protected” elite in government, finance, tech, tenured academia, and the media failed even to notice this, no less consider its long-term political implications.
  13. Since the 1970s, the income of the top 1 percent of households has grown by 85 percent and the top 10 percent by 45 percent, but the bottom 60 percent lost ground. The income of the lowest 20 percent fell by 12.5 percent. Real hourly earnings among the working class fell 5 percent. This, along with the adverse trend of social indicators (morbidity and mortality, drug addiction, suicide) suggests that the welfare of the majority of the country declined in the age of globalization — a point that was unnoticed because of the abovementioned points: The elite class became ideologically ossified after the failure of the USSR, which they took as dispositive proof of the benevolence of free markets and their ability to lift all boats in their rising tides; moreover, the elite class mentally and geographically separated itself from the rest of the country, and thus literally did not see what was happening to it. The mainstream media, drawn from this class, barely noticed that only a minority had been the beneficiaries of global trade. It briefly noticed this issue during Pat Buchanan’s 1996 campaign, then forgot it again entirely.
  14. The media and professional politicians — the elite whom Peggy Noonan calls “protected” — thus failed to notice the discontent of the public. The elite domination of the media occurs so naturally that media news people, even when operating with complete integrity and goodwill, are able to convince themselves that they choose and interpret the news “objectively” and on the basis of professional news values. These constraints are so powerful, and built into the system in such a fundamental way, that they don’t see that they’re operating within them. Thus the media confused a public that had been lulled into apathy by cheap imported goods and cheap non-stop entertainment for a public that was, in the main, satisfied with politics as usual.
  15. As a result, the media both failed properly to report the sentiments of this public to policy makers and failed properly to report to this public with information it could use to guide its political decision-making. This public is now in full-scale revolt.

Do you agree with some, all, or none of the above? If so, why?

Again, US Trade with China Has Been a Good Thing


RTX274C4_shanghai_china_trade-e1457381972406Scott Sumner offers an interesting response to the recent David Autor, David Dorn, and Gordon Hanson paper on the China trade shock, which show some areas exposed to this new competition never recovered:

First, even if China trade was bad for the US, it was almost certainly extremely good for China, which was a vastly poorer country in 1990. So I’m quite confident that economists are justified in supporting free trade. Whether they are justified in suggesting that Chinese trade is beneficial to the US is another question.

Second, this is just one study, and as we’ll see it’s far from convincing. We don’t abandon views held for 200 years, and supported by hundreds of studies, just because of a single study. I can’t speak for other economists, but I very much doubt whether economists are holding back some sort of “secret” information that free trade is actually bad.

Trump is a Nazi, Only More Elitist


trump-nazi-saluteOkay, I’ll admit: The headline here is clickbait.

But here’s a data point which I think proves Donald J. Trump — if, in fact, this needs proof — is blowing steam out of his pie-hole. (I’m not trying to dive into the Trump vs. GOPe argument. I’m just trying to help Rob run a business here. I want people to read this post, think about the data point I’m writing about, and then join Ricochet.)

Chinese exports plunged 20 percent last month:

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From ETWN News:  [….] Last month, a new federal law was enacted to prohibit importation of goods made with forced labor into the U.S., a big boost in the fight against labor trafficking.Since the 1930 Tariff Act, which prohibited such importation, one clause exempted this prohibition for when “consumptive demand” required such goods be imported. […]

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India, Intellectual Property, and Innovation


Article72Our conversation about Martin Shkreli and Indian pharmaceuticals reminded me that I’ve been having a mental debate with myself for a while. Where better to air my confusion than Ricochet?

As I argued, the case for importing generic medications from India is open-and-shut. I strongly suspect our failure to permit this is more owed to pharma-company rent-seeking and protectionism than to concern for public safety. American consumers are discerning enough to make their own decisions about whether they trust drugs from overseas. If we allowed them to come into the country, rigorous and trustworthy private mechanisms for inspecting overseas drug manufacturing facilities would quickly emerge, just as they have for awarding Michelin stars to restaurants around the world.

But I’m confused about the ideal regulatory regime for medication under patent, and indeed, for intellectual property generally. It’s a challenging problem if you think markets allocate scarce resources more efficiently than central planners do. The legitimate fight between the US and Indian pharma — “legitimate,” in the sense of, “I’m not sure who’s right” — is a case in point.

The Impact of “China Trade Shock” on US Workers


shutterstock_124001773This is a pretty good example of a trade-off in economic policymaking. From “The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade” by David Autor, David Dorn, and Gordon Hanson (italics mine):

China’s economic growth has lifted hundreds of millions of individuals out of poverty. The resulting positive impacts on the material well-being of Chinese citizens are abundantly evident. Beijing’s seven ring roads, Shanghai’s sparkling skyline, and Guangzhou’s multitude of export factories none of which existed in 1980s are testimony to China’s success.  …

If one had to project the impact of China’s momentous economic reform for the U.S. labor market with nothing to go on other than a standard undergraduate international economics textbook, one would predict large movements of workers between U.S. tradable industries (say, from apparel and furniture to pharmaceuticals and jet aircraft), limited reallocation of jobs from tradables to non- tradables, and no net impacts on U.S. aggregate employment.

Is There a Real Alternative to the Ideas of Trumpism?


RTX1ZP41_trump_supporters-e1451321671210Let’s posit that Donald Trump’s polling power — particularly among white working-class voters — mostly reflects that group’s economic troubles and anxieties about the future. What sort of economically-sound agenda might resonate with these voters? Something other than border walls, immigrant roundups and deportation, and trade wars with Asia.

In his much buzzed-about The Atlantic piece, David Frum tries to outline just such an agenda:

Admittedly, this may be the most uncongenial thought of them all, but party elites could try to open more ideological space for the economic interests of the middle class. Make peace with universal health-insurance coverage: Mend Obamacare rather than end it. Cut taxes less at the top, and use the money to deliver more benefits to working families in the middle. Devise immigration policy to support wages, not undercut them. Worry more about regulations that artificially transfer wealth upward, and less about regulations that constrain financial speculation. …

A Question For Free Traders on the Trans-Pacific Partnership


Up or down on the TPP?  How would you decide?

When Obamacare was being debated I had liberal friends whose argument in favor consisted of “We need to do something,” and “Health care is a right.” One of my responses was that slogans are not legislation and it is only the details of bill that are relevant. In the case of Obamacare, it was a 2,000-page piece of legislation that no one understood, and today even some of my liberal friend rue its passage as they understand what it actually contained.

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Central Asia, the -stan countries that speak Turkic or Persian languages and use the Cyrillic alphabet, was a prominent and strategic region of the world in the past–think Tamerlane and his Mughal scions. This article makes the case that it is returning to strategic importance. It has a kind of blame-the-west tone, but touches on […]

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I, Sandwich


Surely all Ricochetois have read (or at least heard of) I, Pencil, Leonard Reed’s 1958 fable about the necessity of trade and how nobody could actually create a pencil on their own from scratch. If not, read it now at the above link.

Well, Reed was a lightweight. He merely talked about this principle. He never actually tried to make a pencil from scratch, all by himself. YouTuber Andy George puts Reed to shame. No, he didn’t try to make a pencil from scratch. He set out to make a simple chicken sandwich from scratch.

Banning Ivory Will Not Save The Elephants


shutterstock_277259801Several years ago, my wife and I enjoyed a photo safari in Tanzania. I took nearly 1,500 photos, mostly of animals on the Serengeti, and I periodically scroll through my photo files, marveling at the grandeur of Africa. By far, the most majestic and awe inspiring animals that we encountered were the elephants. We were fortunate to get up close and personal with the herds and — on one occasion — our vehicles were challenged by a huge bull who was not amused by our presence.

These wonderful creatures are being slaughtered because they carry a valuable commodity — ivory — which has always been in great demand. At one time, there was a huge population of African elephants, so their hunting was not necessarily the evil it is today. Fortunately, elephant ivory is no longer used for consumer items such as billiard balls, piano keys, jewelry, and other utilitarian objects. It may have an incidental use for musical instruments and the like but — as with animal fur — its use is no longer commonly accepted.

Whether the number of animals illegally killed each year is in the dozens or the thousands, poaching is a despicable act. Though laws are in place to control this criminal enterprise and punish offenders, the Chinese are not convinced and account for the overwhelming majority of demand for illegal ivory. So, U.S. authorities have decided to work backwards and pick on the uninformed, easily influenced, and easily controlled Americans citizens.