Gasp... agreeing with Obama on International Trade...!?!

[AZRedhawk44]

http://www.ft.com/cms/s/0/f67c6fe6-a024-11de-b9ef-00144feabdc0.html

Go there to read:

Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

Synopsis:  Obama signs a 35% duty tax onto an already existent 4% tariff for imported Chinese tires.

Normally I don't take kindly to tariffs, protectionism or price controls.

But, considering the fact that China is about 5 years behind the IMF's mandate that they allow their currency (RMB) to be traded on the world currency market freely, I don't care.  Their currency exchange rate severely hampers the ability for ANY american product to make inroads into the Chinese economy, and it is an artificial rate.  Its value is currently artificially suppressed, making American exports more expensive in China than they should be, and Chinese exports to us cheaper than they should be.

[shudder]
Good job, Obama.
[/shudder]

[makattak]

http://www.ft.com/cms/s/0/f67c6fe6-a024-11de-b9ef-00144feabdc0.html

Go there to read:

Synopsis:  Obama signs a 35% duty tax onto an already existent 4% tariff for imported Chinese tires.

Normally I don't take kindly to tariffs, protectionism or price controls.

But, considering the fact that China is about 5 years behind the IMF's mandate that they allow their currency (RMB) to be traded on the world currency market freely, I don't care.  Their currency exchange rate severely hampers the ability for ANY american product to make inroads into the Chinese economy, and it is an artificial rate.  Its value is currently artificially suppressed, making American exports more expensive in China than they should be, and Chinese exports to us cheaper than they should be.

[shudder]
Good job, Obama.
[/shudder]

Yep. Because the Chinese are harming their citizens, it's a GREAT idea to shoot our citizens in the foot. THAT'll show those Chinese!

[seeker_two]

Yep. Because the Chinese are harming their citizens, it's a GREAT idea to shoot our citizens in the foot. THAT'll show those Chinese!

....and you don't think that South Korea, Taiwan, Japan, the EU, and other countries friendly to us won't fill in the gap left by China?....


I'm for regulating trade with China due to the harm that's been done to AMERICAN CITIZENS....remember the US steel industry?....

[AZRedhawk44]

It's not that the Chinese are hurting their citizens that I care about....


It's that they are hurting US industry and export capability to 20% of the world's consumers (China).

This would not be necessary if their currency was allowed to float on exchange markets. 

[makattak]

....and you don't think that South Korea, Taiwan, Japan, the EU, and other countries friendly to us won't fill in the gap left by China?.... They will, but at a higher price. We end up with less stuff as a result.


I'm for regulating trade with China due to the harm that's been done to AMERICAN CITIZENS....remember the US steel industry?.... So, we harm VASTLY more citizens to help a few. Hmm... what other policies fit that description...

Trade barriers don't economically help the country putting them up.

[Fjolnirsson]

I recall, if memory serves me correctly, that U.S. tire manufacturers are angry over this. Why? Glad you asked. 40+%(IIRC) of tire imports from China are from U.S. companies who have outsourced production.

[makattak]

Also, the fact that the Chinese are manipulating their currency should not matter.

It's the same result: they hurt their own people.

If they manipulate their currency such that their products are cheaper, they have a much harder time buying foreign products and materials.

If they manipulate their currency such that they can buy foreign materials/products more cheaply, they can't sell their products.

Manipulating your currency is a zero-sum game for the country doing it. You just control who wins and loses in the game, though. (Wonder why politicians love that idea...)

[drewtam]

If they manipulate their currency such that their products are cheaper, they have a much harder time buying foreign products and materials.

I think this is the intention. If you make foreign sources more expensive, it drives more development domestically. Of course, if the domestic sources could do it efficiently, they would already be competing. I still agree its a zero-sum game. But its a an alternative tool to drive over investment in domestic industry; its an alternative to putting up high import tariffs.

[longeyes]

If we need a currency-buster, let's call George Soros.  Sic him on the Chinese.  He seems to be very good at fighting war by other means.

Obama wants to get tough now with the sharks he owes the store to?  I think this is just a theatrical gesture that was no doubt orchestratred in the back room of some global summit.  Obama wants to look like a union guy, but the long-term plan still involves humbling America.

[Headless Thompson Gunner]

http://www.ft.com/cms/s/0/f67c6fe6-a024-11de-b9ef-00144feabdc0.html

Go there to read:

Synopsis:  Obama signs a 35% duty tax onto an already existent 4% tariff for imported Chinese tires.

Normally I don't take kindly to tariffs, protectionism or price controls.

But, considering the fact that China is about 5 years behind the IMF's mandate that they allow their currency (RMB) to be traded on the world currency market freely, I don't care.  Their currency exchange rate severely hampers the ability for ANY american product to make inroads into the Chinese economy, and it is an artificial rate.  Its value is currently artificially suppressed, making American exports more expensive in China than they should be, and Chinese exports to us cheaper than they should be.

[shudder]
Good job, Obama.
[/shudder]

Not at all a good job.  Obama is opening up a trade war with out biggest trading partner, at a time when we can least afford it, simply to appease his union allies.  This is cronyism at its worst.

Obama either doesn't have a clue about economics or history, or he wants the recession to deepen and last longer.  I'm not sure which it is, but I suspect it's the latter.  This downturn is proving far too valuable for him politically to just let it go away on its own.  And hey, if he can throw a bone to his union buddies at the same time, it's a win-win for him.

[roo_ster]

Yep, BHO did it to placate his union supporters, specifically the steel workers' union.

There are two point I would make WRT this & trade with China in general:

1. It is not wise to provide the means to arm and become a regional power to the country we are most likely to get into a shooting war with large numbers of casualties. 

I was against MFN for China way back.  I still think it stupid to trade with them and provide the PRC with the cash they need to arm their military.

2. Where are they going to sell their goods?  We are their largest market.  They have much more to lose in this tussle than the USA does.

[Headless Thompson Gunner]

I don't buy it.  Even if it hurts the other guy more than it hurts you, it still hurts you.  Even if the other guy loses more than you do, you still lose.  It's dumb.

And for the record, I'm not agreeing that Obama's trade war is necessarily going to hurt more for them than for us.

[longeyes]

It's another of those fabled dysfunctional marriages...

Other politicians have mistresses; Nixon had China.

[FTA84]

One-way trading does not produce wealth.

Wealth is "created" when one person with a special set of skills exchanges his work with another person with a special set of skills.  Eventually, this forms into groups exchanging sets of skills with each other.  Or put another way, wealth is created when efficiency is improved.  This is why you have an agriculture revolution, then an industrial revolution, then another agriculture revolution, then another industrial one....and so on...

E.g. I could probably figure out how to build 98% of a car myself but by the time I built all the tools to make all the parts, found all the chemicals, ect. ect., it would probably take me my whole life.  On the other hand, I can buy a car from a group of people for less than my yearly salary.  Hence wealth is created (notice, wealth is a bit indistinguishable from time), that group of people exchanged the car they made for my services.

We don't produce wealth with China.  We rid ourselves, systematically, of our wealth.

We are like a rich widow paying her cook/maid with valuables from the mansion.  Eventually, there will be nothing left to sell.  The cook is not buying anything from the widow, the widow is not producing any goods.  Eventually, the cook and the maid will leave once the house is plundered.  The widow will have nothing left to sell and no capital to start any enterprise.

I'm all for trading goods, they sell us tyres and we sell them chicken noodle soup, but they are not interested in such an exchange.

I know that our labor laws make production the US more difficult than it should be, but even without labor laws, we couldn't compete with China's communist system.  Just like in health care, a government run (or protected) tyre option will eventually take over.

[makattak]

One-way trading does not produce wealth.

Wealth is "created" when one person with a special set of skills exchanges his work with another person with a special set of skills.  Eventually, this forms into groups exchanging sets of skills with each other.  Or put another way, wealth is created when efficiency is improved.  This is why you have an agriculture revolution, then an industrial revolution, then another agriculture revolution, then another industrial one....and so on...

E.g. I could probably figure out how to build 98% of a car myself but by the time I built all the tools to make all the parts, found all the chemicals, ect. ect., it would probably take me my whole life.  On the other hand, I can buy a car from a group of people for less than my yearly salary.  Hence wealth is created (notice, wealth is a bit indistinguishable from time), that group of people exchanged the car they made for my services.

We don't produce wealth with China.  We rid ourselves, systematically, of our wealth.

We are like a rich widow paying her cook/maid with valuables from the mansion.  Eventually, there will be nothing left to sell.  The cook is not buying anything from the widow, the widow is not producing any goods.  Eventually, the cook and the maid will leave once the house is plundered.  The widow will have nothing left to sell and no capital to start any enterprise.

I'm all for trading goods, they sell us tyres and we sell them chicken noodle soup, but they are not interested in such an exchange.

I know that our labor laws make production the US more difficult than it should be, but even without labor laws, we couldn't compete with China's communist system.  Just like in health care, a government run (or protected) tyre option will eventually take over.

>.<

Really, we aren't trading with China?

Why is it people can understand things like trade as an individual, but it gets all screwy in the aggregate?

http://china.cat.com/cda/components/fullArticle?m=321016&x=7&id=1670662

There's just ONE example of what China buys from us. I choose this one as much of what the US produces is no longer physical products. People don't understand that value is created even without a physical object. For example:

http://www.microsoft.com/presspass/features/2009/feb09/02-19chinamobilemrkt.mspx

What happening with their currency manipulation is NOT that we're giving away our valuables for nothing. In fact, quite the opposite is going on. China is manipulating their currency such that WE are getting a lot more out of them then we should be able to. WE are benefitting because we are getting a lower priced good.

Chinese people are losing because they have to trade MUCH MORE of their time for our goods than their productivity says they should.

We should applaud China's government for giving us such a great deal, but instead we insist that our government cripple us in response.

[longeyes]

The trade is not one-sided.  The laptop computer I'm using to type this--it's a Mac--was made in Shanghai.  The same laptop enables me, one hopes, to be productive, to make money.  Made in America that computer would have cost me twice as much, perhaps, to get the same economic power.

That said, the issue goes beyond better tools and more ample consumer consumption.  We have to look at longer-term issues like overall competitive viability, essential survival skills, and the ever-present prospect of wars as "economics by other means."

[makattak]

The trade is not one-sided.  The laptop computer I'm using to type this--it's a Mac--was made in Shanghai.  The same laptop enables me, one hopes, to be productive, to make money.  Made in America that computer would have cost me twice as much, perhaps, to get the same economic power.

That said, the issue goes beyond better tools and more ample consumer consumption.  We have to look at longer-term issues like overall competitive viability, essential survival skills, and the ever-present prospect of wars as "economics by other means."

If you want to argue non-economic reasons for restricting free trade, that's fine.

I have no problem with national security concerns being reflected in trade policy.

To claim they are hurting us because we are getting less expensive tires is fallacious, though.

[AZRedhawk44]

The laptop computer I'm using to type this--it's a Mac--was made in Shanghai.  The same laptop enables me, one hopes, to be productive, to make money.  Made in America that computer would have cost me twice as much, perhaps, to get the same economic power.

Macs cost $2500 because people are dumb and pay that much.

A PC with the same CPU/RAM/disk/software horsepower costs a third of that.  If that much.

Made in America versus made in Malaysia doesn't matter.  You're paying for trendiness.  Mac has plenty of profit per unit to bring the factory back to Cupertino, CA and pay Americans to do the job.

Interestingly, my school district had a stipulation that all Macs purchased had to be manufactured in the States, back when I used to work in that IT department.  Still got them at about 2/3 retail price per unit, even with the supposed higher cost of manufacturing in the states.

Parallel argument:  Nike versus New Balance, in the shoe market.  Nike ships supplies to Indonesia, then ships shoes to the States.  They sell them for $100+ per pair.  New Balance manufactures their shoes here in the US paying anywhere from minimum to skilled wages for various jobs, and sells them for $50 a pair.  They've been eating Nike's market share away for years now.  Comfy shoes, so they aren't cutting corners on shoe design.  Just "trend" and marketing.

"Marketing" and "trend" are not goods we can use to subsidize our trade deficit with other countries.

Using labor and design talents (along with appropriate bureaucratic overhead like IT and HR) here state-side, we can "package" that labor as a marketable good abroad and sell it to other countries rather than allowing them to do the same thing to us to claim a debt against us.

America's failure to maintain industry will bite us hard at some point in the future, IMO.

Allowing China and the rest of the East to package their labor as a claim on our debt just puts us farther in the hole every year.  When they artificially lower the time/value of their labor pool by playing games with currency it makes it impossible for us to re-establish trade parity.  If you can't change their laws or trade practices, then you have no other choice than to add tariffs or import taxes to that country's goods.

[makattak]

America's failure to maintain industry will bite us hard at some point in the future, IMO.

We produce more than we ever have before. (Prior to the recession)

We produce more than we ever have before

We produce more than we ever have before.

http://www.cato.org/testimony/ct-dg06132007.html See graph at the bottom of the article.

Our manufacturing EMPLOYMENT is falling, just like our Agriculture employment fell at the beginning of the last century. Was that a bad thing, too? Are we all starving now?

[FTA84]

I do not disagree that (certain) services can be part of trade.  I just don't know how realistic to think we will forever be able to corner such a market.  We only have that niche currently because of the post-WWII wealth that permitted us to educate a great part of our population, while much of the rest of the world was standing by.

Services, unlike physical products, are not usually linked to the resources of a particular country.  It is fairly universal -- agriculture revolution leads to industrial revolution leads to education revolution.  As China and India become richer, they will have more money to invest into education, they will be able to meet their own demand for services.  We know that they have the population resources for it.

[longeyes]

That wasn't a Mac commercial, amigo.  

However...

I am writing this on an iBook that I bought for $1250, not $2500.  In my mind the Mac is worth the price differential for these reasons: OS X; the software suite that comes with the Mac; and, last but definitely not least, the far smaller susceptibility to viruses and spyware.  I have extensive experience with DOS, Windows, OS 9 & X, and Linux.  I went from an HP running Windows to the Mac for security more than anything else.

Hey, I have no problem getting good tires for less.  My gripe is giving away vital technology over the years for less than it's worth...or having it stolen.  Asia "thinks different."

[Headless Thompson Gunner]

I do not disagree that (certain) services can be part of trade.  I just don't know how realistic to think we will forever be able to corner such a market.  We only have that niche currently because of the post-WWII wealth that permitted us to educate a great part of our population, while much of the rest of the world was standing by.

Services, unlike physical products, are not usually linked to the resources of a particular country.  It is fairly universal -- agriculture revolution leads to industrial revolution leads to education revolution.  As China and India become richer, they will have more money to invest into education, they will be able to meet their own demand for services.  We know that they have the population resources for it.

There are other resources in a nation beyond the raw materials that spring from the ground.  Attitudes, traditions, culture, institutions, and so forth all matter just as much as the stuff in the ground, if not more.

One example, among many, is that the United States has some of the best higher education institutions anywhere in the world.  China and India may have the population, but since they have to send their brightest over here to be educated they're at a distinct disadvantage.

[longeyes]

Right about the higher-ed institutions--but how long before even the top-echelon schools become infected by egalitarian politics? (If they are not already.)

[Headless Thompson Gunner]

Right about the higher-ed institutions--but how long before even the top-echelon schools become infected by egalitarian politics? (If they are not already.)

I think many of the so-called 'elite' schools already are infected.  There are still plenty of other excellent schools out there that are still teaching.

[RevDisk]

Not at all a good job.  Obama is opening up a trade war with out biggest trading partner, at a time when we can least afford it, simply to appease his union allies.  This is cronyism at its worst.

Obama either doesn't have a clue about economics or history, or he wants the recession to deepen and last longer.  I'm not sure which it is, but I suspect it's the latter.  This downturn is proving far too valuable for him politically to just let it go away on its own.  And hey, if he can throw a bone to his union buddies at the same time, it's a win-win for him.

I'm with HTG.  It's a favor to the unions, and it is ill advised.  I'm not in favor of protectionist* trade controls. 


(OTOH, I have no problem mirroring another country's protectionist laws.  Perhaps I am mistaken, but it doesn't seem like a wonderful idea to open your markets to a country that is intentionally closed to your own.  So, use Prisoner's Dilemma game theory on the situation.  But retaliation only.)