[DGthe3]

Originally Posted by a_Username

I wouldn't call those methods an advantage in the least. The first thing you have to do is convince people that government is better at allocating resources than the market. The inherent assumption here is that the (international) market failed, and it did not optimally allocate resources to say the (United States') manufacturing industry. I believe Krugman, who I might add is not your typical "free market = answer to everything" kind of guy, says it best about the manufacturing industry's "decline,"



Krugman is simply applying the allocative ability of the market to a specific industry. This has happened primarily because the manufacturing industry is requiring less and less workers for its required output. And it is this high productivity that demands both higher paid and more skillful jobs to be fulfilled by the most productive. A side effect of this increased productivity means that capital can now be invested more in the service industry.



The "currency devaluation" method, for example, may increase exports, but it does so at a relatively high cost to consumers (really everyone). Consumers lose purchasing power thus reducing the amount of goods they can buy, which in turn results in a lower standard of living. So, how does buying fewer goods than before help strengthen our economy? Would you identify a regressing standard of living with economic progress? In a real world application, it is probable that Japan's infamous "Lost Decade" may not have happened without a government so keen on devaluing their currency combined with uncontrolled credit expansion and making its manufacturers "competitive" at the expense of making its citizens poorer.

I believe we all know why banning "free trade," which I must say is nonexistent in this country and any other, is bad for our economy. In short, yes I do believe that unhampered free trade will only make us richer, more competitive, and better off in the long run.



I would advise you to look up the division of labor and trade. These two phenomena are primarily what leads to economic growth; economic growth has never been the product of government policy. Also, you have nothing to fear, considering it is mostly comparative advantage and not absolute advantage that drives trade. That is, no country will ever have an absolute advantage in the production of automobiles, which means that the United States will likely always have at least a few automakers. But the comparative advantage may shift from country to country.

For the sake of consistency of the protectionist argument, what if we take this argument to its logical conclusion? Specifically, where is the outrage at the "trade deficit" between Tennessee and Kentucky or any other two states? Should Tennessee not impose laws to "equalize" wage rates by imposing tariffs on the "inexpensive foreign labor" of its northern counterpart? Also, does this mean that consumers can never patronize low-cost firms because it is "unfair" for them to have lower costs than inefficient competitors?



Continuing on the example above, would the retaliatory tariffs made by the Kentucky government not "sit well" with you either? Of course, you don't have to take my word for any of this; I believe Smoot and Hawley knew very well the harmful effects of tariffs and quotas.



I'm interested in the consumer. I have no interest or sympathy to whom try their hand in the market and failed.

Currency devaluation is merely one method to attempt to improve your exports. And taxes/wages aren't really a form of protectionism in my mind. They're a cost of doing business in that country, sure I accept that. But the way to fight it is to try and raise the standard of living in other countries, not reduce your own or try to impede their growth.

That said, there are plenty of other ways to protect a market, import taxes/tariffs, tax breaks for domestics, quotas, subsidies. And its absurd to argue that when a nation like South Korea or Japan has millions of guaranteed domestic auto sales it doesn't provide a competitive advantage in the global market place. Toyota, Honda, Nissan, and Hyundai/Kiacars are all clearly up to the standard of what buyers in the US and around the world want, so for them its not a case of propping up failures. I can almost support protectionism when a nation is trying to establish its own industries and their own fledgling attempts to stand on their own without getting swamped by big international competitors. But that hasn't been the case in Korea for years, or Japan for decades. Instead, you have Toyota selling more cars worldwide than anybody else, when there is only a single major market where they sell more than GM: Japan. Meanwhile, the JDM also allows smaller manufacturers like Suzuki and Mitsubishi to keep building cars.


Also, with my equal trade idea it would usually be in the other nations best interest to simply remove their own trade barriers. Afterall, the Korean auto industry would take a severe hit if they lost ~400,000 units of export to the United States, far bigger than what they would take by allowing the unimpeded import of US automobiles. Afterall, their market is at best 1/6 the size of the US market. Assuming that the combined US automakers would have a comparable market share in South Korea as Hyundai/Kia have over here the 'trade rate' on cars would be somewhere around 6:1 (currently its something like 66:1). So Korea would stand to lose either 65,000 sales by allowing US automakers in or lose 400,000 by being shut out of the US. I would rather Korea open up, but I wouldn't be terribly saddened if they got shut out either. Same with China, Japan, or an number of other countries.