Wednesday, October 24, 2007

Where Right, Left and Center Agree - Free Trade

An Economics professor from George Mason University explains why free trade brings the greatest benefit to the greatest number....

Daniel B. Klein: Where Left, Right, and Center Agree

He's basically saying the same thing that I said here, but doesn't get as worked up about it.

Here's a sampling from his article....
Today, the extent of the market is vast. That's one reason why humanity is better off than in the past. People in China are part of a great chain of beings, a chain that works to make stuff for humanity. Humanity would be happier still if the market were free of protective duties and quotas.
Economists don't agree on much. But almost all economists favor freedom of trade. It is an exceptional consensus in economic opinion.
However, "the man in the street" is less supportive of free trade. That's because he hasn't thought through the ways in which Americans benefit by foreign efforts, and how buying from foreigners is connected to their buying from Americans. Opposing trade with China is like opposing trade with Ohio.

But I'm still deeply disturbed that Starbucks won't let me transport any of their coffee. They apparently use shipping companies with lower rates than mine, despite the amount I spend with them every morning of my life.
Therefore as of today, October 24th 2007, I've modified my current trade agreement with Starbucks:

  1. Quotas are now in place. Starbucks will only receive 50% of my Double-Espresso business unless they allow me to transport some loads for them. It's only fair. The only other way they can have a quota increase is to assure me that I'm purchasing coffee that is grown, processed, packaged, and poured in Fort Worth, Texas. Except for the pouring, none of those other industries currently exist in Fort Worth because of unfair foreign competition and a mythical concept called "natural advantage". (It's just some Voodoo Economics concept about the weather.) But I'm prepared to hold out in the name of justice.
  2. I will be lobbying Congress to put a 20% protective tariff on all coffee imported into Fort Worth. This will protect Fort Worth jobs in the infant Fort Worth coffee industry. Granted, these jobs don't exist yet but look what protection did for the infant sugar industry, starting back when Thomas Freakin' Jefferson was President (and our infant sugar industry is still protected). If we as a nation can overpay for sugar every year by $400,000 per job saved, we can attempt the same for Fort Worth coffee. Starbucks must now "Think Globally, Grow Locally".
  3. I am proposing that we model our remaining "Globally Sourced" coffee quotas on the regulations that are now in place for cotton. A precise quota will be allowed into Starbucks from each nation that currently allows me to haul freight for them. At this point, the number of eligible nations is....One. But to protect my infant shipping industry in additional nations and to encourage them to allow entry to my business, I am requiring Starbucks to bring in 2% of their coffee from each of the following countries: Greenland, Iceland, Norway, Sweden, Denmark, Finland, Estonia, Lichtenstein, Canada, and The Vatican. The current Starbucks practice of limiting their coffee purchases to Equatorial regions isn't just unfair, it's racist. And if we can require the Asians to frantically move their fabric businesses around to whichever nation has some quota left at the end of the year, then the Latin Americans and their buddies in Ethiopia can do the same.

Administering this program will require a swarm of regulators and inspectors to appear every time a Fort Worth Starbucks receives a shipment of coffee. These inspectors will be paid by tax increases, since I'm not about to pay more than $2.00 for a Double Espresso. Plus, I'm the one who has to pay drivers and buy diesel. It will be like the current cozy relationship between ethanol tariffs and Archer Daniels Midland.

Think of it as jobs saved.

I'm waiting by the computer to receive the praise and gratitude of a grateful nation. And Lou Dobbs.


roma38 said...

The Law of Comparative advantage is destructive. Goods are transported thousands of miles wasting huge energy resources in the process un-necessarily.

Local self-sufficiency would be better, so long as only goods necessarily needed from elsewhere can be imported.

The current Statist and Financial regime encourages Gllobalization and dependency on goods from elsewhere. Chinese workers creating goods at knock down prices is not a good thing for everyone, it promotes low paid jobs elsewhere, a level playing field at a lower level.

The Whited Sepulchre said...

Thanks for your comment.
I agree that it is destructive. In fact, the term often used in economics is "creative destruction". It's the reason you posted via a PC rather than a TRS-80. As the world shrinks, so does the reach of competitive advantage.
The transportation argument is a huge distraction in the "buy locally" argument....Which do you think comes with the higher price tag, shipping your computer from China to an American or European retailer, or transporting it (and nothing else) from the retailer to your home?
Regarding your 2nd paragraph, what kind of local self-sufficiency do you think can be achieved in Aspen, Colorado? San Francisco? Bangor Maine? The Vatican? Do any of those regions think they can support their own textile industries? When an industry moves to China, it usually means that the U.S. or European workers have become too productive for the industry to remain there. That's why you can purchase denim jeans at Wal-Mart for the exact price (no adjustment for inflation) that I was paying in 1978. Yes, there is a "race to the bottom", but the workers at the bottom gain skills, humanity gets what they want for less, and a more efficient result is achieved. Eventually, the "bottom" country has workers who start their own enterprises, and then lobby THEIR governments to keep out unfair competition from the new "bottom" country. See China vs. India.
Also, see "The Travels of a T-Shirt" buy an economist from Penn State, I believe.
I'm glad that the current regime encourages buying from elsewhere. Yes, some workers are harmed, and some never recover. The alternative is a nation of protected buggy whip manufacturers. No nation has ever protected itself to prosperity. It can only be done via trade, and the fastest path is free trade.