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He is admitting those benefits. His point is that with different tax rates and regulations the market is distorted and if anything imposing tariffs / revenue ta

He is admitting those benefits. His point is that with different tax rates and regulations the market is distorted and if anything imposing tariffs / revenue taxes is just equalising the market. I don't think he's talking literally about units.

barry-cotter 9y ago
If other people do stupid things you don’t have to do stupid things too. Market distortions, different tax rates and regulations do not change how returns to specialisation and gains from trade work. Anti-dumping tariffs are stupid because it not notnto your benefit to punish people for giving you cheap stuff that should be expensive. Being able to have different tax rates is part of the power to tax, which is part of being sovereign. Equalising the market is a fool’s game. The market is what it is. If you want to help some people or groups by all means do it, but tariffs are a very inefficient way to do it. Transfer payments ftw!
- danbruc 9y ago
  Anti-dumping tariffs are stupid because it not notnto your benefit to punish people for giving you cheap stuff that should be expensive. That is only true in a very simplistic model. If a country sells for example cheap subsidized steel you may lose your steel production capability because you are not able to compete with that price. But once you lost that capability it may become prohibitively expensive to regain it because the initial costs to rebuild the knowledge and infrastructure is going to be much higher than the marginal costs for an established industry and you would have to accept, at least to some extend, which ever price they ask for. The other country may also be able to offer a lower price due to externalities, for example exploitation of their workers or environmental destruction, and you may want to compensate for that.
  - barry-cotter 9y ago
    If you’re not able to compete with a price that’s the market saying you’d be better off doing something else with those resources. If you suspect that the price is due to subsidy, great, free money. If you want to maintain domestic production capacity subsidise it. If you want to reduce startup costs pay to mothball a plant. If you want to maintain expertise subsidise the salaries of citizens who go abroad to learn about or work in those industries. As far as externalities go you certainly have a point but if you feel you have a right to tell other people and countries what to do, go ahead. I don’t think there’s any reason to stop anywhere between sovereignty and colonialism. Those positions are coherent, the ones in between aren’t.
    - danbruc 9y ago
      Well, it is not free money if I have to spend money to protect me against potential future negative outcomes of that free money. And where would the money come from to mothball a plant? Naturally that would be from anti-dumping taxes on the subsidized goods causing the issue, wouldn't it? And I would almost never suggest to tell any other country what to do - even though I would consider that legitimate within the right framework because sovereignty is not an absolute right - but I certainly have no objections against and am actually for putting taxes on foreign goods if those were produced according to standards I do not agree with.
      - barry-cotter 9y ago
        The free money is the subsidy that is the reason usually avowed for anti-dumping tariffs. Choosing to mothball a plant is a choice, not something that automatically happens if some other country chooses to subsidise one of their industries. Revenues and expenditures are both fungible. In the end one goes into the state’s coffers and the other goes out. In no sense worth mentioning would taxes from anti-dumping tariffs fund subsidising domestic production or mothballing a plant. The costs, benefits and consequences of tariffs, subsidies on domestic production and mothballing should be considered not as a unit but as three separate policies with no necessary relations. If one, two or three of them make sense by all means do them but the idea that one can fund the others is just a desire for retribution looking for a justification.
        danbruc 9y ago
        The free money is the subsidy that is the reason usually avowed for anti-dumping tariffs. Choosing to mothball a plant is a choice, not something that automatically happens if some other country chooses to subsidise one of their industries. Sure, in the general case, but I don't think we are debating the general case, at least I wasn't. If this other country just had a ton of useless money laying around and felt particular altruistic wanting to provide cheap steel to the entire world, nice of them. Also people would probably not be too worried about imposing tariffs. But that is not really the case that people worry about, they worry about countries subsidizing goods to hurt or even destroy your industry and making you dependent on them even if prices rise above what you own industry was able to provide before. Unless you are willing to accept this or at least take the risk of this happening, you now have a link. If the price difference is small enough, tariffs will equalize the difference and you might not actually collect that much money from them because buying from the local industry does not cost more. If the difference is large enough, you might decide to capture part of it with tariffs and use that to mothball your plants as protective measures and still profit from the additional difference. Also note that I am assuming that production costs are comparable before any subsidies and that there are no other strategic interests for maintaining an industry locally which of course will change the equation again. Even if that other country can legitimately produce steel at a better price than you, say because it has a lot of easy to mine iron ore, you might still put a price sticker on becoming dependent on that country. If you consider the relation potentially unstable, then you might not want to put all your eggs in that basket.
- bobcostas55 9y ago
  > But once you lost that capability it may become prohibitively expensive to regain it because the initial costs to rebuild the knowledge and infrastructure is going to be much higher than the marginal costs for an established industry and you would have to accept, at least to some extend, which ever price they ask for. This has literally never happened. People keep bringing up this objection, but nobody can point to a single instance of it ever happening. It's irrelevant.
  - andosa 9y ago
    How has it not ever happened? China, who essentially blocked Google, Amazon et al, now have Baidu, Alibaba, Tencent and other massively successful tech companies, while EU is stuck with aforementioned monopolies with near-zero chance of a local competitor competing with them.
    - barry-cotter 9y ago
      Google, Amazon, Microsoft etc. are still there. The US can still produce steel and computer chips. Other countries subsidising domestic production of software, steel and computer chips did not lead to the US being unable to do so. And amazon is pretty big in China, taobao and jingdong are just bigger and better.
      - andosa 9y ago
        Yes, they are still there, but the protectionism is what allowed the local companies (Baidu, Tencent, Alibaba etc) to compete initially and be better in the end. Whereas in EU, local competition has been crushed and it is now stuck with the monopolies.
        barry-cotter 9y ago
        Baidu is still not better than Google, even in Chinese, for what it’s worth. Infant industry protection may make sense in some cases but it’s more commonly used as a smokescreen for corruption. It was used as a justification for high tariffs and low quality domestically produced goods all over the world throughout the 50s to at least the 80s. If the EU doesn’t have much in the way of domestic IT companies so what? They’re still rich. The fact that others are getting rich in other, different ways does not make them poorer.

barry-cotter 9y ago

If other people do stupid things you don’t have to do stupid things too. Market distortions, different tax rates and regulations do not change how returns to specialisation and gains from trade work. Anti-dumping tariffs are stupid because it not notnto your benefit to punish people for giving you cheap stuff that should be expensive. Being able to have different tax rates is part of the power to tax, which is part of being sovereign. Equalising the market is a fool’s game. The market is what it is. If you want to help some people or groups by all means do it, but tariffs are a very inefficient way to do it. Transfer payments ftw!

danbruc 9y ago
Anti-dumping tariffs are stupid because it not notnto your benefit to punish people for giving you cheap stuff that should be expensive. That is only true in a very simplistic model. If a country sells for example cheap subsidized steel you may lose your steel production capability because you are not able to compete with that price. But once you lost that capability it may become prohibitively expensive to regain it because the initial costs to rebuild the knowledge and infrastructure is going to be much higher than the marginal costs for an established industry and you would have to accept, at least to some extend, which ever price they ask for. The other country may also be able to offer a lower price due to externalities, for example exploitation of their workers or environmental destruction, and you may want to compensate for that.
- barry-cotter 9y ago
  If you’re not able to compete with a price that’s the market saying you’d be better off doing something else with those resources. If you suspect that the price is due to subsidy, great, free money. If you want to maintain domestic production capacity subsidise it. If you want to reduce startup costs pay to mothball a plant. If you want to maintain expertise subsidise the salaries of citizens who go abroad to learn about or work in those industries. As far as externalities go you certainly have a point but if you feel you have a right to tell other people and countries what to do, go ahead. I don’t think there’s any reason to stop anywhere between sovereignty and colonialism. Those positions are coherent, the ones in between aren’t.
  - danbruc 9y ago
    Well, it is not free money if I have to spend money to protect me against potential future negative outcomes of that free money. And where would the money come from to mothball a plant? Naturally that would be from anti-dumping taxes on the subsidized goods causing the issue, wouldn't it? And I would almost never suggest to tell any other country what to do - even though I would consider that legitimate within the right framework because sovereignty is not an absolute right - but I certainly have no objections against and am actually for putting taxes on foreign goods if those were produced according to standards I do not agree with.
    - barry-cotter 9y ago
      The free money is the subsidy that is the reason usually avowed for anti-dumping tariffs. Choosing to mothball a plant is a choice, not something that automatically happens if some other country chooses to subsidise one of their industries. Revenues and expenditures are both fungible. In the end one goes into the state’s coffers and the other goes out. In no sense worth mentioning would taxes from anti-dumping tariffs fund subsidising domestic production or mothballing a plant. The costs, benefits and consequences of tariffs, subsidies on domestic production and mothballing should be considered not as a unit but as three separate policies with no necessary relations. If one, two or three of them make sense by all means do them but the idea that one can fund the others is just a desire for retribution looking for a justification.
      - danbruc 9y ago
        The free money is the subsidy that is the reason usually avowed for anti-dumping tariffs. Choosing to mothball a plant is a choice, not something that automatically happens if some other country chooses to subsidise one of their industries. Sure, in the general case, but I don't think we are debating the general case, at least I wasn't. If this other country just had a ton of useless money laying around and felt particular altruistic wanting to provide cheap steel to the entire world, nice of them. Also people would probably not be too worried about imposing tariffs. But that is not really the case that people worry about, they worry about countries subsidizing goods to hurt or even destroy your industry and making you dependent on them even if prices rise above what you own industry was able to provide before. Unless you are willing to accept this or at least take the risk of this happening, you now have a link. If the price difference is small enough, tariffs will equalize the difference and you might not actually collect that much money from them because buying from the local industry does not cost more. If the difference is large enough, you might decide to capture part of it with tariffs and use that to mothball your plants as protective measures and still profit from the additional difference. Also note that I am assuming that production costs are comparable before any subsidies and that there are no other strategic interests for maintaining an industry locally which of course will change the equation again. Even if that other country can legitimately produce steel at a better price than you, say because it has a lot of easy to mine iron ore, you might still put a price sticker on becoming dependent on that country. If you consider the relation potentially unstable, then you might not want to put all your eggs in that basket.
bobcostas55 9y ago
> But once you lost that capability it may become prohibitively expensive to regain it because the initial costs to rebuild the knowledge and infrastructure is going to be much higher than the marginal costs for an established industry and you would have to accept, at least to some extend, which ever price they ask for. This has literally never happened. People keep bringing up this objection, but nobody can point to a single instance of it ever happening. It's irrelevant.
- andosa 9y ago
  How has it not ever happened? China, who essentially blocked Google, Amazon et al, now have Baidu, Alibaba, Tencent and other massively successful tech companies, while EU is stuck with aforementioned monopolies with near-zero chance of a local competitor competing with them.
  - barry-cotter 9y ago
    Google, Amazon, Microsoft etc. are still there. The US can still produce steel and computer chips. Other countries subsidising domestic production of software, steel and computer chips did not lead to the US being unable to do so. And amazon is pretty big in China, taobao and jingdong are just bigger and better.
    - andosa 9y ago
      Yes, they are still there, but the protectionism is what allowed the local companies (Baidu, Tencent, Alibaba etc) to compete initially and be better in the end. Whereas in EU, local competition has been crushed and it is now stuck with the monopolies.
      - barry-cotter 9y ago
        Baidu is still not better than Google, even in Chinese, for what it’s worth. Infant industry protection may make sense in some cases but it’s more commonly used as a smokescreen for corruption. It was used as a justification for high tariffs and low quality domestically produced goods all over the world throughout the 50s to at least the 80s. If the EU doesn’t have much in the way of domestic IT companies so what? They’re still rich. The fact that others are getting rich in other, different ways does not make them poorer.