4 ms·

Doesn't this all assume that all trading partners are being fair and honest, though? For example, let's say a country artificially keeps prices low for microch

Doesn't this all assume that all trading partners are being fair and honest, though? For example, let's say a country artificially keeps prices low for microchips in an effort to infiltrate the US market (for whatever underlying reason). Or some other country's clothing is super-cheap because they use forced labor. I'm no economist, and I'm not even well-versed in the subject. I don't even know if these are real-world scenarios. But it's things like this that have always bothered me when people advocate for straight-up libertarianism, or complete lack of government oversight. Because there are always people who don't play fair.

resters 8y ago
If a foreign government subsidizes manufacturing of things that are exported to the US, it is taxing its own citizens and effectively paying US firms/individuals to import those goods at a discount.
- tynpeddler 8y ago
  If it were that simple than no one would care if Walmart dumps a ton of goods on the market at below cost to drive its competitors out of business.
  - resters 8y ago
    Companies always try to undercut competitors. That is just how it works when you have competitive markets. If China subsidizes steel production, the subsidy is benefitting US firms that import steel. If there is a need for the US to have steel production capacity domestically, then why not keep steel reserves in a warehouse somewhere. This would cost a fraction of the cost of tariffs. The same rationale is used with oil reserves. Keeping reserves costs a bit of money and requires a small number of people to administer the project. Contrast this with a tariff that props up a dead industry and results in thousands of workers being paid to work a job that shouldn't really exist and is essentially a welfare check in disguise. Far better to use the money to directly and transparently address any resource needs, national security, etc,. and then also use money to directly and transparently provide job training to help workers deal with slower-paced but obvious economic trends.
Tyrek 8y ago
To answer your high level question: Absolutely not. International trade theory's core concepts are structured as a n-player game, with n being the number of nations. That is to say, a nation has a fixed amount of resources. If a domestic policy is chosen to optimize for the production of cheap microchips (because you can't produce under-cost for a significant period of time), you are impacting the production of other goods. When a nation optimizes for the production of a good it can produce advantageously (see: comparative advantage), the world benefits (As you make less of the goods you produce less efficiently). Sure, individual members within the nation may receive subsidies or subsidize others, but that's a domestic issue. It's difficult to explain this in the level of detail that it warrants to the layman, because the underlying theory is built upon a substantial chunk of underlying economic theory. The biggest issue with Econ is that it's simply unintuitive, and that it takes a lot of effort to switch your mindset.

resters 8y ago

If a foreign government subsidizes manufacturing of things that are exported to the US, it is taxing its own citizens and effectively paying US firms/individuals to import those goods at a discount.

tynpeddler 8y ago
If it were that simple than no one would care if Walmart dumps a ton of goods on the market at below cost to drive its competitors out of business.
- resters 8y ago
  Companies always try to undercut competitors. That is just how it works when you have competitive markets. If China subsidizes steel production, the subsidy is benefitting US firms that import steel. If there is a need for the US to have steel production capacity domestically, then why not keep steel reserves in a warehouse somewhere. This would cost a fraction of the cost of tariffs. The same rationale is used with oil reserves. Keeping reserves costs a bit of money and requires a small number of people to administer the project. Contrast this with a tariff that props up a dead industry and results in thousands of workers being paid to work a job that shouldn't really exist and is essentially a welfare check in disguise. Far better to use the money to directly and transparently address any resource needs, national security, etc,. and then also use money to directly and transparently provide job training to help workers deal with slower-paced but obvious economic trends.

Tyrek 8y ago

To answer your high level question: Absolutely not. International trade theory's core concepts are structured as a n-player game, with n being the number of nations. That is to say, a nation has a fixed amount of resources. If a domestic policy is chosen to optimize for the production of cheap microchips (because you can't produce under-cost for a significant period of time), you are impacting the production of other goods. When a nation optimizes for the production of a good it can produce advantageously (see: comparative advantage), the world benefits (As you make less of the goods you produce less efficiently). Sure, individual members within the nation may receive subsidies or subsidize others, but that's a domestic issue. It's difficult to explain this in the level of detail that it warrants to the layman, because the underlying theory is built upon a substantial chunk of underlying economic theory. The biggest issue with Econ is that it's simply unintuitive, and that it takes a lot of effort to switch your mindset.