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Globalization is about an even playing field, not one-sided concessions and subsidies
by paulsutter 8y ago
Globalization is about an even playing field, not one-sided concessions and subsidies
- colechristensen 8y agoThe idea of free trade/globalization is everyone benefiting from the efficiency of each place doing the work it can do most efficiently. Iowa corn and Swiss fine machinery and Arab oil and all sorts of things where one place can do something better and cheaper because of the nature of the place. Poverty (cheap labor) and treaties (cheap postage) shouldn't be the drivers of this efficiency because they aren't caused by fundamental differences, just political ones.
- raquo 8y agoBut the issue here is not the differential in efficiencies. It's China receiving subsidies from the US because it was considered a developing country in 1969. It's not anymore, it's a global superpower now, it can pay its own postage.
- baldfat 8y agoNo it has no bearing on China. It is the same policy with Switzerland. You get the international package to America we pay for the final delivery. Pay for a package to Switzerland and Switzerland pays for the final delivery. It was suppose to be a wash for both parties. China just got a much better deal. Cost me more to mail a package the next state away then for me to get a package delivered from China. Now you have to pay for Switzerland delivery and then the domestic cost. Wish and EBay from China is now bye bye.
- nkurz 8y agoEBay from China is now bye bye. Why would this change the be end of direct shipping from China? Currently (rounded off numbers) the cost of shipping a 2 lb (1 kg) package within the US is about $7, and the cost of shipping such a package from China to a US address is about $2. The obvious solution would be that the Chinese shipment ends up costing $9 (current Chinese rate of $2 to the US border, plus $7 standard US shipping). The Chinese shipping would thus end up $2 more than the US. Presumably there would be lots of cases where the $2 greater shipping is offset by lower price of the item?
- baldfat 8y agoI can order 8 recycling batteries for $2.99 and have them shipped to my house. That is a loss of $4. They are looking at an increase of $7 at least. BTW when I ship a small box 2 pound of cookies to my son from his mom it cost me around $10.
- nkurz 8y agoSure, certain things will no longer be feasible. My doubt was that these less-than-the-cost-of-shipping items were the bulk of the current direct-from-China Ebay orders, and even if they were, I was doubting that there was not a market for slightly more expensive items. For the US cost, a "Priority Mail Small Flat Rate Box" is $7.20 between any two US addresses, and a "Priority Mail Flat Rate Envelope" is $6.70. If you don't use one of these, the postage will likely will be slightly more.
- kbenson 8y agoWhere are you getting those numbers from? My understanding is that there's a nominal fee for last-mile delivery the USPS charges mail from other countries, which is all (or the vast majority) that's being charged for Chinese shipments, as the Chinese side is subsidized completely (or almost so) for outgoing mail. I think the $2 you are quoting might be the treaty fee for delivering mail from other countries, which is not the true cost of delivery, but mostly works out as long as there's a fairly even flow of mail between two countries. What we have here is that China is subsidizing their side of the outgoing mail, so all that's being paid is the treaty set delivery fee for external mail (which again, isn't the true cost of last-mile delivery).
- michaelt 8y agothe treaty fee [...] is not the true cost of delivery, but mostly works out as long as there's a fairly even flow of mail between two countries. Isn't the core problem here that there _isn't_ an even flow of mail between China and the US? Because there's far more ebay/aliexpress traffic coming out of China than going in.
- netsharc 8y agoActually Swiss Post has the same problem as the USPS: buying something from a Swiss online shop is usually expensive because of high Swiss wages, but you can buy stuff for "dirt cheap" from China, and the delivery isn't paid for by the customer but by Swiss Post. Things like S-ATA cables cost maybe at least 7 Francs in Switzerland, but 0.40 CHF from China, with free shipping!
- datavirtue 8y agoAlso of note, American tax payers were dropping $300MM a year to help Chinese small business.
- toomuchtodo 8y agoWhile it's unlikely that money saved would be directed to more useful endeavors internally, as a US citizen I'd prefer that money not subsidize Chinese commerce (or rather, subsidize US consumers purchasing directly from China).
- baybal2 8y agoNo, every few years, there is a reevaluation. Last one was in 2016.
- specialist 8y agoHuh. Very interesting. I have a notion that all decisions should auto expire and be explicitly renewed. Because it's so hard to cull outdated or revisit / repair suboptimal rules. Inspired by stuff like IP/TCP leases and cache TTL. But your example of the powers that be waving thru a bad rule refresh suggests my notion won't be sufficient. Thoughts?
- baybal2 8y agoWell, the process did exactly what it was required to do, to classify countries by income levels. China is not that rich, not even passing as a newly industrialised country. Were it to pass as such, say, Kenya and many other African countries would've too.
- morpheuskafka 8y agoThis. I've got nothing against US aid to less privileged nations, I'm all for it. I can't stand a US adversary who is running re-education concentration camps for Uighurs and implanting remote access devices into US corporate infrastructure getting an unjust benefit form one cent of American tax money that operates the post office.
- niij 8y agoThe US post office is 100% self funded. They get exactly $0 from taxes.
- morpheuskafka 8y agoNot so fast. You're right that the general operations of the USPS are no longer directly appropriated by Congress. However, the US government and its citizens do give the USPS significant economic benefits, including a 100% tax exemption from state and local taxes, and the ability to "pay" federal taxes back to itself[1]. USPS need not comply with local zoning, parking, toll road, etc. laws. According to a 2015 report[2] cited by Fortune, that included $2.1B in waived taxes, the benefit of a federal monopoly on deliveries worth $14.9B, and as much as $490M/yr in subsidized lower interest rates due to not having to have a credit rating and borrow on the open market, but instead getting preferential treatment from the Treasury. Not included in the report is the fact that USPS OIG and USPIS are federally funded through appropriations[3]--whereas UPS or FedEx would have to hire their own off duty police offers at significant expense to receive the same level of protection. [1] https://www.uspsoig.gov/blog/taxing-postal-service https://www.uspsoig.gov/blog/taxing-postal-service [2] http://www.sonecon.com/docs/studies/Study_of_USPS_Subsidies-Shapiro-Sonecon-March_25_2015.pdf http://www.sonecon.com/docs/studies/Study_of_USPS_Subsidies-... [3] https://www.uspsoig.gov/sites/default/files/document-library-files/2018/FY%202019%20Congressional%20Budget%20%20Justification%20-%20FINAL.pdf https://www.uspsoig.gov/sites/default/files/document-library...
- niij 8y agoThat's interesting, thanks for the detailed reply.My point was that their operating expenses are covered by fees for postage and not directly paid through taxes. But now I realize that this is more of a grey area than I had though.
- breerly 8y agoCan’t have real free trade with central-banking and fiat, must have hard global money.
- wbl 8y agoThe biggest reduction in global poverty we've seen is due to outsourcing to China. Don't you care about starving Chinese peasants?
- pkaye 8y agoI'm sure there are plenty of billionaires in China that can do more for them.
- jarfil 8y agoDepends. Are they so desperate that they want to go to war, or are they rather becoming more of a middle class that wants to play the newest video games?
- tomohawk 8y agoBefore WW I, France and Germany were each others largest trading partners. Trade and prosperity are orthogonal to war.
- notfromhere 8y agoTrade wasn't anywhere as big as it is now; most trade was within internal colonies, not externally.
- Tsubasachan 8y agoHow many wars has China instigated in the last 30 years though? Seems to me the region is shifting to accommodate the new power balance quite nicely.
- oblio 8y agoI'm not sure about video games, but they do seem to crave mobile phones and luxury goods :D
- baldfat 8y ago> due to outsourcing to China No it is the demand for better working conditions and wages. That helps the local Chinese and American workers. Oh that's right labor unions are evil????
- dTal 8y agoAnd yet, if the profits can be prevented from all floating to the top, globalisation would appear on the surface to be an excellent way of redressing global inequality. Massive international wage gaps will be perceived by the market as an exploitable inefficiency, which over time will be ironed out. Or, to put it another way, if two people wish to trade, it must be in both of their interests. If I, as a westerner, go to a third world country and buy a bunch of stuff that from my perspective is cheap but from their perspective is expensive, we both end up happy. What's so terrible about that? (Of course where it falls down is where labor is cheaper because of poor worker protections and exploitative practices, in which case it constitutes an end-run around the labor laws of the richer party. But they are the ones that should be upset, not the poorer party, whose labor laws would be terrible regardless of exploitation)
- anonuser123456 8y ago'Labor laws' is a bad argument, particularly in poor developing nations. If you enforce labor laws in developing countries, the cost of production will be high enough that industry doesn't develop. At that point, the people there have no industry and are much worse off (e.g. a sweatshop is better than subsistence farming). A better argument is 'labor choice'. Individuals need to have the ability to choose their circumstance. If they can choose, and choose freely, over time the whole society can ratchet up their standard of living by making these choices at the margin.
- kingraoul3 8y agoThat rosy picture is totally divorced from the actual historical course of Capitalist development.
- icebraining 8y agoOn the contrary, it's debunking the rosy picture that developing economies can afford developed-economy levels of worker protection.
- 8y ago
- Tsubasachan 8y agoI want to remind everyone that Chinese economy became what it is today because European, American and Japanese companies invested trillions in China. It was a Republican president who kicked it all off. A policy decision of pure capitalism.
- boomboomsubban 8y agoThose areas made far more than they invested, and China needed that huge investment because those three areas had already spent a century exploiting it for profit.
- JPKab 8y agoNo, China needed that investment because Mao and his communist policies held China back for decades. But feel free to mouth the CCP line of China being a great victim.
- boomboomsubban 8y agoFor a start, things before 1950 still happened. Even during the decades you admit happened, those areas refused to acknowledge the existence of China, making trade impossible. Early Maoist policy hadn't helped matters, but it's pretty hard to argue American, Japanese, and European policy hadn't already left them in an incredibly shitty position.
- awnfuron 8y agoAre you saying that China was not a victim? They literally had millions of civilian deaths in WWII. I've seen figures from 14 million to 20 million. Never mind the destructive effects of western imperialism up to that point. As for Mao holding back China, no doubt there were big problems. But the greatest increases in life expectancy at birth came under Mao [1] and his push to greatly expand access to medical care and education in rural areas. That was itself an investment which set the stage for future growth. (It's a lot easier to get things done when your people aren't dying at age 45.) [1] https://data.worldbank.org/indicator/SP.DYN.LE00.IN?locations=CN https://data.worldbank.org/indicator/SP.DYN.LE00.IN?location...
- jamesknelson 8y agoI’m not sure if Swiss fine machinery is the best example here. What is it about the nature of Switzerland that makes it a more natural place to create fine machinery then anywhere else? Similarly, using American corn as an example of how free trade should work is pretty underhanded. There’s a ridiculous amount of subsidies there, and the US doesn’t have any qualms with dumping the resulting product on international markets.
- unfunco 8y agoThe nature of the place in the context of Swiss watches could mean the établissage system.
- yourapostasy 8y agoI had to look up that term [1], thanks for introducing me to it. I'm still not sure how Switzerland the geographic place intrinsically leads to more efficient watch-making, as Shenzen and other Chinese factory cities make copious use of établissage in many different industries. Also, Apple's offshored Chinese manufacturing demonstrates that extremely high quality hardware manufacturing is not ethno-culturally-bound, and can be successfully transmitted through a corporate culture. Ricardo's comparative economic advantage in Net age-birthed industries seems increasingly more hand-wavium the further away I get from intrinsically geographically-tied economic inputs like mineral resources, fresh water, salt water fish migration paths, or latitude-dependent agriculture, etc., and the further one transits away from historical network effects like Swiss watch-making, Silicon Valley software-writing, or Belgian diamond-polishing, etc. The mathematical and empirical analyses of comparative advantage [2] [3], as well as great explanations about it [4], don't seem to address extremely complex goods with very high cognitive input factors, like semiconductors, industrial machinery, bio-pharma products, avionics, spacecraft, high-end electronics manufacturing, fracking, cloud services, search engines, e-commerce, etc., and I suspect comparative advantage breaks down as we evolve those and similar economic areas because ceteris paribus, there is no natural, lasting advantage one nation comparatively holds over another on human cognitive power (which I celebrate). In all those areas, there are leaders, but not so much and to such a comparative degree that they decisively elbow out other nations from economically attempting to enter those industries now or in the future. The Sudan might be a cognitive desert right now compared to Palo Alto or Shenzen, but there is nothing structurally preventing them from turning into a powerhouse in the future (on a multi-generational timescale) to contend with, as say there is with them turning into the next corn-production hub like Iowa, or oil-producer like Saudi Arabia or the fracking Permian Basin. [1] https://www.watch-wiki.net/index.php?title=Etablissage https://www.watch-wiki.net/index.php?title=Etablissage [2] https://www.dartmouth.edu/~rstaiger/Bernhofen%20and%20Brown%20AER.pdf https://www.dartmouth.edu/~rstaiger/Bernhofen%20and%20Brown%... [3] https://www.nber.org/papers/w17969 https://www.nber.org/papers/w17969 [4] https://www.pauldeng.com/teaching/intecon/IE_Fall2011_Lecture%202.pdf https://www.pauldeng.com/teaching/intecon/IE_Fall2011_Lectur...
- anonuser123456 8y agoCheap labor/poverty should absolutely drive free trade, at least if you are interested in improving the human condition. People in impoverished nations choose to work in sweatshops because the alternative is so much worse; prostitution, indentured servitude, being completely destitute etc.
- icebraining 8y agoAgreed; though that must be actually a choice. There have been cases where governments have made the alternatives worse to push people into "progress".
- justinmchase 8y agoI disagree. This incentivizes the fostering of an environment where these are the only choices available to people. It does not help laborers anywhere in the world to exploit labor and further weaken places where labor has already organized and achieved protection. This is a fundamental failure of capitalism and a particularly harmful neo-liberal belief.
- zanny 8y agoIts the only choice available because the previous means of survival was at best subsistence farming. And it isn't guaranteed to happen, but impoverished countries will never enter modern society if they are just isolated from it for labor protections sake. The trickle of money from the pockets of capitalists into the dictators of Indochina in exchange for functionally slave labor is still better than if these countries had nothing to offer the world at all. You would want the optimistic capitalist means to uplift the third world to be simple investment - you take a country with nothing to offer and no resources, invest money in it to educate its people and develop its infrastructure, and then you would have their substantially improved productivity to profit off. But that has never happened on just the backs of dollars because there is no way to risk manage that kind of arrangement. It almost always comes second to bombs or prophets as a way to provide that collateral - even if the country fails to recoup the investment, you can pillage the natural resources or convert its people into adherents of your own culture. Because those acting in self interest are approaching a scenario where the other party has nothing to offer (except idle hands) and you have everything.
- complexmango 8y agoI once believed this as well, via one of my degrees (economics). It turned out to be contradicted by reality. Ricardo and Adam Smith argued that the consumer surplus gains of free trade for the higher labor market would be greater than the losses sustained in producer surplus in the same market. I.e. that American consumers reap more $$ from imported foreign cars than American workers/business lose. However, since then its become obvious that the population that loses jobs cares a LOT more than consumers do about their cars being a few $$ cheaper (e.g. Donald Trump won Michigan and Ohio). In other words - political differences DO matter. Perhaps economics should return to its previous name - Political Economy - in order to actually describe the real world again.
- awakeasleep 8y agoSquare that idea with the differences in national labor law for us, please?
- adwhit 8y agoGlobalization is a hegemonic project of the West, best understood as a means to transfer capital from the economic peripheries to the imperial core, and has tended to wreak havoc on developing countries that have exposed themselves to it. China has been very sensible to ignore the dogma about free trade and to exploit weaknesses and loopholes in trade treaties when they find them.
- secfirstmd 8y agoVery true. In reality this is following the model South Korea, Japan took.
- kingraoul3 8y agoAnd the U.S.!
- krona 8y agoHmm. It might be possible for one person to create wealth without another person losing it. Almost as though it wasn't a zero-sum game. Just a theory.
- adwhit 8y agoThis is true. Nothing to do with what I said, but, it is true. It isn't what happens at the moment. Every dollar of growth worldwide is subtracted many times over from our environmental commons. At the moment the global economy is a heavily negative-sum game.
- CodeWriter23 8y agoPlease illustrate one example of how someone (not the Fed firing up the presses) can make money without someone else giving them money.
- krona 8y agoI didn't mention money. You don't need to have read The Wealth of Nations to know that it's possible to increase the GDP of a country without decreasing the overall savings. Service driven economies are the best example of this.
- A2017U1 8y agoYou would have to eliminate all government policy to get rid of subsidies. There a million ways around every clause in a 1000 page free trade agreement. It's just not possible. I'm a supporter of liberal trade between all countries but you've got to be honest that pure "free" trade just ain't happening while there's a few hundred individual countries on Earth
- ryanmarsh 8y agoI hear you but if it costs $3 to drop ship something from China to CONUS but $4 for me to send it within CONUS I’m not sure how we can say it’s “not one-sided concessions and subsidies” I get the argument of globalization but I just don’t see it playing out how people say it’s supposed to.
- GlobalFrog 8y agoThat is the theory. I might be pessimistic, but it looks to me that everyone claims that one want that even playing field and at the same time, hides as much subsidies as possible to be able to protect ones own industries. Europe is heavily subsidizing its agriculture. The US are heavily subsidizing anything that has a link to anything military and oil. And others are doing the same. True, a few markets have been freed and commerce has increased, but an enormous amount of industries are helped by governments who like to criticize the subsidies of the others. By the way, there was a nice article last year about how the US are subsidizing the oil and fossil fuel industries in two ways: first by direct subsidies (about $20 billions each year and the "hidden" one about the cost of carbon emissions which can be estimated at $200 billions per year (which is real money on the carbon trading market : the government pays for the carbon emitted by its industries). (https://www.forbes.com/sites/ucenergy/2017/02/01/the-200-billion-fossil-fuel-subsidy-youve-never-heard-of/#3f18de56652b https://www.forbes.com/sites/ucenergy/2017/02/01/the-200-bil...) It is interesting to see that the "Clean Power Plan" of the previous administration was made to allow for levelling the playing field more or less by removing those hidden subsidies, and that the current administration destroys it. And that is not even including the costs of global warming that will impact the future for todays actions. So to sum up, the supposed efficiency of the markets seems to me like an illusion, or at least, an ideal that will be never reached because it allways allows for cheating. Same for the postal union of this topic : for years, the US had a net gain financially from it and it didn't seem to bother them. Now, it is China that has this net gain and they are not behaving differently than the US did for many years by trying to preserve this advantage.
- neltnerb 8y agoI don't think anyone sensible would fault China for taking advantage of something that is advantageous for their businesses, nor for them to advocate for it. It would be irrational for them not to, the subsidies exist so obviously any reasonable business would use them. Nonetheless, it's clearly not in the interest of US businesses. The US is not obligated to provide subsidies that, due to the scale of trade using this tool, demonstrably favor Chinese small businesses over those in the US and distort the market. I'd much rather see the market made more balanced by charging the same prices for shipping than by tariffs. At least that's a real cost. Though I have the ulterior motive of thinking charging full price for air freight will reduce carbon emissions and inefficient supply chains.
- justinmchase 8y agoI may be cynical but I don't believe this. I think its more about producing goods using more exploitable workers and resources. If all countries had the same worker and environmental protections and same degree of unionization, aka an actual level playing field, then maybe. But instead its more about exploitation and breaking organized labor unions.
- tmaly 8y agoI kept hearing the claim that the US Post Office was losing money on items shipped by Amazon. So I asked the Postman delivering my Amazon package on a Sunday, and he confirmed that indeed the Post Office was being paid far less on a per package basis for Amazon deliveries than the regular rate. In the case of this Postal Treaty, it seems like the Post Office is losing money on delivering these <= 4 pound packages from China. The US Post Office is struggling enough, I think pulling out of this treaty is a good thing if it can help them.
- CodeWriter23 8y agoThere’s a little more nuance to it. The Postal Accountability and Enhancement Act of 2006 [1] is the major contributor to USPS’ ongoing financial issues. That act requires USPS to maintain a 75 year reserve for retirement and medical benefits. Other agencies including the Armed Forces max out at 20 years by comparison. 1. https://www.congress.gov/bill/109th-congress/house-bill/6407 https://www.congress.gov/bill/109th-congress/house-bill/6407