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Tariffs and other protectionary measures make much more sense for developing countries than for developed countries. Developing countries want to protect their

Tariffs and other protectionary measures make much more sense for developing countries than for developed countries. Developing countries want to protect their fledgling industries from much stronger competition from the developed world. This hurts consumers in developing countries, who are forced to buy substandard domestic products at higher prices. Developed countries want as free of trade as possible, so that their advanced companies can sell everywhere, and their consumers can buy the best products at the cheapest price. A good analogy is to weight classes in boxing. They protect lighter fighters from the heavyweights. The heavyweights themselves would be fine if the weight classes were abolished. They'd win every fight.

coliveira 7y ago
Excellent explanation. I wish people, especially politicians, had a clear understanding of this.
lliamander 7y ago
That would be more true if domestic labor was on a more even playing field with global competitors. As it stands, domestic labor is expensive: not just because of wages and benefits, but also health and safety regulations, legal liabilities, etc. I'm not saying we necessarily need to roll back those protections, but it's worth mentioning out that as the cost of hiring domestic labor in developed countries go up, companies begin to off-shore labor as soon as they are able. My point is that we already don't have "free trade". The question is whether tariffs are a good way to balance the scales between domestic and foreign labor.
- DiogenesKynikos 7y ago
  > as the cost of hiring domestic labor in developed countries go up, companies begin to off-shore labor as soon as they are able. Productivity of labor is also much higher in developed countries. What matters is comparative advantage. Even from a strictly economic point of view, it is often better for rich countries to off-shore a lot of low-level manufacturing. That decreases prices for manufactured goods in rich countries and frees labor for more productive jobs. If you somehow force companies to bring back manufacturing jobs to the US, two things will have to happen: 1. Prices will increase for consumers. 2. People will be transferred from their current jobs to the new manufacturing jobs. You may actually be transferring people from more useful, productive labor into less productive labor, leaving the entire society worse off.
  - lliamander 7y ago
    Government imposed costs on labor don't necessarily scale proportionally with productivity. It's possible that those costs can price even highly productive labor out of the market. Furthermore, at least some of the people affected by the displacement of manufacturing jobs in developed countries do not have higher productivity. The opioid crisis in the US is to some extent an example of this. I know of blue collar communities where the level of productive employment is lower now than it was a generation or two ago. That doesn't mean these communities could not adapt to the changing economic landscape (as people did when there was the transition from an agricultural to a manufacturing economy). Patterns of specialization and trade are bound to change, but government imposed prices on labor can create a hindrance to a society's ability to adapt.
    - DiogenesKynikos 7y ago
      > Government imposed costs on labor don't necessarily scale proportionally with productivity. Not necessarily, but they correlate very strongly. It's the rich countries that tend to have strong labor protections, mandatory pension schemes, high healthcare costs, etc. > at least some of the people affected by the displacement of manufacturing jobs in developed countries do not have higher productivity. Some of them don't, but overall, developed countries have moved on to higher value-added sectors. Moving large numbers of American workers into things like mass hand-assembly of smartphones would not make economic sense. > That doesn't mean these communities could not adapt to the changing economic landscape Government could much more strongly redistribute the overall gains from world trade to those who lose out to trade. That would make a lot of sense, though it would go against the right-wing economic thinking that has dominated American politics since Reagan.
      - lliamander 7y ago
        > Not necessarily, but they correlate very strongly. It's the rich countries that tend to have strong labor protections, mandatory pension schemes, high healthcare costs, etc. Obviously they correlate. The question is whether such labor regulations run ahead of labor productivity and inadvertently price labor out of the global market place. It's certainly not a given that labor regulations are proportional. If it's not proportional, you either need to roll back some of those regulations or enact protectionist measures (tariffs, etc.) to enable fair competition. It's not just labor regulations either. Environmental regulations also play a role. While I agree with having environmental regulations, if they are too stringent, then the result is that resource extraction moves countries without any protections. > Some of them don't, but overall, developed countries have moved on to higher value-added sectors. Those "left behind" could be a fairly large number. Democratic societies need to balance the interests of all of their citizens. > Moving large numbers of American workers into things like mass hand-assembly of smartphones would not make economic sense. If those large numbers of Americans are otherwise unemployed, or even working in low-skill service jobs, then moving them into smartphone manufacturing absolutely makes sense. > Government could much more strongly redistribute the overall gains from world trade to those who lose out to trade. That would make a lot of sense, though it would go against the right-wing economic thinking that has dominated American politics since Reagan. We are already redistributing to those who lose out on trade. I don't think more redistribution is what they want. My impression is that they would rather have jobs. Indeed, it makes much more economic (and psychological) sense to have as much of your population engaged in productive occupations as possible.

coliveira 7y ago

Excellent explanation. I wish people, especially politicians, had a clear understanding of this.

lliamander 7y ago

That would be more true if domestic labor was on a more even playing field with global competitors. As it stands, domestic labor is expensive: not just because of wages and benefits, but also health and safety regulations, legal liabilities, etc. I'm not saying we necessarily need to roll back those protections, but it's worth mentioning out that as the cost of hiring domestic labor in developed countries go up, companies begin to off-shore labor as soon as they are able. My point is that we already don't have "free trade". The question is whether tariffs are a good way to balance the scales between domestic and foreign labor.

DiogenesKynikos 7y ago
> as the cost of hiring domestic labor in developed countries go up, companies begin to off-shore labor as soon as they are able. Productivity of labor is also much higher in developed countries. What matters is comparative advantage. Even from a strictly economic point of view, it is often better for rich countries to off-shore a lot of low-level manufacturing. That decreases prices for manufactured goods in rich countries and frees labor for more productive jobs. If you somehow force companies to bring back manufacturing jobs to the US, two things will have to happen: 1. Prices will increase for consumers. 2. People will be transferred from their current jobs to the new manufacturing jobs. You may actually be transferring people from more useful, productive labor into less productive labor, leaving the entire society worse off.
- lliamander 7y ago
  Government imposed costs on labor don't necessarily scale proportionally with productivity. It's possible that those costs can price even highly productive labor out of the market. Furthermore, at least some of the people affected by the displacement of manufacturing jobs in developed countries do not have higher productivity. The opioid crisis in the US is to some extent an example of this. I know of blue collar communities where the level of productive employment is lower now than it was a generation or two ago. That doesn't mean these communities could not adapt to the changing economic landscape (as people did when there was the transition from an agricultural to a manufacturing economy). Patterns of specialization and trade are bound to change, but government imposed prices on labor can create a hindrance to a society's ability to adapt.
  - DiogenesKynikos 7y ago
    > Government imposed costs on labor don't necessarily scale proportionally with productivity. Not necessarily, but they correlate very strongly. It's the rich countries that tend to have strong labor protections, mandatory pension schemes, high healthcare costs, etc. > at least some of the people affected by the displacement of manufacturing jobs in developed countries do not have higher productivity. Some of them don't, but overall, developed countries have moved on to higher value-added sectors. Moving large numbers of American workers into things like mass hand-assembly of smartphones would not make economic sense. > That doesn't mean these communities could not adapt to the changing economic landscape Government could much more strongly redistribute the overall gains from world trade to those who lose out to trade. That would make a lot of sense, though it would go against the right-wing economic thinking that has dominated American politics since Reagan.
    - lliamander 7y ago
      > Not necessarily, but they correlate very strongly. It's the rich countries that tend to have strong labor protections, mandatory pension schemes, high healthcare costs, etc. Obviously they correlate. The question is whether such labor regulations run ahead of labor productivity and inadvertently price labor out of the global market place. It's certainly not a given that labor regulations are proportional. If it's not proportional, you either need to roll back some of those regulations or enact protectionist measures (tariffs, etc.) to enable fair competition. It's not just labor regulations either. Environmental regulations also play a role. While I agree with having environmental regulations, if they are too stringent, then the result is that resource extraction moves countries without any protections. > Some of them don't, but overall, developed countries have moved on to higher value-added sectors. Those "left behind" could be a fairly large number. Democratic societies need to balance the interests of all of their citizens. > Moving large numbers of American workers into things like mass hand-assembly of smartphones would not make economic sense. If those large numbers of Americans are otherwise unemployed, or even working in low-skill service jobs, then moving them into smartphone manufacturing absolutely makes sense. > Government could much more strongly redistribute the overall gains from world trade to those who lose out to trade. That would make a lot of sense, though it would go against the right-wing economic thinking that has dominated American politics since Reagan. We are already redistributing to those who lose out on trade. I don't think more redistribution is what they want. My impression is that they would rather have jobs. Indeed, it makes much more economic (and psychological) sense to have as much of your population engaged in productive occupations as possible.