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What bothers me in today's world is that we ignore how some countries achieve their comparative advantage. Why did Hershey's chocolate close the factory not to

by mabbo 6y ago

What bothers me in today's world is that we ignore how some countries achieve their comparative advantage. Why did Hershey's chocolate close the factory not too far from where I grew up, and move the manufacturing to Mexico? Well, labor is cheap there because there are no unions, few health and safety regulations, few workers' rights groups. That makes it much cheaper to operate. Why can China manufacture clothing cheaply? Well, they have hundreds of thousands of Uighur prisoners being 're-educated' via forced labor. And while I don't disagree that for some countries that are trying to move up in development, so-called 'sweat shops' can represent a stepping stone forward (2 generations ago, South Korea had plenty of them), the question is how long that's an acceptable excuse? In my opinion, we need trade rules that explicitly tax and tariff those countries who are only finding comparative advantages through exploitation and unethical activity.

junipertea 6y ago
in that case the government would just profit from the forced labor via additional tax income
- mabbo 6y ago
  If the tax were high enough, there would be no advantage and we wouldn't trade with them at all. We'd instead trade with ethical countries. The money could also be explicitly put into human rights campaigns.
  - zingplex 6y ago
    Alternatively, you could issue an annual dividend to all taxpayers at the end of the year. This would be akin to the carbon fee and dividend policy some have proposed.
lotsofpulp 6y ago
> In my opinion, we need trade rules that explicitly tax and tariff those countries who are only finding comparative advantages through exploitation and unethical activity. The US and Europe have this situation too, where some European countries have decent parental leave and overtime rules, non employer subsidized healthcare, and lack of employer dependent H1B workers. Even within the US, you have states like CA offering paid parental leave, paid sick leave, environmental protections, non compete bans, and eliminating tipped minimum wages versus most of the other states trying to compete with cheap labor and not offering any job protections to people. It’s 2020 and Ohio doesn’t even require employers to pay out accrued PTO.
- pyronik19 6y ago
  Many people don't think all of the goodies you mentioned for workers are things they should have rights to. Why is a company responsible for your decision to have kids? That makes no sense. If CA wants to make up said rights then it has to suffer the consequences. The only way this logic makes sense to me is when it comes to environmental issues which everyone suffers the externalities.
  - lotsofpulp 6y ago
    I consider taxpayer funded healthcare needed by a child due to the child's mother not being able to breastfeed due to needing to work all the time an externality. Employers also do not need to be responsible for people's decision to have children. Parental leave can be paid for by the government. However, in the current economic system, retaining one's ability to earn income may need to be protected by the state and involve employers having to do something. Maybe with a universal basic income, employers can be completely left out of the equation.
  - shuntress 6y ago
    Many people do think all of those necessities you mentioned for workers are things they should have rights to. Why is a company responsible for your decision to have kids? That makes perfect sense. If CA wants to uphold said rights then it gets to reap the benefits. The only way this logic does not make sense to me is when it comes to environmental issues from which everyone suffers.
bluGill 6y ago
Note that Hershey's moving only works out for them if the resulting change in labor situation means that their customers can still afford their candy. If the excess labor instead means wages at home go down and now people cannot afford candybars it doesn't work out for them. In short, we are better off for not having Hershey's in the US. Mexico gets better wages (more competition) and out people are freed from making candybars and can move to more productive uses of our people.
- jungturk 6y ago
  An issue with this type of analysis is that "them" is ambiguous. Even if the candy company folds in 5 years, part of "them" is probably still ahead - the management team "them" experiences gains through short-term incentives for performance while the ownership part of "them" suffers losses. In some cases, those owners aren't fat-cat capitalists - they're workers' pensions and retirements funds. In these cases, "we" didn't end up being better off by the company moving to Mexico. Also, the claim that this type of relocation "frees" local labor from the toil of candybar-making to focus on real value creation is a stretch. More likely, they're now free to compete in a smaller labor market and superficially one would expect that to drive wages down (since the demand for jobs hasn't changed and the supply has of them has gone down).
- letitbeirie 6y ago
  In theory, but > ...freed from making candybars and can move to more productive uses of our people relies on the presumption that there is sufficient local demand for laborers (who may not necessarily have any experience that doesn't involve the manufacture or distribution of chocolate) in positions of increased productivity. The decaying socioeconomic situation for wide swaths of the rural US suggests that this was not the case.
  - bluGill 6y ago
    Half you are stateing what I said... US rural areas face a very different issue: high wages relative to other countries (shared with cities), but with the population density advantages of cities. I don't need to look to tell you Hersey didn't move to a rural area of mexico they moved to a city of some sort. They don't need the largest city, but a small town cannot supply their labor needs.
DiogenesKynikos 6y ago
China's comparative advantage in clothing comes from long before there were any re-education camps in Xinjiang. The first phase of industrialization in China was based on clothing production. Compare China's exports in 1995 [1], which were heavily skewed towards clothing, to their exports in 2018 [2], which were much more heavily skewed towards electronics. Xinjiang makes up only a tiny part of the Chinese economy, anyways. Xinjiang has 22 million people and exports barely $17 billion of goods per year. Guangdong has 113 million people and exports $440 billion of goods per year. > In my opinion, we need trade rules that explicitly tax and tariff those countries who are only finding comparative advantages through exploitation and unethical activity. That policy would lead to tariffs against most poor countries. I could imagine some unintended consequences there. 1. https://oec.world/en/visualize/tree_map/hs92/export/chn/all/show/1995/ https://oec.world/en/visualize/tree_map/hs92/export/chn/all/... 2. https://oec.world/en/visualize/tree_map/hs92/export/chn/all/show/2018/ https://oec.world/en/visualize/tree_map/hs92/export/chn/all/...
- balthasar 6y ago
  Less developed countries would move towards reform if exploitation regulation went into effect.
tasogare 6y ago
> Why can China manufacture clothing cheaply? Well, they have hundreds of thousands of Uighur prisoners being 're-educated' via forced labor. This is complete nonsense. I hate CCP as much as anyone outside it but let's be real for a second: China became a manufacturing center way before the islamic terror attacks (like the Kunming attack of 2014) incitated them to take action against that ideology in East Turkestan.
nbs_tar 6y ago
I had hoped your second sentence was going to be about Hershey ripping off Wilbur Buds!
s1artibartfast 6y ago
I think you are conflating comparative advantage and absolute advantage. As the article explains, comparative advantage is what a country is good at doing, not how good it is compared to other countries. The latter is absolute advantage. You can be worse than every country on earth at making X, but still have a comparative advantage in making it. >And while I don't disagree that for some countries that are trying to move up in development, so-called 'sweat shops' can represent a stepping stone forward (2 generations ago, South Korea had plenty of them), the question is how long that's an acceptable excuse? Understanding comparative advantage helps answer this question. Sweat shops should not be banned by the exporting country as long as it provides a comparative advantage to workers. That is to say, if sweat shops are better than the next best option, they should be allowed. Once better jobs exist for workers, sweatshops should be disallowed. Otherwise, banning them doesn't make replacement jobs, it just pushes workers into worse options. Changes can also be made on the buyers side to not import products made in sweatshops. This could have positive or negative effects on workers in the exporting country. If the manufacturing country still has an absolute advantage in shirt making after the import ban on sweatshop goods, their people will be better off. If the absolute advantage now goes to another country, the workers will be worse off.
- chii 6y ago
  > Once better jobs exist for workers, sweatshops should be disallowed why do they need to be disallowed, if workers are given the freedom to pick their best option?

by mabbo 6y ago

junipertea 6y ago

in that case the government would just profit from the forced labor via additional tax income

mabbo 6y ago
If the tax were high enough, there would be no advantage and we wouldn't trade with them at all. We'd instead trade with ethical countries. The money could also be explicitly put into human rights campaigns.
- zingplex 6y ago
  Alternatively, you could issue an annual dividend to all taxpayers at the end of the year. This would be akin to the carbon fee and dividend policy some have proposed.

lotsofpulp 6y ago

> In my opinion, we need trade rules that explicitly tax and tariff those countries who are only finding comparative advantages through exploitation and unethical activity. The US and Europe have this situation too, where some European countries have decent parental leave and overtime rules, non employer subsidized healthcare, and lack of employer dependent H1B workers. Even within the US, you have states like CA offering paid parental leave, paid sick leave, environmental protections, non compete bans, and eliminating tipped minimum wages versus most of the other states trying to compete with cheap labor and not offering any job protections to people. It’s 2020 and Ohio doesn’t even require employers to pay out accrued PTO.

pyronik19 6y ago
Many people don't think all of the goodies you mentioned for workers are things they should have rights to. Why is a company responsible for your decision to have kids? That makes no sense. If CA wants to make up said rights then it has to suffer the consequences. The only way this logic makes sense to me is when it comes to environmental issues which everyone suffers the externalities.
- lotsofpulp 6y ago
  I consider taxpayer funded healthcare needed by a child due to the child's mother not being able to breastfeed due to needing to work all the time an externality. Employers also do not need to be responsible for people's decision to have children. Parental leave can be paid for by the government. However, in the current economic system, retaining one's ability to earn income may need to be protected by the state and involve employers having to do something. Maybe with a universal basic income, employers can be completely left out of the equation.
- shuntress 6y ago
  Many people do think all of those necessities you mentioned for workers are things they should have rights to. Why is a company responsible for your decision to have kids? That makes perfect sense. If CA wants to uphold said rights then it gets to reap the benefits. The only way this logic does not make sense to me is when it comes to environmental issues from which everyone suffers.

bluGill 6y ago

Note that Hershey's moving only works out for them if the resulting change in labor situation means that their customers can still afford their candy. If the excess labor instead means wages at home go down and now people cannot afford candybars it doesn't work out for them. In short, we are better off for not having Hershey's in the US. Mexico gets better wages (more competition) and out people are freed from making candybars and can move to more productive uses of our people.

jungturk 6y ago
An issue with this type of analysis is that "them" is ambiguous. Even if the candy company folds in 5 years, part of "them" is probably still ahead - the management team "them" experiences gains through short-term incentives for performance while the ownership part of "them" suffers losses. In some cases, those owners aren't fat-cat capitalists - they're workers' pensions and retirements funds. In these cases, "we" didn't end up being better off by the company moving to Mexico. Also, the claim that this type of relocation "frees" local labor from the toil of candybar-making to focus on real value creation is a stretch. More likely, they're now free to compete in a smaller labor market and superficially one would expect that to drive wages down (since the demand for jobs hasn't changed and the supply has of them has gone down).
letitbeirie 6y ago
In theory, but > ...freed from making candybars and can move to more productive uses of our people relies on the presumption that there is sufficient local demand for laborers (who may not necessarily have any experience that doesn't involve the manufacture or distribution of chocolate) in positions of increased productivity. The decaying socioeconomic situation for wide swaths of the rural US suggests that this was not the case.
- bluGill 6y ago
  Half you are stateing what I said... US rural areas face a very different issue: high wages relative to other countries (shared with cities), but with the population density advantages of cities. I don't need to look to tell you Hersey didn't move to a rural area of mexico they moved to a city of some sort. They don't need the largest city, but a small town cannot supply their labor needs.

DiogenesKynikos 6y ago

China's comparative advantage in clothing comes from long before there were any re-education camps in Xinjiang. The first phase of industrialization in China was based on clothing production. Compare China's exports in 1995 [1], which were heavily skewed towards clothing, to their exports in 2018 [2], which were much more heavily skewed towards electronics. Xinjiang makes up only a tiny part of the Chinese economy, anyways. Xinjiang has 22 million people and exports barely $17 billion of goods per year. Guangdong has 113 million people and exports $440 billion of goods per year. > In my opinion, we need trade rules that explicitly tax and tariff those countries who are only finding comparative advantages through exploitation and unethical activity. That policy would lead to tariffs against most poor countries. I could imagine some unintended consequences there. 1. https://oec.world/en/visualize/tree_map/hs92/export/chn/all/show/1995/ https://oec.world/en/visualize/tree_map/hs92/export/chn/all/... 2. https://oec.world/en/visualize/tree_map/hs92/export/chn/all/show/2018/ https://oec.world/en/visualize/tree_map/hs92/export/chn/all/...

balthasar 6y ago
Less developed countries would move towards reform if exploitation regulation went into effect.

tasogare 6y ago

> Why can China manufacture clothing cheaply? Well, they have hundreds of thousands of Uighur prisoners being 're-educated' via forced labor. This is complete nonsense. I hate CCP as much as anyone outside it but let's be real for a second: China became a manufacturing center way before the islamic terror attacks (like the Kunming attack of 2014) incitated them to take action against that ideology in East Turkestan.

nbs_tar 6y ago

I had hoped your second sentence was going to be about Hershey ripping off Wilbur Buds!

s1artibartfast 6y ago

I think you are conflating comparative advantage and absolute advantage. As the article explains, comparative advantage is what a country is good at doing, not how good it is compared to other countries. The latter is absolute advantage. You can be worse than every country on earth at making X, but still have a comparative advantage in making it. >And while I don't disagree that for some countries that are trying to move up in development, so-called 'sweat shops' can represent a stepping stone forward (2 generations ago, South Korea had plenty of them), the question is how long that's an acceptable excuse? Understanding comparative advantage helps answer this question. Sweat shops should not be banned by the exporting country as long as it provides a comparative advantage to workers. That is to say, if sweat shops are better than the next best option, they should be allowed. Once better jobs exist for workers, sweatshops should be disallowed. Otherwise, banning them doesn't make replacement jobs, it just pushes workers into worse options. Changes can also be made on the buyers side to not import products made in sweatshops. This could have positive or negative effects on workers in the exporting country. If the manufacturing country still has an absolute advantage in shirt making after the import ban on sweatshop goods, their people will be better off. If the absolute advantage now goes to another country, the workers will be worse off.

chii 6y ago
> Once better jobs exist for workers, sweatshops should be disallowed why do they need to be disallowed, if workers are given the freedom to pick their best option?