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The first thing to understand about trade is that it is always beneficial for both parties. Because each side can simply decline a transaction that doesn't hel

The first thing to understand about trade is that it is always beneficial for both parties. Because each side can simply decline a transaction that doesn't help them.

Mountain_Skies 3y ago
Countries aren't Borg ships. Trade between countries have beneficiaries and victims in both countries. The victims usually have zero say in the trade so, no, they can't simply decline a transaction that harms them.
- worrycue 3y ago
  They can decline the whole agreement. Thus the agreement has to be a win for them too else there is no reason to sign.
  - sidkshatriya 3y ago
    This is assuming that every trade delegation can accurately predict all the impacts into the future. This is especially difficult now because the pace of change in the world is only increasing. In general trade is a good thing. It must be encouraged but everything is not so open and shut.
    - worrycue 3y ago
      Inaccurate predictions go “both ways” and applies to both countries.
      - notnaut 3y ago
        The benefits and consequences of which are entirely asymmetrical. There’s a reason poor people engage in significantly higher rates of some of the worst “trade decisions” in the form of gambling. On top of that, when your pool of resources are closer to skim, poor trade decisions result in health-harmful effects, which continue to contribute to poor decision making.
- BurningFrog 3y ago
  Who are the victims when someone buys something from someone in another country? How is that different from when they buy from someone in the same country?
  - fnordpiglet 3y ago
    The typical argument is in a closed market everyone buys something produced locally by local labor. In an open market the lowest cost supplier wins. Which will mean when costs of production are asymmetric, the supplier in the more expensive market loses. So while a single transaction has occurred, someone loses because of the trade agreement. This is because in a market that’s not theoretical there are actual people losing out. But this is the typical argument against free trade and protectionism - I assume it’s not new? I’m sympathetic fwiw. But I think maximizing trade is generally good and don’t want to see a reversal. The real issue in my mind is trade allows for environmental, labor, and other regulatory arbitrage. If the benefits in pricing were just market based I’d be down with it no matter the pain. But that’s not really what’s going on. The regulatory arbitrage is a race to the bottom not just in wages or other spaces that in my belief stabilize over time, in irreversible spaces like destruction of the earth.
  - bombcar 3y ago
    The USA dumps food and clothes on many poor countries, absolutely destroying their own agriculture and clothing industries.
  - edgyquant 3y ago
    Millions of people who formerly worked in those factories that lost their jobs to outsourcing and have never economically recovered? How can you ask such a question when we have the answer here in the real world?
sidkshatriya 3y ago
What you’re saying is correct but a tad bit theoretical. If a country is flooding your market with goods your manufacturers cannot possibly compete with, it leads to the destruction of your manufacturing capacity. So while the consumers are better of in the short/medium run in your country they are left vulnerable in the long run. The issue is balancing the short term positive impact of trade with the long term strategic impacts on your economy. Customs duties can help level the playing field a bit and allow local manufacturing to adjust. Sometimes local manufacturing can never adjust and as a country you need to make the tough decision that it’s ok for those factories to close permanently.
- bootsmann 3y ago
  Comparative advantage is a thing, an economy can function perfectly fine without a local source of steel manufacturing. I don’t understand why people fetishize manufacturing of cheap consumer goods as a sector that is more essential than anything else.
  - jakeinspace 3y ago
    Because if that trade partner unilaterally shuts off trade with you due to a dispute or war, then you are hosed. They can probably find other buyers for their steel, but you will have to pay a lot more, if you can find enough at all.
    - yaa_minu 3y ago
      This problem seems completely unrealistic because then you simply buy through the countries they haven't banned? What you're suggesting will only work if said country is a global superpower that can bully every country to tow the line. At the end of the day, no country can produce all the "critical" things it needs so this national security defence of restrictions on trade seems like a very unwise insurance to buy in almost all cases except maybe your millitary supply chain.
      - edgyquant 3y ago
CPLX 3y ago
This is fucking ridiculous, and I have a degree in economics. Even in the sort of useless basic neoclassical models there are a million exceptions to this rule like incubation of infant industries, resource extraction, national defense and health, and so on. And nobody sane even believes that stuff any more. Trade can benefit societies or destroy them. Details matter.
ChainOfFools 3y ago
I happen to have a client right now who is in the midst of a massive downturn in business but is also obligated to pay for our services at a rate negotiated more than a year ago when they were in the midst of a brisk upswing in business; an upswing that had been going on for several years with no obvious indication that it would ever change. Our services, though immensely useful, are not absolutely necessary for their business to function and frankly are much more of a burden than a benefit for them at this point. Yet they cannot refuse to do business with us, and must pay for services that are unnecessary every month until either this obligation becomes part of what kills them, or their fortunes return to the state they were in a year ago. I'm sorry, but your belief is simplistic, shallow and naieve to the realities of business and trade as they are actually practiced.
- wsgeorge 3y ago
  > Yet they cannot refuse to do business with us... I obviously know little about business and "trade", because this strikes me as odd. I mean, I get that it's contractual, but how could a well-written contract not anticipate a time when doing said business with you would be detrimental to the company forced to pay... And, long term, such a situation hurts both parties, because if "this obligation becomes part of what kills them", the business on the receiving end also loses a customer.
  - bombcar 3y ago
    It’s how SaaS and most business contracts operate. Only tiny personally negotiated ones will have downturn provisions - and many companies have never experienced a downturn.
    - deleted 3y ago
      [deleted]
- SanderNL 3y ago
  Incidentally, how do you handle such a situation? I'm a bad business man and would probably let them off the hook for a while so they can recover. In my dreamworld this will build significant amounts of longterm goodwill.
pxue 3y ago
You ever heard of the opium trade force on China?
lmpdev 3y ago
The crux of your argument doesn't hold water outside of economics circles. The power imbalance between parties makes "simply declining" as real a possibility as Plato's Forms. In a perfect world with almost all degrees of freedom removed, yes, you're correct. But the world is not perfect, ensuring a beneficial transaction to both parties for every transaction is simply intractable without infinite time/computational resources to brute force a solution, every time. To expand on the dogmatic proclamations economists are prone to making, this is why almost all natural and formal scientists have conscious or unconscious disdain for the claim that economics has a claim to the same epistemological rigour as other sciences. You can't extrapolate results and lemmas from within a domain of discourse to the outside world. Even the best economic models and the real world are not isometric. Implying that they are has so far resulted in some fantastic and incomprehensibly efficient systems but also an untold amount of human suffering.
- ethanbond 3y ago
  All of that is true and yet it is still mostly true that most transactions are beneficial to both parties — or at least appears more beneficial than known alternatives which is in practice a synonym of “beneficial.”
- abduhl 3y ago
  Sorry, this is just drivel. Trade happens between individuals or businesses, not countries. If the numbers don’t make sense for a business they will certainly “just decline,” although the numbers might make sense for another business. The large disparity in wealth actually helps the economically weaker party oftentimes because a X% increase in cost will often mean less to the wealthy purchaser (who will mark up the product accordingly) than to the poor seller relatively.
- rajamaka 3y ago
  Is this ChatGPT generated?
jncfhnb 3y ago
“Give me 10 dollars or I shoot you in the head” “Give me 10 dollars or I stop supporting your industry and threaten famine” Trade includes leverage and threats
notnaut 3y ago
There is a significant pillar of free trade called “grifting” that this seems to ignore.
JustLurking2022 3y ago
It's good for someone on each side, but necessarily the population at large on each side... Plenty of dictators will happily sell off their country's natural resources to line their own pockets, and the same general principal holds true for many other types of transactions.
- BurningFrog 3y ago
  The only parties to a trade are the buyer and the seller. If both don't think they'll be better off doing the trade, it won't happen. No one else is materially affected. You can think of this as how trade creates wealth!
  - slv77 3y ago
    This assumes that both parties are rational agents acting with full knowledge, no coercion and no externalities. The rational agent in economics is similar to the spherical cow in physics. Great for modeling but pretty useless to a cowboy.
    - BurningFrog 3y ago
      I think you missed the word "think".
goodbyesf 3y ago
> The first thing to understand about trade is that it is always beneficial for both parties. Not true. There can be winners and losers in 'trading' and usually there are. For example, the native americans and europeans being a prime example. > Because each side can simply decline a transaction that doesn't help them. Not if one side is much stronger and liable to invade or punish you. The past 500 years is essentially a story of europeans invading/'exploring' to get better 'trade terms' from natives, africans, indians, chinese, ottomans, japanese, etc. The biggest winners of trade in the last 500 years were europeans and the biggest losers are everyone else.

The first thing to understand about trade is that it is always beneficial for both parties. Because each side can simply decline a transaction that doesn't help them.

Mountain_Skies 3y ago

Countries aren't Borg ships. Trade between countries have beneficiaries and victims in both countries. The victims usually have zero say in the trade so, no, they can't simply decline a transaction that harms them.

worrycue 3y ago
They can decline the whole agreement. Thus the agreement has to be a win for them too else there is no reason to sign.
- sidkshatriya 3y ago
  This is assuming that every trade delegation can accurately predict all the impacts into the future. This is especially difficult now because the pace of change in the world is only increasing. In general trade is a good thing. It must be encouraged but everything is not so open and shut.
  - worrycue 3y ago
    Inaccurate predictions go “both ways” and applies to both countries.
    - notnaut 3y ago
      The benefits and consequences of which are entirely asymmetrical. There’s a reason poor people engage in significantly higher rates of some of the worst “trade decisions” in the form of gambling. On top of that, when your pool of resources are closer to skim, poor trade decisions result in health-harmful effects, which continue to contribute to poor decision making.
BurningFrog 3y ago
Who are the victims when someone buys something from someone in another country? How is that different from when they buy from someone in the same country?
- fnordpiglet 3y ago
  The typical argument is in a closed market everyone buys something produced locally by local labor. In an open market the lowest cost supplier wins. Which will mean when costs of production are asymmetric, the supplier in the more expensive market loses. So while a single transaction has occurred, someone loses because of the trade agreement. This is because in a market that’s not theoretical there are actual people losing out. But this is the typical argument against free trade and protectionism - I assume it’s not new? I’m sympathetic fwiw. But I think maximizing trade is generally good and don’t want to see a reversal. The real issue in my mind is trade allows for environmental, labor, and other regulatory arbitrage. If the benefits in pricing were just market based I’d be down with it no matter the pain. But that’s not really what’s going on. The regulatory arbitrage is a race to the bottom not just in wages or other spaces that in my belief stabilize over time, in irreversible spaces like destruction of the earth.
- bombcar 3y ago
  The USA dumps food and clothes on many poor countries, absolutely destroying their own agriculture and clothing industries.
- edgyquant 3y ago
  Millions of people who formerly worked in those factories that lost their jobs to outsourcing and have never economically recovered? How can you ask such a question when we have the answer here in the real world?

sidkshatriya 3y ago

What you’re saying is correct but a tad bit theoretical. If a country is flooding your market with goods your manufacturers cannot possibly compete with, it leads to the destruction of your manufacturing capacity. So while the consumers are better of in the short/medium run in your country they are left vulnerable in the long run. The issue is balancing the short term positive impact of trade with the long term strategic impacts on your economy. Customs duties can help level the playing field a bit and allow local manufacturing to adjust. Sometimes local manufacturing can never adjust and as a country you need to make the tough decision that it’s ok for those factories to close permanently.

bootsmann 3y ago
Comparative advantage is a thing, an economy can function perfectly fine without a local source of steel manufacturing. I don’t understand why people fetishize manufacturing of cheap consumer goods as a sector that is more essential than anything else.
- jakeinspace 3y ago
  Because if that trade partner unilaterally shuts off trade with you due to a dispute or war, then you are hosed. They can probably find other buyers for their steel, but you will have to pay a lot more, if you can find enough at all.
  - yaa_minu 3y ago
    This problem seems completely unrealistic because then you simply buy through the countries they haven't banned? What you're suggesting will only work if said country is a global superpower that can bully every country to tow the line. At the end of the day, no country can produce all the "critical" things it needs so this national security defence of restrictions on trade seems like a very unwise insurance to buy in almost all cases except maybe your millitary supply chain.
    - edgyquant 3y ago

CPLX 3y ago

This is fucking ridiculous, and I have a degree in economics. Even in the sort of useless basic neoclassical models there are a million exceptions to this rule like incubation of infant industries, resource extraction, national defense and health, and so on. And nobody sane even believes that stuff any more. Trade can benefit societies or destroy them. Details matter.

ChainOfFools 3y ago

I happen to have a client right now who is in the midst of a massive downturn in business but is also obligated to pay for our services at a rate negotiated more than a year ago when they were in the midst of a brisk upswing in business; an upswing that had been going on for several years with no obvious indication that it would ever change. Our services, though immensely useful, are not absolutely necessary for their business to function and frankly are much more of a burden than a benefit for them at this point. Yet they cannot refuse to do business with us, and must pay for services that are unnecessary every month until either this obligation becomes part of what kills them, or their fortunes return to the state they were in a year ago. I'm sorry, but your belief is simplistic, shallow and naieve to the realities of business and trade as they are actually practiced.

wsgeorge 3y ago
> Yet they cannot refuse to do business with us... I obviously know little about business and "trade", because this strikes me as odd. I mean, I get that it's contractual, but how could a well-written contract not anticipate a time when doing said business with you would be detrimental to the company forced to pay... And, long term, such a situation hurts both parties, because if "this obligation becomes part of what kills them", the business on the receiving end also loses a customer.
- bombcar 3y ago
  It’s how SaaS and most business contracts operate. Only tiny personally negotiated ones will have downturn provisions - and many companies have never experienced a downturn.
  - deleted 3y ago
    [deleted]
SanderNL 3y ago
Incidentally, how do you handle such a situation? I'm a bad business man and would probably let them off the hook for a while so they can recover. In my dreamworld this will build significant amounts of longterm goodwill.

pxue 3y ago

You ever heard of the opium trade force on China?

lmpdev 3y ago

The crux of your argument doesn't hold water outside of economics circles. The power imbalance between parties makes "simply declining" as real a possibility as Plato's Forms. In a perfect world with almost all degrees of freedom removed, yes, you're correct. But the world is not perfect, ensuring a beneficial transaction to both parties for every transaction is simply intractable without infinite time/computational resources to brute force a solution, every time. To expand on the dogmatic proclamations economists are prone to making, this is why almost all natural and formal scientists have conscious or unconscious disdain for the claim that economics has a claim to the same epistemological rigour as other sciences. You can't extrapolate results and lemmas from within a domain of discourse to the outside world. Even the best economic models and the real world are not isometric. Implying that they are has so far resulted in some fantastic and incomprehensibly efficient systems but also an untold amount of human suffering.

ethanbond 3y ago
All of that is true and yet it is still mostly true that most transactions are beneficial to both parties — or at least appears more beneficial than known alternatives which is in practice a synonym of “beneficial.”
abduhl 3y ago
Sorry, this is just drivel. Trade happens between individuals or businesses, not countries. If the numbers don’t make sense for a business they will certainly “just decline,” although the numbers might make sense for another business. The large disparity in wealth actually helps the economically weaker party oftentimes because a X% increase in cost will often mean less to the wealthy purchaser (who will mark up the product accordingly) than to the poor seller relatively.
rajamaka 3y ago
Is this ChatGPT generated?

jncfhnb 3y ago

“Give me 10 dollars or I shoot you in the head” “Give me 10 dollars or I stop supporting your industry and threaten famine” Trade includes leverage and threats

notnaut 3y ago

There is a significant pillar of free trade called “grifting” that this seems to ignore.

JustLurking2022 3y ago

It's good for someone on each side, but necessarily the population at large on each side... Plenty of dictators will happily sell off their country's natural resources to line their own pockets, and the same general principal holds true for many other types of transactions.

BurningFrog 3y ago
The only parties to a trade are the buyer and the seller. If both don't think they'll be better off doing the trade, it won't happen. No one else is materially affected. You can think of this as how trade creates wealth!
- slv77 3y ago
  This assumes that both parties are rational agents acting with full knowledge, no coercion and no externalities. The rational agent in economics is similar to the spherical cow in physics. Great for modeling but pretty useless to a cowboy.
  - BurningFrog 3y ago
    I think you missed the word "think".

goodbyesf 3y ago

> The first thing to understand about trade is that it is always beneficial for both parties. Not true. There can be winners and losers in 'trading' and usually there are. For example, the native americans and europeans being a prime example. > Because each side can simply decline a transaction that doesn't help them. Not if one side is much stronger and liable to invade or punish you. The past 500 years is essentially a story of europeans invading/'exploring' to get better 'trade terms' from natives, africans, indians, chinese, ottomans, japanese, etc. The biggest winners of trade in the last 500 years were europeans and the biggest losers are everyone else.