[Nesster]

This is an interesting interview, and the guy makes some sense.

Michael Hughes: Free Trade Doesn't Work: Interview With Economist Ian Fletcher

You argue that protectionism is more "American" than free trade. How would you respond to libertarian types who might see this as an assault on America's deeply-held capitalistic values?

IAN FLETCHER: Libertarians simply don't know their history. Take out a $10 bill and have a look at the portrait on it. Alexander Hamilton, founding father and intellectual architect of American capitalism, was a protectionist, and protectionism was American policy from Independence until after WWII. The reality is that a blend of government support for economic growth along with vigorous market-oriented competition has been the American tradition from the transcontinental railroad to the Internet. Entire industries like semiconductors and aircraft were effectively launched by Cold War military industrial policy. Is it an accident that nations, like China, that still do this sort of thing are cleaning our clock right now?

You thoroughly and convincingly document, supported by countless inconvenient facts, how protectionism has been much more beneficial to the U.S. throughout history than free trade. If protectionism is clearly the better economic policy, why is the U.S. so resistant to change?

IAN FLETCHER: The U.S. isn't totally resistant to change on this issue, and it is, in fact, changing. Since the late 1990s, one can trace public opinion and congressional majorities inexorably turning against "free" trade, which has really been a distinctive, offshoring-focused approach to trade policy to benefit multinational corporate interests. Why has it taken so long? Corruption, both the obvious kind driven by campaign finance, and the subtler kind deriving from the laziness, complacency, and intellectual arrogance of economists.

The "American" multinationals, which are no longer American corporations but find this fiction convenient on Capitol Hill, and other free trade advocates have prevailed because a critical mass of American voters has not yet seen through the delusional economics of free trade, and because America can still borrow money abroad and sell off assets to cover its trade deficit. But this music is going to stop fairly soon.

But doesn't foreign competition force U.S. corporations to become leaner and more productive?

IAN FLETCHER: Sure, but I'm not against foreign competition. I'm not against trade either. I'm against free trade and the ersatz version thereof we are being subjected to, neither of which are the same thing as trade per se. Companies need enough competition to keep them on their toes, but not so much as to knock them off their feet. The U.S. color TV industry hasn't exactly been driven to heights of efficiency by foreign competition--because foreign competition killed it. And a lot of that competition wasn't free at all; it was subsidized by foreign nations seeking a foothold in strategic industries, i.e. those with a future.

India's prime minister recently suggested offshoring processes to India makes American corporations more productive overall. Is there any validity to this statement?

IAN FLETCHER: This is a mirage created by the fact that if you offshore the low-productivity jobs from an American company, the jobs remaining in the U.S. will have, by definition, higher productivity--creating the illusion that the company is now more productive. But jobs have still been lost, and there is, pace laissez-faire economic theory, no guarantee that the workers who formerly held them will find new jobs of equal or greater value. What works on the level of the individual company is a net loss for the economy as a whole.

And it's erroneous to suppose that merely upgrading skill sets will be enough to protect American wages and employment levels if we do nothing to fix our employment situation. Educating people for jobs that don't exist because they've moved abroad will not magically cause jobs to come into existence.

Can China sustain its unprecedented growth through free trade, and what would happen to China if America woke up one day and became protectionist?

IAN FLETCHER: Free trade does not even remotely characterize what China practices. China practices industrial policy and mercantilism, which are the systematic manipulation of the domestic economy and foreign trade to increase economic growth. Right now, the interests of China's ruling elite are far more closely aligned with the interests of the Chinese economy as a whole than in the U.S. China's elite wants to build up its own country; the American elite is quite happy to let America gradually decline so long as they can make investments and money overseas. At some point, America's ability to absorb China's trade surpluses will end, and it doesn't look like China can smoothly segue to satisfying domestic demand quickly enough. Their manufacturing base is set up to produce goods, like fax machines, pitched at the income levels of their trading partners, not their own people.

Explain how free trade actually leads to artificial pricing (i.e., dubious assumption #2 in your book: "there are no externalities").

IAN FLETCHER: An externality is a missing price tag. For example, this means that products produced in environmentally-harmful ways impose economic costs on the environment that ought to show up in their price and don't. To take another example, buying so many cheap imports that you kill off an entire domestic industry will deprive America's economy of the future value of that industry and everything that would have grown out of it. Because we lost the color TV industry, we've never had a flat-screen TV industry either--but the cost of that wasn't factored into all those cheap color TVs in 1981.

Countless jobs have been lost from corporations procuring parts, relocating or outsourcing entire manufacturing operations overseas. Why is manufacturing important to America?

IAN FLETCHER: Because Americans want to consume manufactured goods, which means that either we must make them, or we must make something else to trade for them. And there just aren't enough other things we can offer the rest of the world, to keep them supplying us manufactured goods forever. Exporting soybeans and investment-banking services just won't cut it; the numbers (which are easy to look up) aren't nearly big enough. Non-elite service-industry jobs are also much more productivity-constrained than manufacturing, so you're never going to be able to pay most people decent wages there.

[GeneV]

You start with the fact that it is impossible to define when trade is "free." There are so many ways that subsidies and protection go into industries that the entire concept is illusory. Then, if you go one step further, and see that one government/country is willing to shoulder the burden of economic externalities while another is not, and you have a further subsidy of a sort.

[Nesster]

Although, as this is a photography forum, I must point out whoever took / selected this author photo of Mr. Fletcher... may have grown up on a steady diet of Nickelodion TV, specifically Rocko's Modern Life and The Wild Thornberrys...

[Ratmagiclady]

You start with the fact that it is impossible to define when trade is "free." There are so many ways that subsidies and protection go into industries that the entire concept is illusory. Then, if you go one step further, and see that one government/country is willing to shoulder the burden of economic externalities while another is not, and you have a further subsidy of a sort.

Apart from that, it's not a 'free market' if it's been *bought.*

'Might makes right' is no more freedom where money's concerned than it is where weapons are.

As trade goes, it's about balance. (And the balance isn't necessarily where the *brokers* would say it is: zero-sum-with-a-cut-off-the-top is *not* beneficial or sustainable. ) Trade *does* have benefits, but it can be used to great detriment, to one locale, another, or both: it has to be in symbiosis at least to some degree, or else it's not so good. When it's solely about *profit,* it's interesting how things can turn. Hence 'trade deficits' and no jobs here, despite the fortunes being made by a few.)

[Phil1]

A better word might be a 'balanced' trade meaning about equal in monetary value. Exporting about half of our industrial base is plain efn stupid while we import about 13,000,000 illegal hamburger flippers with more on the way wanting benefits.

[Nesster]

Phil - the industrial base meaning capital and decent jobs, plus back office jobs, technology jobs, stock research jobs, gone overseas.

In return, the more vehement Republican types point out, Americans are too coddled and welfared to take the jobs that are available. I just scanned a long article that I won't dignify with a link here, where the guy ends up saying that as he drives around northern NJ and NY he sees all sorts of foreigners doing yard work and stuff... not that he would actually talk to these people, but 'anecdotally' he feels they are undocumented. He actually makes the point that see, there are plenty of jobs to be had, except that lazy Americans are too dependent on government handouts to get off their butts to get these jobs.

Sheesh, talk about having a good income producing a emphathectomy and sensectomy simultaneously: I'm certain he would be first in line to do yard work at undocumented immigrant rates should he lose his job. And yes, I'm sure he'd make ends meet just fine.

Not only are these production level jobs gone, at least for now, hollowing out the economy, but we'll be paying the cost of lost opportunity for a long time: innovation, new management, new expertise all used to come up these ranks... well, except those who skipped that by paying for a top MBA degree anyway.

[Ratmagiclady]

A better word might be a 'balanced' trade meaning about equal in monetary value. Exporting about half of our industrial base is plain efn stupid while we import about 13,000,000 illegal hamburger flippers with more on the way wanting benefits.

Has little to do with 'legal' or 'illegal,' there's only so many hamburgers to flip, anyway, and 'wanting benefits' from your labor isn't a 'sin,' either. The benefits of labor are what get cut back in the name of 'profit' even if people don't have things to do which are strictly *productive* of anything but more circulation of money for the richest to take their cut of each go-round.

'Balance' in trade, likewise, isn't just about monetary values, either. It's about things the money sometimes represents, sometimes does not. Especially not when it comes to things like industry and building things in the country rather than just selling off resources and 'financial products' (like the monetary trade deficit itself) to buy finished goods.

It's more than just money-scorekeeping, it's about the things and services and resources and labor *actually needed in each place.* When these are de-linked so from profits and currency, and the quality of life for the people, it can obviously be destructive.

[Wheatfield]

Interestingly, we've had "free trade" with the USA for a couple of decades. Historically, it's only free if it's America getting the better deal.
We've seen back door protectionist subsidies, using the letter of the NAFTA agreement to circumvent the spirit of it, and then, ironically, the spirit of the NAFTA agreement used to circumvent the letter of the agreement when that suits American interests.
We've seen protectionism rear it's ugly head every step of the way, from the BSE scare (we documented our cases, ranchers south of the border use the shoot, shovel and shut -up method to hide their cases, while at the same time lobbying for restricting beef imports because we have BSE.
Don't get me started about softwood lumber or potato exports, it could get ugly.
Through it all, what Canadian producers have learned is to distrust Americans when it comes to doing business.

[Chwisch87]

Well an economist will tell you that the cost of protectionism in the EU is about 270,000 dollars per job and the cost in the United states is like 140,000. The issue is, like he said, there is no guarantee those that lost their job will be re-employeed in that job that the United States would specialize in. What really ends up happening is what we know happens... that money goes to the top income bracket.

We used to have RCA/Victor. Then we decided to let japan make all of our electronics. Now RCA is no more.

[Nesster]

Not just that, but some other very iconic American brands died or nearly so, under the financials above all else conglomerate management style... Fender, Gibson, Harley, McIntosh, Marantz, GM, Chrysler and the paper mill Jeff talks about in the other thread.

Things are over abstracted, over financialized (you get what you measure, and you measure only what you are able to) at the expense of true quality and the appreciation of labor. In fact, all too often (see State Street) layoffs claim to improve 'quality' of service, and the term 'Centers of Excellence' is a pseudonym for 'outsourced function to cheapest provider, who by congregating similar skills in one factory claims to better support said function across several clients.' The only quality these things add is to certain lines in spread sheets

[Wheatfield]

The capitalist model ensures that exactly what is happening will happen. In a model where success is measured by the yardstick of make as much profit as is possible, costs have to be kept as low as possible.
Corporate owners don't give a damn about their fellow citizens, they care about making as much profit as is possible.
CEOs don't give a damn about anything other than ensuring that their shareholders make as big a dividend as possible, and that they get as big a performance bonus as possible.
Shareholders don't give a damn about their fellow citizens, they only care about how big their stock holdings are valued at.

As long as the business model that is allowed to operate measures success by raw dollars and cents, you will continue to see your manufacturing sector shrink.
At some point though, it will reverse.
At some point, America (and Canada) will fall into Third World status, and countries like China and India will achieve First World-like wealth, similar to what we enjoyed in North America through the last century.
When that happens, our labour will be valued cheaper than their labour and they will start outsourcing manufacturing and tech support jobs back to us.

[Ira]

After NAFTA, I was able to get Canadian maple syrup at great prices compared to before. Now the price has skyrocketed.

What gives? Is it high in Canada too?

A bottle here is like 8 bucks now!

I know that in the grand scheme of things, maple syrup ain't that important, but something fishy is going on.

[jolepp]

After NAFTA, I was be able to get Canadian maple syrup at great prices compared to before. Now the price has skyrocketed.
...

The current exchange rate at about parity is pretty high as the all time low is 1 C$ ~ 0.62 US$ (2002), all time high 1 C$ ~ 1.04 US$ (1974), in 1994 the rate was ~0.75.

[Wheatfield]

After NAFTA, I was able to get Canadian maple syrup at great prices compared to before. Now the price has skyrocketed.

What gives? Is it high in Canada too?

A bottle here is like 8 bucks now!

I know that in the grand scheme of things, maple syrup ain't that important, but something fishy is going on.

Only 8 bucks?
That's a lot less than I can get it for. We bought some really nice syrup at the Garlic Festival this year, 750ml (about 4/5th of your quart) for 15 bucks.
Grocery store syrup is less, but not by that much, I don't think.
I'll find out when we do our restock today and post back to you.

[Ratmagiclady]

After NAFTA, I was able to get Canadian maple syrup at great prices compared to before. Now the price has skyrocketed.

What gives? Is it high in Canada too?

A bottle here is like 8 bucks now!

I know that in the grand scheme of things, maple syrup ain't that important, but something fishy is going on.

Climate issues with the supply seems to be a real problem recently, this year, I've heard about stress from more bugs, invasive ones that couldn't survive there before, and different weather and all, at least in some areas in the northern US.

Also, I don't know about Florida, but they're total barbarians about syrup down here: the real stuff has tended to be expensive and hard to find, and you get the crappy ersatz in surprisingly-nice breakfast places.