Posted: 10/25/2007 6:28:41 AM EDT
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I have a question for the people on this board who so condescendingly say that "protectionist" tactics will kill our economy. China is one of, if not THE most protectionist economy in the world. Their economy is growing about about 10% per year. America is one of if not THE most open markets in the world. Our economy grows at less than 2% per year. Explain to me how this is possible if "protectionism" kills economies. |
China is growing IN SPITE OF their protectionist ways, not because of them. Trying to explain anything to you with facts has proven to be pointless in any other thread, I doubt this will be any different. |
 Yes, I'm dumb as a stump...yet you still can't answer my question. |
I like to think of it this way. China has a big sucking vacuum and they've been filling the space quickly. The US had a big sucking vacuum, but we've mostly filled it and are just improving it gradually as time goes by. Eventually China's economy will slow down and probably perform similar to the US economy. |
Our economy is a lot more developed and mature, so we will never see growth rates of 10%, and said growth rates would shrink if we became protectionist. Countries tend to retaliate and seek alternative trading partners in such cases. Also, you have to understand that 3% growth in the largest economy in the world dwarfs a 10% growth rate in a developing country. |
2% on 13,000,000 million or 10% on 2,000,000 million, which do you want? |
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Access to our domestic markets should be handled just like any other scarce resource with alternate uses; by economics. We empower the government to act in our interests. Its not unreasonable that the government defray the costs of allowing imports using tariffs and fees. The government has imposed a huge burden on domestic production by way of labor and environmental laws. Providing domestic subsidies funded by import tariffs seems like a reasonable thing to do. The voters have demanded domestic products support their labor and environmental agendas. It would be hypocritical to give foreign goods a free pass. |
Is it not true that the Chinese government places heavy tariffs on imports, and gives tax rebates to Chinese manufacturers on exports? Is it not true that China artificially devalues it's currency in order to keep the prices of it's exports low? Is it not true that China deliberately discourages speculation and investment in their currency to the value of their currency low? I would call that pretty damn protectionist. |
I've heard these allegations made before and I've never understood them. (Not saying they're untrue, I just don't understand them). How exactly does a country "artificially devalue" its currency and how exactly does a country "discourage speculation and investment" in their currency? |
China is actually no more protectionist than most nations, and far less than many. In case you missed it in the red above, the US has more pending complaints before the WTO than does China. |
Well, they used to set the value of their currency to be some percentage less than the dollar. My understanding is that no matter if the dollar up or the dollar went down then the Yuan was always only worth $.75 (I don't know what the actual value was, that's just an example). They recently disassociated their currency from the dollar and now they are using some other technique that I don't understand. The same with investment. When the Yuan was always $.75 (for example) then no one would want to invest in it because it would never go up. Now they do it by saying that there is some low ceiling on the value of their currency. They don't want investors creating a demand for their currency and therefore driving the value of it up. By artificially keeping the value low they ensure that no one is going to invest in it. Who would invest in something that is guaranteed to never grow? |
Wow. This post admits you don't know how currency values are set, or maintained, but dammit, you just KNOW China is devaluing theirs.  BTW, a dollar peg is fairly popular. Heck, at least one other country (Ecuador) uses the dollar as its official currency. |
It's not like you to twist someone's words out of context. I always thought you were above that sort of thing.
Ecuador isn't a belligerent nation. |
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By fixing the currency exchange rate. The official exchange rate will be stated, and people would have to use that. However, what happens is that black market exchange rate becomes more prominent and when SE asia had financial crisis, countries that had somewhat of government controled exchange rate had problems. China is no exception if they continue to do so. It's delaying the inevitable. At this moment, the Chinese economy is in the industrial-era. The general idea is that an economy starts with agricultural economy, progresses to industrial economy, then to service-based economy. During industrial economy phase, there is a hugh growth in wealth of a nation, as the economy is now capable of producing faster than agricultural economy. This is evident in British Industrial revolution, Japanese Korea, and Taiwanese growth of 60s and 70s. At this point in time, there is no need for fancy stuff, just mass production of things that they are used to, which we as US do not produce as returns are low, and other nations do not pose competitive edge since China's domestic economy can handle it. Once they move to service-based economy, they lose their industrial competitive edge and that's when the economy really becomes protectionist. Since industrial production is not as competitive as before, the need for protection of their domestic industry increases, and that leads to protection. And this is where protectionism will finally catch up with them. By denying importation of foreign goods that are more efficiently made, or has relative competitive edge, they would have to pay more for domestic goods instead of paying for goods that are made from abroad. From strict economist's view that results in inefficiency, i.e. paying more for something you could have gotten from else where. |
How did I twist your words? You were asked how a nation like China artificially devalues its currency and you clearly state they do so using a method you do not understand. If you do not understand how it is being done, how do you know that it is being done? By how much is the yuan undervalued? |
Never been to China, eh?  I have. They must hide those slaves really well. 
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Text book answer, and it makes sense too. However, it doesn't take into account that the country with the service based economy is buying unsafe products from an industrialized nation with rampant corruption which ignores product safety standards. It also ignores the fact that the industrialized nation is deliberately trying to drive the service based economy out of all manufacturing by engaging in unfair trade practices, supporting the enemies of the nation with the service based economy and has expansionist goals towards one of the close allies of the service based nation. |
I don't understand the method because I don't understand international finance very well. The simplest explanation is that the Chinese government allows the value to go up and down somewhat now, but that there is a low ceiling that they will place on the value at their discretion to keep the value from rising higher than what they are willing to allow.
My understanding is that it is no longer a fixed percentage or fixed percentage window as it was when they had it pegged to the dollar. Now the value is allowed to fluctuate more, but the Chinese government will set some low ceiling on the value of the currency if they feel that it is growing either too rapidly or too high. |
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Through the end of August, US exports are up 11.6% vs. the same time period in 2006. Here's the link Yes, China has taken all of our novelty rubber vomit and tinker toy manufacturing jobs, but the anecdotal evidence of your friends who have lost their jobs doesn't come close to telling the true story of US economic conditions. Jobs are plentiful, we're near an all time record for sustained GDP growth in the US and wages are growing faster than inflation. The last thing we need now is a slew of protectionist policies. Did it ever occur to you that there is an upside to cheap imported goods? |
Maybe you should stop keep digging the whole? The goods that are inferior will be kicked out of the market by the invisible hand. For example, the recent toy recall was made and the manufacturers ended up biting the effects of their disregard for regulations. The claim of "industrialized nation is deliberately trying to drive the service based economy out of all manufacturing by engaging in unfair trade practices" needs a lot of basis for justification. In fact US does go the same route too. As someone already mentioned we use and get abused by WTO. I doubt China has to abuse it's industrial strength, as such action would lead for us to find alternatives. We don't vote from the roof top, but we do vote without money. |
You're right, I'm arguing with people who are a hole lot smarter than I am.
How many major recalls or product warnings does that make for Chinese products this year? Pet food, toys a few times, seafood...anyone know where these exploding lithium batteries in the laptops and Ipods are being manufactured? How many consumers have to suffer from buying tainted goods before "The Invisible Hand" works it's magic? How many choices do consumers have anymore in where their products, or the major components of their products are manufactured?
Is it untrue that the Chinese government places tariffs on imports and subsidizes exports, even to the point of refunding domestic taxes on exports and subsidizing foreign tariffs?
All other market factors are trumped by two facts about China: 1. They have almost no regulation of their industry. No workplace safety standards, no product safety standards (none that anyone bothers adhering to anyways). No wage, benefit or insurance requirements. Nothing. Business has a free hand over there, and the results show it. We had a member of this board who went over there and posted pictures about it. During the time that he was there, 4 workers were killed in accidents but the project didn't miss a beat. On our side we have product recalls left and right. 2. The Chinese subsidize exports. They refund domestic taxes on exported goods and the subsidize foreign tariffs on exported goods. That's it. As long as business can make something cheaper someplace else then they will. Bottom line. |
We are limited only by our imagination. That's what irritates me about protectionism. It sacrifices adaptability for the comfort of an outdated economic principle.
Not all services are exported. Not all jobs are service jobs. Considering that even communist systems had unemployment rates, the ~5% unemployment is about as good as you're going to get. (Yes, the way we measure unemployment is probably inadequate. How we can do better or even if we can do better is a matter of some debate.)
They adapt. That's the point of a capitalist society. People WILL adapt just as the have several times over the past 100+ years. I also don't understand why people are lamenting the loss of a manufacturing economy. You're about 50 years too late. It was in 1957 when we left the industrial economy. I don't understand the pissing and moaning about a service economy. We never were in a service economy, and in 1980 the number of information workers surpassed all the other workers combined.. We are currently in an information economy, and we've been in one for nearly three decades. It's about time people come to this realization and adapt or face being left in the trash bin of history. I do imagine that the rise of the industrial economy caused considerable consternation in ~1905 we finally left the agricultural economy behind. |
There certainly is!!!!! We are saving the tax payers MILLIONS, by using Chinese steel, and illegal labor to build our southern border fence!!!
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This year, through the end of August, the US has exported over $1Trillion worth of goods. Exports to South/Central American countries - you know those that we signed free trade agreements with - are up 19.5% for the period. Lowering barriers to trade benefits all trading partners. At some point you have to confront the reality that the US still has and will always have a manufacturing sector. What we will continue to lose are the low value manufacturing and assembly jobs that can be done more efficiently through automation or low-cost foreign labor. Former factory workers with limited skills will either make themselves more valuable through training & education or find similar unskilled work in the service sector. A job lost to a machine, a new innovation or a Chinese worker is still a job lost. It's happened throughout the history of this country and will continue to happen as long we believe in capitalism. It's what built the largest economy the planet has ever seen and it's what is building the Chinese economy right now. At some point China will price themselves out of cheap labor and those workers will complain about the Vietnamese stealing their jobs. |
Good start. Now it's "whole" not "hole" 
The invisible hand already did its magic. The products are recalled and people are more aware of tainted products. I say it did just well.
You mean like how farmers are subsidized in US? There are other industrys in this nation that get subsidy from government to stay competitive. What they do is nothing too far fetched from what we do with our economy. In fact US does go the same route too. As someone already mentioned we use and get abused by WTO. I doubt China has to abuse it's industrial strength, as such action would lead for us to find alternatives. We don't vote from the roof top, but we do vote without money.
Sounds like pure capitalism at work. Everything has its price, and Chinese are being purely capitalistic. |
You realize that he switched the tags around right? No, maybe you don't... |
NNNNNNNNNICE! Someone wants to remove my fingers with woodworking tools! This is a first!!! 
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Think of the economy like an athlete's body. The U.S. is the equivalent of an olympic champion. Because we are in such good shape, any negative thing we do to our body (like eating too much fat) will hurt us because we are in peak condition. In order to remain in peak condition we must continue to do everything right. China, on the other hand, is like a 300lb fatty who has just started exercising. China can still do a lot of things wrong, but because it just started exercising, it will lose weight and get into shape in spite of this. So every though the fatty continues to eat her Quarter Pounder w/ Cheese every day (i.e. tarriffs), it will continue to lose weight because of the exercise. But if it ever wants to become an olympic athlete, it will eventually have to do everything right. |
Yes, I do. He was correcting himself and I dont think he knew it, thats why I thought it was funny. |
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You don't need top be an economics expert. Just apply common sense to your question. Lets say that I could bestow upon you an exemption to all EPA rules, OSHA rules, EEOC rules, and generally keep the government off your back. The few remaining regulations in your way can easily be handled with the strategic placement of a few small bribes.. Now lets also assume that I could furnish you workers that actually had motivation and work ethic. By the way. They get paid $10 per DAY. Do you think you could grow that company? |
It isn't that protectionism is some terrible, insidious evil that will destroy all. The issue is, it isn't free trade. Free trade means just that... anyone can freely trade with anyone else. That will always result in the "correct" distribution of goods and services. When one country institutes protectionist policies, others do so as well, either in retaliation or in an attempt to "protect" their local industries from what is now un-free trade. And more countries respond to that protectionism, and so on and so forth. You're left with a market where prices are distroted badly... they're no longer accurately communicating information about how to alloctae scarce resources. They merely reflect government whims and the dictates of bureaucracies. The result will be misery. |
Of course you could. Is that what you're suggesting we do to compete in the global economy? Eliminate OSHA, the EPA and EEOC? Should we scrap our product safety standards too? I guess we need to lower our standard of living to that of our third world communist enemies whom we've tried so hard to keep from becoming. Once we do that, then there will be NOTHING standing in our way! 
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I think you are missing the point there. |
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Answer to your original questions motown_steve: China is NOT that protectionist of a country. I mean, the most popular car brand in China is Buick , not a domestic. If you look at WTO complaints, you'll actually see that the United States has FAR more protectionist charges against them than China - just look at the whole United States-Canada softwood lumber disputeAnd you have to look at our economies - their economy is still in the 'industrial stage' - our economy is WAY past that. We're past the service stage too - we're now in the information age. . And sure, we still manufacture stuff - but it's highly advanced stuff. China is making toys and toothpaste; we're making boeing jets and intel processorsI mean, while they're selling toys and toothpaste for a few dollars - we're selling Facebook.com for $15 BILLION (yeah, facebook.com was valued this week at 15 BILLION dollars  ), we're selling iPhones for hundreds of dollars, etc.We're not even in the same league. So comparing their 10% to our 3% is just apples and oranges really. |
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Okay, well I am missing the point here. What is the point? Cheaper lettuce? Let's say that a few million workers get displaced, and even alot of higher skilled jobs go to India like they are doing. Then we have people here making less money, or out of a job totally. Cheaper lettuce doesn't help them. They can't afford any lettuce. People say, "Let these sub-100 IQ workers train to become nuclear engineers. Ain't going to happen. What's your plan to deal with this? And here's my other concern. Let's say it's all great and fine to have some international company that doesn't give two shits about America getting cheaper labor. And then they bring the imports back in to the US, and sell them at the same price as they did when the products were US made, like they do already. So, how is that a benefit? I didn't get my cheaper lettuce, but I lost my job. Oh yeah, the International company made a few extra billion, and the stock market went up. Big deal. I'm not an institutional investment company. I don't care. |
I have personally designed products, put the contract for manufacturing said products out for bid and ultimately imported the finished goods from China. Free trade to me means that I can enter into a contract with a manufacturer from anywhere without undue interference from the government. I guarantee you that the product safety violations you keep referring to were also a violation of the contract between the manufacturer and the US distributor - a contract violation doesn't mean free trade should be scrapped. The importer needs more rigorous local inspections, but it's hardly a basis to scrap trade agreements we have with an entire country. There are food safety and product safety violations that happen domestically all the time - when there's money involved short-sighted people always have an incentive to cut corners. The products I have had manufactured in China have cost me, net of all fees, duties, shipping, about 1/3 of what it would cost to have them built in the US. That's more money for me to grow my company - it's pretty simple math. I outsource and my business grows and I hire people. If I don't go offshore, my products never get built because they wouldn't make sense price-wise. If you had your way, my private label products would not exist, I'd have a few less employees and my customers would have fewer, more expensive products to choose from. Sure, this is anecdotal evidence, but it's also one that is reflected in our growing economy and a rising standard of living both at home and with our trading partners. |
Your 'logic' flies in the face of what has actually happened in this country as a result of free trade agreements. We have more jobs, faster wage growth and are exporting more. Did you miss the link earlier showing that US exports to Latin America are up almost 20% this year vs. 2006? |
Sorry, you completely missed the point. The company I described is China. As somebody already stated, they are growing in spite of their protectionist policy. BTW- yes, we would need to roll back a bunch of the current regulations to compete effectively with the rest of the world. |