Tuesday, June 23, 2015

Free Trade & Fair Trade

There is no doubt that Free Trade has cost the United States millions of manufacturing and other related jobs.  Part of this has occurred because Unions in the US have driven up compensation and benefits to a level that is uncompetitive in the world.  Additionally, the US tax system and burdensome regulations sometimes make it impossible to manufacture products in the US.  Currently, we have 50 million Americans on Welfare, 10 million Americans collecting Disability Benefits, about 9 million officially unemployed and probably another 10 million, either under employed, or that have just stopped looking for work altogether and as a result they are not counted. 

So that means there are about 79 million, or more Americans, many of whom that are able bodied that have no jobs because there are no good paying jobs for them.   Of course, some of these people are legitimately disabled and some are just lazy and would not work even if there were jobs available, but certainly there are a good percentage that were once working that have been displaced by Free Trade. 

Socialists and even Republican Donald Trump are calling for Tariffs (taxes on imported goods) presumably to keep those goods out of the country, or to equalize their cost with potential production in the United States that would result from higher labor cost, taxes and regulations in the US.  However, these people have not learned the lessons of history.  Tariffs caused trade wars that contributed to the Great Depression as all countries attempted to protect their manufacturers and even farmers from outside competition.  It is not the answer.   Besides, American have a higher standard of living because of goods produced overseas that are more affordable than would be the case if they were produced in the United States.  Tariffs would hurt the very people they are intended to protect. 

The problem is that we have opened our markets to goods produced overseas; but other countries have made it difficult to do business in their countries and or people in countries like Japan just won't buy American products, considering them inferior to products produced in Japan.  This Blogger was recently in Japan.  And, aside from American fast food and some other consumer products I saw,  there are few American products in Japanese stores and almost no American cars on Japanese streets. 

The reason is that Japan is a collective society.  It is all about Team Japan for the Japanese people.  They will actually spend more money to buy a product made in Japan than to buy a cheaper product imported from the US, even if it is of the same, or better quality.  That is just not the American psyche.  We shop price and quality, no matter where the product was made because we don't function as Team America.  Americans act as individuals, not as a collective society.  It has ultimately been the basis of our success as a nation and perhaps one of the reasons that Japan has fallen behind in the last 20 years. 

Tariffs would just result in trade wars.   Instead, we must push for truly open markets in those countries that artificially control their currencies to make their products cheap overseas, i.e. the Chinese and removal of barriers that make it impossible to compete in these countries.  In addition, the Chinese often require American companies to share their proprietary technologies, as a condition of doing business in China, so that 5 or 10 years later, the Chinese are manufacturing the very same products competing around the world.  This is wrong and should be an illegal practice.   We need Free Trade; but it must also be Fair Trade.  We are not there today. 

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