FREE TRADE

[duncan macgregor]

Worst thing that can happen Is free trade. A chinaman works seven days a week 16hrs a day, and gets paid a subsistance rate, and we want free trade. A farmer In NZ with a great climate low overheads low fuel costs, wants free trade and no subsidies with his British counterpart. Free trade means whole Industries will collapse who pays for that?. Free trade only works on a level playing field. Free trade with china means get out of manufactureing companies. and Into agriculture and forestry. Australia and America look like Its on ,good luck the Aussies, bad luck the yanks. It Is not about being efficient, Its about a level platform how can a business compete when the price of fuel might be double In one place and not In the other.
Regardless If we like It or not free trade means everyone gets the lowest price for everything, that Includes wages and conditions.

MACDUNK

[Morpheus]

Hi MAC
A Former Fonterra boss once told me that he would strip naked and run down Lampton Key in joy if we signed a FTA with the US.
Now that certainly would be the worst thing that could happen !:D

Morpheus

Now don't you wish you had taken the Blue pill?

[Nevl]

Ok have to answer thýs one. But thanks for puttýng out the totally backward versýon of free trade and I suggest a readýng of any fýrst year economýcs text book. But ýncase that ýs too hard.

Free trade actually ýncreases wealth of all the traders!! Thýs may seem counter ýntuýtýve when manufactures are tryýng to compete wýth cheap chýnese labour but ýt actually does. Those ýn hýgh cost countrýng tend to use more capýtal goods (econýmývc capýtýal ýe machýnes, computers, robots) hence lowerýng the amount of labour ýn the productýon process. I thýnk no one can argue wýthg the fact that the spýnnýng jenny contrýbuted hugely to Brýtýans economýc prosperýty ýn the 18th century. Despýte the fact many were forced out ýnto the labour force they actually found other and ýn most cases better work and the resources freed up and profýts created allowed econýmc progress to be made ýn other areas especýally technologýcal development whých took off ýn the 19 century. Yes sometýme these changes take týme but ýn the end just as the computer has not caused mass unemployment ýn the world neýther wýll the next být of technology.

Another good example ýn the the response ýn the 1930 when countrýes ýn response to the sharemarket crash panýced and put huge trade barrýers on thus worsenýng ( or causýng!!! A sharemarket crash doesn't automatýcally mean a depressýon!! ) the great depressýon. In 1987 countrýes actually opened markets leadýng to the best rýse ýn econýmýc wealth ýn hýstory ýn the 1990,s.

Countrýes wýth open market have hýgher growth rates and better employmemt. Sýngapore, Hong kong Before chýna, New Zealand, Taýwan.

Countrýes wýth barrýers and hýgh unemployment. The entýre EU, Indýa, most of Afrýca.

The lýst can go on.

The growth comes from the effýcýent use of resources. Less waste means more for the same effort and open markets are the most effýcýent we have devýsed ( not perfect yet though). Just thýnk of the growth ýn Europe ýf the 100 býllýon a year they waste on there farmers was spent on thýngs people want. More BMW's, nýcer houses, býgger gardens, more holýdays and a beach house. Lots of Jobs ýn all those categorýes. Jaapn ýs the same all that money they spend on expensýve food could be spent on so many other thýngs, schools, another phone more leýsure týme, housýng the envýroment.

Ok nuf saýd

[Major von Tempsky]

Nevl, I suspect you are using a Turkish keyboard - I had some emails from one of my daughters travelling through Turkey and it looked rather the same, unfortunately it rather looks like gibberish altho I can see enough in it to see there's a lot of sense.
MacDunk, if you studied some economics you would quickly come across some fascinating arithmetic models, where in the simplest case if there are only two countries A and B and two goods produced X and Y and one factor of production labour cost per hour, you can show that even if one country can produce both goods at a cheaper cost than the other, that the total production and consumption is maximised if each country specialises in one good and exchanges it with the other country. You can then progressively elaborate the model to more countries, goods and services and factors of production, getting the same result - that free trade makes sense.
This is why, economists, world leaders, even most politicians keep pushing world trade and why Rod Donald doesn't understand it as he's never done any economics.
And it's not just the theory, it's been borne out in practice many many times, from the free trade amongst the original 13 US colonies/states, to the huge growth in the Common Market countries when they introduced free trade.
It's a no brainer to insist that the US or NZ produce their own shoes and clothing at high prices instead of importing them cheaply from China and India while selling the Chinese and Indians milk powder, aircraft, and business services & in return.
Would you rather be sewing shoes together or designing buildings or financial packages?
God save us from the Latter Day Luddites (Luddites were people in the Industrial Revolution in England who went around smahing up machines because they didn't understand them) whether they be socialist, petty chauvinist nationalist or Green or a horrible combination of the above.

[duncan macgregor]

What free traders forget Is that sometimes the cost outweighs the advantages. If people mean nothing then of co**** you are right. Exploit their cheap labour and you will find you join them In poverty. A level playing field or look out. The poor country benefits the rich country suffers ask the yanks. MACDUNK

[Cooper]

Research the ideas of "comparative advantage" by David Ricardo, Macdunk, because otherwise you will have anyone who has done a bit of economics (myself included) ramming what MVT has said down your throat.

[John Mexted]

quote:Originally posted by Cooper

Research the ideas of "comparative advantage" by David Ricardo, Macdunk, because otherwise you will have anyone who has done a bit of economics (myself included) ramming what MVT has said down your throat.


Agreed Cooper.

Person A takes two hours to cook a meal one and a half hours to wash the dishes. Taking three and a half hours to complete the task.

Person B is much more efficient and cooks a meal in half an hour and washes dishes in one hour. Full task - One and a half hours.

It would seem that these two should not trade, since B is better at both tasks than A.

However, if A specialises in doing dishes, they can do two lots of dishes in 3 hours. They are half an hour better off (half an hour more free time, or produce a third of a load more of clean dishes for someone else). B can focus on cooking two meals. They are also half an hour better off and can either have half an hour more free time (or cook an extra meal to trade with someone for foot rubs!).

Substitute people for countries, hours for dollars...you get the idea. MVT and Nevl are correct in what they say. If a country can get a comparitve advantage, they will benefit from trade - Even if the other party can produce everthing cheaper than they can.

[Cooper]

Well said JM

[Placebo]

Macdunk your anti-free trade views don't take account that people (and countries) can change their skills base and adapt to new environments. I remember when Nats removed tariffs on vehicles and textiles and those local industries collapsed almost overnight. Yet here we are, six or seven years on, and NZ has a labour shortage in nearly all industries. So even though those jobs were lost, many many others have been created to the point that employment is at an all-time high. Nobody likes to lose their job but in reality an economy is a fluid environment that can alter course quite rapidly.

Free trade is a nice theory but the trouble with "free" trade agreements are they are always skewed in favour of the bigger country, which always has the most to lose and the least to gain. You claim US will be worse off in US-Aus FTA -- not so. US pharmaceutical companies have negotiated big concessions from Aust (patent protections); also Aust sugar farmers continue to be subject to quotas and tariffs (to protect US producers). Free trade??

The Yanks are the worst nation to have a "free" trade agreement because they talk the talk but don't walk the walk. The WTO disputes resolution process is full of complaints about US trade practices (on really bizarre stuff like bananas and soy). Also latest WTO round is negotiating on farm subsidies -- US and EU have agreed to lower access barriers but will continue to pay huge production subsidies, thus ensuring continued protection to their own. Fair enough I hear you say but NZ is vulnerable to this kind of practice as an agricultural trading nation facing competition from farmers with state protection (Americans).

Speaking of changing jobs, Macdunk looking at today's Herald perhaps you need to go back to building. Your country needs you!!:D

[thereslifeafter87]

An argument can be made that subsidies and tariffs can protect fledgling industries, enabling them to eventually become competitive and compete on equal terms with overseas players.

However, in my opinion this ignores the fact that such protection becomes politicised and institutionalised.

US farmers see protection like that they receive as their god-given right, they don't associate such payments with their social equivalent - the unemployment benefit.

Politicians will do all they can to prevent such protection being removed because of the power of lobby groups.

This is a classic example of rent-seeking, and I believe the costs far outweighs any perceived benefit.

Countries should specialise in what they are good at. If third world nations enjoyed free-trade with the US and EU they would be infinitely better off!

[duncan macgregor]

Thereslifeafter87. Of co**** countries from the third world would be better off, my point being the USA would be worse off. We are in the same position In NZ we will wreck whole Industries and compete with people being paid 4 bowls of rice a day In wages. Who Is left paying for that In the end?. Think about It Is It worth It?. MACDUNK

[thereslifeafter87]

The USA won't be worse off in the medium-long term.

The capital that is being inefficiently allocated at present (being given to farmers to subsidise uncompetitive production) will be reallocated into industries that will use it more efficiently. Farming in the USA would become more efficient, and move towards areas where the US has a competitive edge.

Look at NZ dropping subsidies and tariffs on agriculture in the 80's, our farmers were worse off in the short term, but now they cope well.

[Major von Tempsky]

If you have a look at China MacDunk, you'll see that under the influence of much greater trade that the 4 bowls of rice is changing rapidly, that shortly over 50% of the Chinese population will live in the cities. There is already a huge Chinese middleclass which is a huge market for NZ goods and services.
The process of growth, of raising living standards has to start somewhere and it's counterproductive stopping the process from even starting by arguing the 4 bowls of rice story.
The way to stop Africa, Indonesia & & from ever getting ahead is to go anti Free Trade against them.

[Placebo]

MacDunk et al, Stats NZ figures out now show NZ has the highest employment on record -- over 2m jobs. Unemployment at just 4 pct.

Of course the media paints this as a `bad news' story (upwards inflation pressure), but clearly the sign of a buoyant economy.

I'd be interested to know how this squares with your view that free trade and lower tariff barriers is a bad thing for economies? NZ has v low tariff barriers, yet our economy is thriving. Please explain [?]

[Cooper]

Another argument to consider is that NZ workers are paid more because they produce more... to use economic jargon the marginal productivity is higher, meaning that your standard kiwi can produce more because of better training and a higher amount of technology per worker. In NZ we are lucky enough to have a higher level of productivity per worker and therefore the NZ worker should be paid more accordingly. Nb this is not because of racial difference, but due to a higher level of aggregate skills and a larger "per person" capital stock. The difference in wages reflect this and the NZ average wage rate should not reduce (theoretically) under a free trade agreement.

[duncan macgregor]

Looks like I am on my own with this. Lets take It further WHY?.
One reason might be that I worked all over Afica, Canada,Australia, and NZ. Most of you read It In books. If you dont protect what you have got you will lose It. I could take the first uneducated urchin out of the street In CALCUTTA that I fell over, bring him here and he will own more than the average KIWI In ten years time. Agriculture, and forestry great, everything other than that goodbye. If free trade Is so good, why do the rich countries fight It?. We simply cant compete with people that get paid In bowls of rice, and If we do they bring us down as we pick them up. I traveled through India and encountered this guy digging a ditch at the side of the road. My companion and I asked him what hours he worked. He told us seven days a week daylight to dark, and at night he slept In this bloody ditch. He got paid with bowls of rice. He seemed to think that he would be rich and could set up business In the city with a paltry 15 pound sterling. We got him out the bloody ditch got him cleaned up gave him 15 quid and set the poor bugger loose In the city.
I would hate It If I were looking down and saw some dumb Indian silly enough to stick a couple of bob In the pocket of one of the people following on behind you. Throw your books away and see It In reality you cant compete. MACDUNK

[Cooper]

All due respect Macdunk, rich countries fight it because of political pressure from people like yourself... most know that economically speaking free trade is better for everyone.

[thereslifeafter87]

MacDunk..
Read my post about political interest groups and rent seeking.

[thereslifeafter87]

Also,
If there was free trade, as poor countries get richer people would stop working such hours for low wages, workers would eventually unite and demand better conditions as happened in ALL major industrial democracies.

[duncan macgregor]

Question , Anyone agree with old macdunk Or Is he on his own trying to save the place. Not one poster seems to agree with me. That dousnt make me wrong of co****. MACDUNK

[Major von Tempsky]

Question for MacDunk: Have you read and understood the example on Person A and Person B by John Mexted?
If you have then you shouldn't be asking the question.

[Paper Tiger]

Answer for MacDunk:

You are in the minority (maybe of one).
I presume that you live by the principals you espouse here and ensure that at every opportunity you purchase New Zealand goods and services?

[duncan macgregor]

Paper tiger, You got me covered In one. Only buy NZ shares. Support your own first. adulterate my scotch with NZ lemonade how Is that for being one eyed. CHEERS MACDUNK

[Liberty]

This is worth a read. I certainly couldn't have put it any better.


[u]These Disunited States</u>

by Jim Peron

Does anyone think Americans would be richer if each of the fifty states had restrictions on trade with the other states?

That's the interesting question that Martin Wolf, Associate Editor at the Financial Times, asks in his new book "Why Globalisation Works".

The question itself is a valid one. In the US a product produced in Maine can be sold in New Mexico without any significant problems.

No customs agents inspect the goods. No tariffs are imposed. The resident of Maine trades with the resident of New Mexico no differently than he trades with his fellow state citizens.

In fact one of the reasons a central government was originally established in the United States was to see to it that no trade restrictions were placed between the various states. It helps explain America's wealth.

It's not hard to understand why maximum trade improves human well being.

Just think about your own situation. You are a seller some of the time and a buyer some of the time. You may sell a product, your ideas or your labour. You buy all sorts of things including the products, ideas and labour of others. In other words you are sometimes a consumer and sometimes a producer.

When you are a consumer do you benefit by having more competitors in the market or less? Does a greater selection make you better off or do you prefer to have a small number of choices?

Most people realise they are better off with more choices. If you want to see a film you prefer there to be several cinemas around showing different movies. One cinema offering a documentary on the secret life of bugs is not likely to inspire your interest. More choices are better.

And if you are selling something do want more buyers bidding for what you have to offer or fewer buyers? Again it is pretty self-evident that more buyers are good and more sellers are good.

By increasing the number of possible trades the chances of you finding one that will make you better off also increases.

Now go in the other direction. Imagine not just national borders which restrict trade opportunities by regulating, controlling or taxing them. Imagine the same sort of barriers existed between towns or other communities.

Imagine if every good from outside the region were stopped at the border of your town and a high tax were slapped on them to protect the jobs in your community. Oddly such a system would more likely destroy jobs than save them and it would impoverish your entire community.

By restricting your chances of finding the product you want at a price you are willing to pay the bureaucrats are substituting their will for your own. You have to pay the prices they find advantageous. You must buy the products they prefer and shun the products they dislike. Your ability to make decisions that benefit you are severely restricted.

When we close trade off into smaller and smaller areas the people within those areas become worse off. Poverty increases. People end up living at more primitive level.

Doing the opposite, by widening the trading area, produces greater wealth. More modern technologies are used. Consumers are better off and so are producers.

If you really do think trade barriers improve your life why not put more of them into place voluntarily and see if it's true. Insist on only buying products produced in your own small community and see if your life improves.

In fact why have a trade relationship with people across town? Why not put up a few barriers to trade internally as well. Restrict trade to only the people on your street or just living in your house. In fact why even bother trading with others at all? Doesn't that destroy you finding employment to produce the things you need yourself?

"Ah, don't be daft" says the projectionist. "If you did that you'd have to produce everything yourself and no one can do that."

Precisely. We trade with others to take advantage of what they can produce

[skinny]

Cheers Liberty, the book that Peron draws upon by Martin Wolf got a stellar review in The Economist a few weeks back. I have my Amazon order in for it, buying it in the UK to take advantage of the price difference of it here in Euros ;)

Another non-technical treatment on the benefits of globalisation I've read and quite liked was Thomas Freidman's (NY times columnist now better known for his views on the Arab-Israeli conflict) "The Lexus and the Olive Tree".

Though to balance my reading I've also waded through Naomi Klein's "No Logo" - useful to get a sense of what the luddites are thinking [:p]

[Liberty]

Hey Skinny - They must have made a mistake with Klein's book title - shouldn't it have been "No Logic"?

[Paper Tiger]

quote:
adulterate my scotch with NZ lemonade


MacDunk, I consider myself an open minded person and believe that people are entitled to their own views where it does not harm others but:

LEMONADE in SCOTCH?

[duncan macgregor]

PAPERTIGER, You contradicted your statement with the question mark. Never knock anything unless you try It. Started doing It In Kenya In the army the beer was crap. cheers macdunk

[Paper Tiger]

Sorry for the bad composition MacDunk. I was suffering from shock at the time. I have tried it. [xx(]
Lagavulin or Talisker for me.

[stormrose]

Lexus and the Olive tree is a great read. No Logo presents its case like globalisation is ALL bad.