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http://www.dtschmitz.com/dts/2008/08/i-am-a-god-damn-protectionist.html#comment-31

Feel free to register and comment along side George Ou.

We are a big piece of the pie today, but we won’t remain globally competitive if we hide behind our borders. Not only that, but the benefits from any protection will be minor and short-term, replaced faster than you think by the dragging effect which necessarily comes from making every American pay a lot more for every product they buy.

50 years ago, the point of origins of the parts put into a typical product were overwhelmingly from one country. Communications and transportation improvements has destroyed that, with the benefit that prices are lower and all of us have more, in real terms, than we ever had before. It does mean that the nature of employment in America has moved around, but that’s how economies evolve.

We must do what we comparatively do best if we hope to remain a wealthy and healthy part of the world economy. Hiding from that economy is like trying to hold out a feared infection by locking yourself in an airtight bubble. Things might feel fine for awhile, but eventually, the air stops supporting life.

China, in contrast, has a 30-40% savings rate. That means they buy a lot less, and that makes a lot more excess capital available to fund our negative savings rate. If more of that money went to consumption, China’s export surplus would be a lot smaller, if not negative, given the sheer amount of stuff the Chinese simply do not have yet.

Rich nations tend to have lower savings rates (though they don’t usually have negative levels, which is something WE need to fix, not China). Imagine a country the size of china with a much lower savings rate, and you will see what the opportunities are from a richer and more prosperous china.

Changing that will be hard, but I know one way that is sure not to work: starving Chinese children and thinking America’s economy wouldn’t get walloped by extreme price inflation.

Simple example: Steel tariffs helped 3% of the economy (the steel producers), and hurt 14% (companies that use steel). Move to something as fundamental as computer software, and the temporary benefits would be quickly overrun by the costs associated with such a move, thus reducing demand for software and replacing those temporary benefits with extreme negatives.

Be thankful for the lower-value dollar, though: http://afp.google.com/article/ALeqM5i2sQ7YUEJV2XGJ3p2alEh63LpDJA

Bottom line: we need to deal with the reality of a global supply chain. Hiding from it certainly isn’t going to do American business any favors.

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http://www.dtschmitz.com/cgi-bin/mt/mt-comments.cgi?__mode=signup&blog_id=2&entry_id=&static=http%3A%2F%2Fwww.dtschmitz.com%2F

I think you’re mistaken because I’m for free trade on ALL sides of the ocean. Rob is advocating MORE free trade and not LESS free trade which isn’t protectionism. What Rob is saying is that countries like China and India are violating WTO free trade agreements and that we need to do something about it and I completely agree with him. That’s NOT advocating that the USA switch to being equally protectionist; that’s saying that China and India or any other country within the WTO need to honor their end of the bargain.

For me, if that means implementing the temporary nuclear option of imposing tariffs on our end which hurts them more a LOT more than it hurts us, then I’m all for it. I really doubt we’ll even need to implement the nuclear option of temporary protectionism because the other nations will flinch long before we pull the trigger. So the ultimate goal here is NOT to implement protectionism; the ultimate goal is to have universal free trade going both directions.

That does NOT mean that we must have equal trade with equal results, just that we need a level playing field for American exports as other countries have a level playing ground in the USA (for the most part). So long as China and India are living on much lower wages (which is rapidly improving) and they’re willing to give us their services and goods for less money, there will be a trade imbalance and that’s ok. What is NOT ok is China and India violating their end of the WTO bargain with protectionism on their end. Once we enforce free trade on both ends, then it’s certain that we’ll see the trade deficit narrow.

So we may be talking past each other a bit considering the fact that you seem to be supportive Rob’s position http://www.theglobalist.com/StoryId.aspx?StoryId=7026.

The economic trend over the last few decades has been consistently steady and healthy despite the huge trade imbalance. The trade imbalance simply means other nations are willing to sell us goods and services cheaper than we’re willing to sell them goods and services. When other nations like China become wealthier, the cost of their goods and services will rise and they will have more money to buy their own goods as well as imported goods and then we’ll see a leveling off in the trade imbalance. As labor costs increase in places like India and China, it will make it economically infeasible to offshore jobs to them. Japan has gotten so wealthy that they offshore many jobs to the USA and Honda and Toyota are some of the biggest employers in this country.

If we do protectionism, you’re quite right that we’ll stop importing and stop exporting which means death to the global economy. That seems like a very drastic and foolish decision to make.