The Nacilbupera Guzzle

Whoever examines with attention the history of the dearths and famines … will find, I believe, that a dearth never has arisen from any combination among the inland dealers in corn, nor from any other cause but a real scarcity, occasioned sometimes perhaps, and in some particular places, by the waste of war, but in by far the greatest number of cases by the fault of the seasons; and that a famine has never arisen from any other cause but the violence of government attempting, by improper means, to remedy the inconveniences of a dearth. (Adam Smith, The Wealth of Nations IV.5.44)

Tuesday, February 23, 2010

Mike Lee's "Free Trade" vs. Cherilyn Eagar's "Fair Trade"

In the 2o1o Utah Senate race there has been a lot of questioning among those of us opposing Bailout Bob Bennett on how the candidates contrast in their political views. While there is a ton that unites them, the two leaders in the race have taken diametrically opposite views over trade during their recent Bob Lonsberry (105.7 KNRS) interviews.

Nacilbupera became a "free trader" during a Economics 101 course at BYU. We understood and embraced the theory we were taught: two countries each specialized in a an activity will produce greater goods through specialization and thus both can benefit from free trade of those goods.

As the years went by, the application of the theory left something to be desired. Although our markets were opening up through GATT, NAFTA, and such it didn't seem to produce the promised benefits and we seemed to be starting to lose control or sovereignty over our trade. We wondered why in the world do we grant Most Favored Nation (MFN) status (now called Permanent Normal Trade Relations) to China? To a country which runs its citizens over with tanks? To a country which puts lead and cadmium in its toys for our children to get sick and die? To a country which uses slave labor to produce its goods? To a country which has no concern for world pollution? To a country which launches daily, sophisticated computer attacks on our systems?

Our American jobs have disappeared due to free trade and as we lower tariffs we have to raise taxes to provide compensatory revenue. It puts us into agreements we don't want to be in. Somehow the theory of Free Trade has gone the way of manmade Global Warming: it just isn't what it's purported to be. We're not opposed to having some lower tariffs with our close allies, but we need to protect America first.

Nacilbupera has moved on from our "free trade" position: it simply doesn't work. We are a "fair trader" now. If you are going to restrict US companies from polluting with fines and penalties then why allow the companies to uproot and move to Mexico or anywhere and pollute there? We're just hurting our own selves by outsourcing our "dirty work" so we can feel good. Penalty-high tariffs are needed to prevent this from happening and we need to become as self-sufficient as we can be so in times of war, we are beholden to none. Take for example the role oil has played in our foreign policy because the Obama administration prohibits us from drilling in ANWAR, Utah, offshore, anywhere. Why not raise the tariff on foreign oil while opening up our own God-given natural resources? Now there's a job-creating plan for you America!

First from UtahPatriot the audio excerpt on the Feb 9th Lonsberry Show interview with Mike Lee. UtahPatriot has done an excellent job with the video and comments:




Cherilyn Eagar responded today during her questioning with Mike Lee which Nacilbupera made the following clip (sorry no fancy comments like UtahPatriot):




Nacilbupera praises our hopeful future Senator Eagar for her courageous and informed position on Fair Trade.

19 comments:

Brad said...

I agree with Mike Lee. Free trade is the way to go. We should not be protectionist. We should set up our country to be the absolute best environment for doing business. If our products are not being purchased by the Chinese people then we are not making goods that are appealing to them.
We need to have better designers better manufacturers etc to be more competitive.

nacilbupera said...

Brad: Thx for the comment.

The Chinese are VERY interested in our technology and defense manufacturing technologies: so much they are willing to steal it! If Hummer was such a horrible company that didn't "appeal" to the Chinese and "needed to be designed better" then why did they buy the company? If American-made goods are so inferior and "needing to be designed better" why do we continue to buy them during this era of free trade (at least on our part)?

America is the bastion of design technology and manufacturing. Can you please name all (any?) the manufacturing innovations by the Chinese? Where we go awry is when the government bails out businesses and government and unions impose inordinate restrictions on capitalism.

The point is--made by Eagar's example of the apple farmer--that the Chinese are not playing by the same rules, cut off their consumer markets with stealthy protectionism, and should not be rewarded for bad behavior.

Gerry said...

"...should not be rewarded for bad behavior."

But whose call is this? From Eagar's comments on Lonsberry's show, it appears that she 100% favor protectionism. Consider:

Lonsberry:

"So you believe it's important to protect America's manufacturing base, America's balance of trade, and America's jobs, and that blind free trade doesn't necessarily do that?"

Eagar:

"I absolutely would agree with you on that..."

Free trade (the proper kind, not the "managed trade NAFTA/CAFTA/acronym soup kind) is just that -- free.

Fair trade on the other hand is a progressive, protectionist scheme where government uses regulations, tariffs, and other economically disastrous manipulation to try and alter markets to achieve a goal.

Mr. Lee flat out said that he doesn't like the pseudo-governmental oversight that is created with supposedly "free trade". He's for free trade as it's really intended; if somebody wants to buy products from the Chinese or Indians or Germans, then let them. To alter the markets through economic manipulation, which Eagar said she favors in the name of protecting manufacturing, trade, and jobs, is pure protectionism.

Here's what Murry Rothbard said on "fair" trade:

Whenever someone starts talking about "fair competition" or indeed, about "fairness" in general, it is time to keep a sharp eye on your wallet, for it is about to be picked. For the genuinely "fair" is simply the voluntary terms of exchange, mutually agreed upon by buyer and seller. As most of the medieval scholastics were able to figure out, there is no "just" (or "fair") price outside of the market price.

So what could be "unfair" about the free-market price? One common protectionist charge is that it is "unfair" for an American firm to compete with, say, a Taiwanese firm which needs to pay only one-half the wages of the American competitor. The U.S. government is called upon to step in and "equalize" the wage rates by imposing an equivalent tariff upon the Taiwanese. But does this mean that consumers can never patronize low-cost firms because it is "unfair" for them to have lower costs than inefficient competitors? This is the same argument that would be used by a New York firm trying to cripple its North Carolina competitor.


Mike Lee clearly won the argument on this one.

Gerry said...

Bastiat spoke about protectionism, showing it for the "communism lite" that it is:

For, sir, it is indeed incontestable that, by the action of tariffs, by means of the so-called protectionist system, governments have brought about the monstrous situation that I have just described. They cease to uphold the right to legitimate self-defense preexisting in every citizen, which is the basis on which they are constituted and the essential function which they exist to perform, in order to arrogate to themselves a pretended right to equalize wealth by way of plunder, a right that, not residing previously in anyone, cannot, by the same token, reside in the community.

Full article here.

Michelle said...

Protectionism hurts consumers and it hurts business--the two key elements for a healthy economy. Private businesses and private consumers should have the right to buy and sell to whoever they wish without interference for the government. I did not know Eager had this position on trade and I am glad you put this out there. It's very important to take this into consideration when I place my vote and this sealed the deal. Eagar will not be getting my vote--Lee will. He understands true freedom and will do everything he can to bring that to us.

Randy said...

Cherilyn is for job growth for our American economy. There is a direct corrolation between keeping jobs here by using "fair" trade rules and allowing jobs to go to other countries because they pay their workers far less.

Tariffs are a way of equalizing economies between two countries. Japan, Mexico, India and China have found us to be a repository to be able to "dump" their goods here using very cheap dollars. Does anyone out there understand macro economics anymore?

Please don't even try to put the nomenclature of "progressive" on "fair trade". The two have nothing to do with each other. Our founding fathers use to raise the entire monies needed for the country by duties and tariffs. And now we have replaced that with "progressive" income taxes (now I am using the word correctly).

Gerry said...

Randy, you misunderstand the context of the word progressive as it is used in this sense. It's not referring to the economic term, but the political philosophy.

Read the Bastiat link. Protectionism -- "equalizing economies", as you put it -- is economic communism. It's not Constitutional, it's not the proper role of the federal government, and it's not what any liberty-minded person would support.

One of Eagar's five planks is "Free Market Solutions", but her clear support for "fair trade" (protectionism) betrays that three-word campaign slogan.

Anonymous said...

Any interview that is conducted in a skewed manner like this is not to be trusted as complete accurate or factual. Even if this is actually what they have said and what they believe it can not be used and trusted. I heard much different questions asked of both individuals. One was asked questions to trip them up. One was asked questions to set them up for their platform. If one can clearly tell which side this interviewer was for … it clearly is not an interview but a political statement. I did not see flaming messages injected into both movies. This interview was wasted propaganda. Next time stick to the interview rather than interviewing to your view point. I want to hear the facts from all candidates not your facts and your opinions of these two candidates. Fact ~ Bennett is out. From what I have seen the race is between Tim and Mike.

nacilbupera said...

Michelle:

Protectionism against countries who aren't allies does not hurt consumers nor business; indeed it helps.

Imagine yourself a owner of a small business selling widgets. Due to a free trade agreement, you complete with a country who uses government money to subsidize their widgets and as a result they flood the market you compete in with widgets at a price below your cost. You are forced to shut your doors, fire your employees, and live off government welfare. So just how did that free trade help you or any of your employees?

And how can you say that the children sick from lead in toys have, as consumers, benefited from trading with a country who doesn't hold the same virtues we do?

All: We are rather surprised no one brought up that if protectionism is SO evil, then why is it in our Constitution? How do you think we paid for our Federal outlays before passage of the 16th amendment? We did a lot of it through tariffs and rose to prosperity while so doing.

Gerry: Just as tariffs can be abused to protect inefficiencies free trade can be abused to destroy one's economic base. Yes we need balance but right now we are falling over each other so fast in the name of "free trade" and lose our sovereignty we will be stuck with the Amero before we know what hit us. The last thing we need right now is Bastiat calling all our founding fathers commies for supporting tariffs. We suppose in your eyes Nacilbupera is a commie too!

Nacilbupera: Serendipitous enough the Chinese Hummer deal was rejected today by the Commie Chinese Govt.

A: From what we understand, Lonsberry isn't a fan of free trade and hasn't worked to hide his bias either. Obviously the interview was biased; every interview is. You may not like the way Lonsberry positioned the questions but that has nothing to do with the positions of the candidates. So...what's your beef? Bridgewater has not winning straw polls and is not positioned in a lead position at this point.

Gerry said...

Nacil,

Time to brush up on your history. (Start at wikipedia, of all places...) The Constitution allows for tariffs, but does not condone protectionism. The first tariffs were broad-based generalized tariffs used for generating revenue for the government.

Contrasted with Mrs. Eagar's use of tariffs to manipulate the economy in favor of a desired goal, the two cannot be reconciled. If we repeal the income tax, then we can go back to general tariffs to generate cash for the government. But that's not what Mrs. Eagar's support is about, now, is it?

The fundamental issue is liberty. If I want to buy a cheap product from China, you want to use the force of government to prevent me from making that transaction on mutually agreeable terms?

You say that "Protectionism against countries who aren't allies does not hurt consumers nor business; indeed it helps." But this is a huge fallacy. I am a consumer, and I have a goal: satisfy my market needs for the lowest possible price. Eagar's protectionist policies stand in the way of that goal , and thus they do hurt me as a consumer.

Who decides who our allies are? The best way to achieve peace is through trade. Look at the countries we're friends with now who we were once at war with. When we engage in commerce, we satisfy mutual desires and increase cooperation. But you say that we should use protectionism against our enemies, not realizing that one of the best ways to make those enemies our friends is through the marketplace. As Jefferson said, "Peace, commerce and honest friendship with all nations..."

This is clearly a negative point for Mrs. Eagar, and those who understand and advocate liberty will be rightly soured by her stance on the issue when seen for what it is.

Anonymous said...

It saddens me to see so many people who do not understand the reality of the situation, even when it is put before them in plain and simple terms. "Free trade" doesn't mean a "free-for-all," where anybody does whatever they want. It means companies trade freely with each other, and governments stay out of it.

It doesn't happen! As far as I am aware, it has never happened. Many European countries practice protectionism, they subsidize whole industries, etc. Other countries undercut prices by paying wages that no American could liive on, China (and our NAFTA "partner," Mexico) among them. The list goes on.

My take on the difference between Lee's "free trade" and Eagar's "fair trade" is EQUALITY, that is, "play fair with us, and we'll play fair with you. If you favor your companies unfairly against ours, we'll follow your lead."

Lee's plan won't work, we know that because it's been tried and it has failed.

nacilbupera said...

Gerry:

Tariffs raise prices but so do sales taxes, payroll taxes, indeed most forms of taxes. The money must be raised from somewhere so when considering the big picture there is no price disadvantage for consumers under a tariff system.

There is an economic disadvantage to consumers in that tariffs--when used appropriately--protect the jobs consumers need to buy their goods.

As far as free trade acheiving peace, we were overwhelmed by the plethora of all peace talks China offered during our recent sell of defense systems to Taiwan (NOT!) We get a lot of CITGO gas from our Venezuelan "friends" who are opening up to us too, right? We suppose sanctions against countries like Iran are evil, too, right? After all, shouldn't you be allowed to trade with whomever the heck you like? The list goes on. You're right to the extent trade CAN promote good relations but dead wrong in asserting peace is its inevitable result.

A (11:09): You really articulated the issue well! Shame on us if we let our country be disadvantaged by allowing our enemies to destroy our economy.

HH said...

Cherilyn Eagar (and all "fair" traders), Please, please, read Henry Hazlitt's book, Economics in In One Lesson, Ch. 11 - Who's "Potected" by Tariffs?

Here's a few quotes for you in the meantime.

"In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest." Adam Smith, Wealth of Nations.

"It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy...What is prudent in the conduct of every private family can scarce be the folly in that of a great kingdom" (Unknown)

"The effect of a tariff, therefore, is to change the structure of American production. It changes the number of occupations, the kinds of occupations, and the relative size of one industry as compared with another. It makes the industries in which we are relatively inefficient larger, and the industries in which we are comparatively efficient smaller. Its net effect, therefore, is to reduce American efficiency." Henry Hazlitt

"It is useless to deny that a tariff does benefit--or at least can benefit--special interests. True, it benefits them at the expense of everyone else." Henry Hazlitt

Finally, with the exception of protecting industries needed for self defense, why should I be deprived of my property (my money) to protect some inefficient American company so some inefficient American worker can be employed? That's wealth redistribution! Not to mention, if I got to keep my property (my money), I could use it to create an efficient American job and grow the economy more quickly.

The Forgotten Stakeholder said...

Nacil, you wrote: "Imagine yourself a owner of a small business selling widgets. Due to a free trade agreement, you compete with a country who uses government money to subsidize their widgets and as a result they flood the market you compete in with widgets at a price below your cost. You are forced to shut your doors, fire your employees, and live off government welfare. So just how did that free trade help you or any of your employees?"

Let's flip the question around and consider all the stakeholders.

Imagine Cheryl Eagar puts in place a fair trade tariff to protect that American widget seller. Consequently, thousands of Americans consumers have to pay more for a product that could have been purchased cheaper. So just how did that "fair" trade agreement help those consumers?

Moreover, so just how did that "fair" trade agreement help the currently unemployed American who would have benefited from a newly created job if only the American consumers of that protected and overpriced widget had more money to invest?

nacilbupera said...

TFS:
(1) You said: "Thousands of Americans consumers have to pay more for a product that could have been purchased cheaper." Higher consumer prices are a result of tariffs only if they are revenue-raising. If we were to appropriately fund our federal obligations more through tariffs, in a revenue-neutral situation we would cut other taxes resulting in price-neutrality for consumers. The benefits of tariffs are similar to those of the implementation of a "fair tax" which would boost savings rates and investment.

(2) We challenge anyone point to a successful, modern implementation of "free trade" with a communist country. Also please explain our deficit with China without bashing our great American workforce and ingenuity which is the most productive in the world.

HH: Maybe you prefer income tax over tariffs??? Those who criticize tariffs do not suggest how they would raise the income necessary to run the government. The founding fathers preferred tariffs because they felt a direct tax was "wealth redistribution" as we both denounce.

ALL: To be clear: we are advocating tariffs as a revenue-REPLACEMENT to some of the revenue generation out there. We DO NOT advocate tariffs as an additional way for the Feds to raise revenues and grow bigger. Also, we said we believe in “fair trade” not protectionism: the difference being “fair trade” levels the playing field and keeps national sovereignty that “free trade” gives away. Protectionism is used to buoy inefficient, stagnant companies similar to government bailouts of companies “too big to fail”. We oppose protectionism excepting non-consumer industries vital to national defense (can you imagine if the Chinese made our aircraft carriers!) and even then care must be used. Please make these notes when expressing your opinion. Some of you have taken out of context our position; we appreciate, however, all the good comments!

The Forgotten Stakeholder said...

Nacil, You didn't answer my questions.

It's amazing how people can be so level-headed on domestic trade but can't transfer the same economic principles over to the topic of foreign trade.

Somewhere in the middle they get all caught up with national pride and demagoguery such as, "our great American workforce and ingenuity which is the most productive in the world." Sure that's a nice thing to say. Sure you get the sentimental patriot vote on your side. But if you really believe it, then prove it. Throw away the protectionism inherent in "fair" trade and let that work force prove it!

And do you know who will be the judges of who's the most productive and efficient? The consumers. And they are the ones who should be the judges because it is their money. If somebody wants to pay more for a product that's made in America instead of a foreign product of the same quality for less, or vice-versa, that's their decision -- not government's.

nacilbupera said...

TFS:

Is it too much for you for the American worker and business owner to ask for a level playing field, particularly when dealing with Communist nations?

"Free trade" with these nations doesn't exist except on paper. Imagine going into a football game and both teams agree to the rules. The home team is better but the visitors secretly violate the rules such as use of steriods, players who have played professional ball, and players hiding their true ages in order to qualify.

This is what is going on with us and China. They have a different set of rules and ethics they abide resulting in unfair trade to Americans.

Effective use of tariffs can help even an unfair field while keeping our sovereignty. We don't want the WTO using the banner of "free trade" to push their agenda.

The Forgotten Stakeholder said...

Nacil, Is it too much for you to let me and my fellow consumers buy whatever we need at the cheapest price we can get it without government interference? After all, it's our money!

But since you like sports analogies so much, maybe you'll understand this one: Cheaters never prosper. That axiom holds more true in the case of foreign governments that subsidize their businesses and then market to the United States than it does in football.

For example, say China subsidizes some widget manufacturer with the equivalent of $1 billion (US) in aid and undercuts the American products by what collectively adds up to the same amount.

Sounds bad so far, right? According to you, we need a tariff of $1 Billion on Chinese widgets to keep the playing field fair, right?

WRONG! If the United States government doesn't over-react by implementing protective tariffs (or tax the people and subsidize the American business), the American consumers will benefit in this scenario by purchasing the products they need for $1 billion less than they would have purchased it. Basically, the Chinese government just subsidized the American consumers with a billion dollars in price savings. Then the wildly intelligent, extremely productive, good-looking American consumers get to invest that billion dollars and create more jobs, thereby growing our economy more quickly.

And it would all happen without some eager politician with an acute sense of fairness playing referee and deciding who the winners and losers should be.

You see, rather than thinking of foreign trade and economics as a game with rules, you should regard them as immovable laws of nature that crush those who try to defy them.

Now, here's where I agree with you. A nation doesn't need to, nor should it give up it's sovereignty to implement real free trade.

Jeff said...

This has been an enlightening discussion. I was initially very supportive of Cherilyn Eagar due to her supposed support for Austrian economics. What an eye opener.

Are you "fair trade" people listening to yourselves? You are saying that a capitalist country cannot possibly compete with a COMMUNIST country without government intervention. This is implicitly saying that a communist country is somehow more efficient. Forgotten Stakeholder had it right. For all of the same reasons that the US government subsidizing a US corporation really just promotes inefficiency and corruption, the same takes place when the Chinese, Russians, or French subsidize their own corporations. It promotes inefficiency, whereas a true free market rewards efficiency and destroys inefficient companies. I second the recommendation to read "Economics in One Lesson". Great read.