The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
The Forum - On Line Opinion's article discussion area



Syndicate
RSS/XML


RSS 2.0

Main Articles General

Sign In      Register

The Forum > Article Comments > The ultimate goal is free trade > Comments

The ultimate goal is free trade : Comments

By David Leyonhjelm, published 17/4/2014

Some people choose to do things that they are not necessarily the best at, and then convince governments to protect them. Trade agreements are aimed at unwinding this protection.

  1. Pages:
  2. 1
  3. 2
  4. 3
  5. 4
  6. All
"In an ideal world"

Which has never existed, doesn't exist and won't ever exist.

"Some people choose to do things that they are not necessarily the best at"
"the fact that imported inputs would be cheaper."

So is it the "best" you really want, or the cheapest?

China can make everything cheaper than anywhere else, but is anything they make the "best"?

Everything they make is crap!

"The popular notion that free trade requires reciprocal agreements is wrong."

Right, we'll have no restrictions on their goods coming in.
While they keep their own restrictions intact.
Brilliant!

"One of the problems with bilateral free trade agreements is that they discriminate against countries that are not included."

Well, what's stopping them making their own agreements?
Obviously, they don't want to or they'd already be doing that.
If they are disadvantaged, it's their own fault.

"Japan will recognise that there is no particular reason to favour Australia."

But in your free trade everywhere hypothesis, there would be no reason to "favour" anyone EVER!

"Some people are their own worst enemies."

Like activists who use the clunkiest argument imaginable?

P.S. Hong Kong isn't and never was a "nation".
Posted by Shockadelic, Thursday, 17 April 2014 11:33:31 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
*And it would be even better if Australia just dropped its restrictions on imports altogether.*

This way the big corporations would be able to make even bigger profits.
Of course the people living in the third world countries would have to keep on working all the hours there are, live in dormitories, lose their health due to the working conditions and the environment in their countries would be totally ruined.
They would pay Australia to rip even more iron ore, coal, copper and rare metals, ruining the Australian environment also.
Diminishing rapidly the amount of oil and gas available causing shortages that will escalate prices, cause another GFC eventually and in the end demolish the manufacturing industry in the first world.
Jobs in Australia will disappear, standards of living will plummet.
And all this for more profit

Why don't we all just jump off a cliff like lemmings?
Posted by Robert LePage, Thursday, 17 April 2014 3:20:08 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
We build houses as good as you can buy anywhere! And we milk cows, make computers, and our cars are as good as you can buy elsewhere.
Who do you think invented the most advanced, most secure computer in the world?
Who invented the smell free two tank system, the digests biological waste, and turns it into energy creating methane? And who invented the ceramic fuel cell, with the highest energy coefficient in the world, at 80%, that can use this same methane, to power every family home 24/7!
A combination that creates as much as a 50% energy surplus!
We invented the pulsed laser light system, that enriches uranium to power making grade, and for far less capital outlay, than traditional cyclones or spirals!
And we invented the atomic absorption spectrometer! Which invariably graces every advanced laboratory in the world!
What we don't do,is pay slave wages to peasants, to get these things produced.
China is currently suffering from considerable wages inflation, enough to oblige some high tech manufacture to return home!
And it has a double GDP debt burden and a worthless derivative load, bigger than anything created in the land of the dollar bill; and a housing bubble, that can only end in mass misery.
Some say we can't grow rice, because it consumes too much water? However, it grows wild in the tropical north, which measures annual rainfall in metres, rather than MM's!
We are more than smart enough, except where it really counts, with our decision makers, and forelock tugging social commentators!
Hence our best ideas and people, keep migrating offshore!
Rhrosty.
Posted by Rhrosty, Thursday, 17 April 2014 3:27:25 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Rhosty
I think you're missing the point. I don’t grow my own food (a few veggies excepted), make my own clothes, manufacture my own furniture etc. I work at things I have skills in, and exchange the money I earn for things that other people are better skilled at doing and making. That’s what the author means by “People do not build their own houses…” By analogy, as a country we should specialise in doing the things we’re relatively good at, and exchange what we produce for things other countries are relatively good at.

Robert le Page
Protectionism benefits businesses at the expense of consumers. Who do you think gained most from the era of high tariffs and quotas on motor vehicles – Australian car drivers who paid thousands of dollars more for their vehicles, or the car multinationals in Detroit and Tokyo?

And do you think that the people living in the third world countries will be better or worse off if we stop buying the things they make?
Posted by Rhian, Thursday, 17 April 2014 5:15:49 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Rhian "as a country we should specialise in doing the things we’re relatively good at, and exchange what we produce for things other countries are relatively good at."

But with free trade it doesn't matter who's good or best at something.

All that matters is who's cheaper.
And they are rarely producers of "the best".

You can only trade goods.
You can't generally trade services.

If we don't *make* anything, what do we have to trade?
Hairdressing? Dry cleaning? Car repairs? Strippers?

They *can't* be traded.
The more our economy relies on services, the less there is to trade.

Our prices are higher because our cost of living is higher.
People need $18 an hour, not 5 cents, or they won't be able to buy all these glorious goodies.

People in the Third World don't need as much, because it doesn't cost as much to live there.

These "inequalities" are not going to vanish any time soon.

We must operate in the world as it is, not some "ideal" fantasy world, where everyone starts with the same conditions.
Posted by Shockadelic, Thursday, 17 April 2014 7:51:16 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
As a farmer I do not see free trade delivering sustainable profits and history suggests that agriculture is the first to feel the effects of free trade. The majority of countries value agriculture and food security far too much so they protect their farm sector in many ways . Supply and demand do not deliver the true costs of production in the short term . Whilst an ordinary business can depreciate their assets over a certain period , sustainable farming can not allow its asset base ( ie soil ) to be run down at all .Modern industrialised agriculture is also totally dependant on fossil fuels which are only valued at the cost of extraction not the cost of replacement
Why is it the economics exam question is "explain free trade " and the economic history question is " why does free trade not work ?"
This purist theory of free trade is not backed up by real experience
Posted by peasant, Thursday, 17 April 2014 10:16:50 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Rhian,
You're the one completely missing the point, with your overly simplistic view of the world!
Shocaholic has nailed it.
It has absolutely nothing whatsoever with who does what best, but rather, the lowest production costs!
We could even win out there, given labor is only 16% of the cost of production/manufacture!
The real limiting factors are the price of energy, transport and water, and that outcome is just worsened by privatization and entirely unproductive parasitical profit demand outcomes.
If we could replace that model with cooperative capitalism, and employee owned co-ops, we could quite dramatically lower production costs, simply because they'd be totally trimmed down and just not carrying any drone or non productive profit takers.
Some say, that the government has no business in business, while conveniently ignoring the tender process and the contractual paradigm, that allows real trimmed of all fat, private enterprise, to beat the pants off of both public and private enterprise!
Even then, employee owned co-ops take the best of both worlds and jettison the rest.
Ditto simply ditching the profit demanding middle man, would allow us to actually halve the cost of living, and with it, the endless wages cost spiral. These people are no better than the money changers in the temple?
We don't need to work harder, just smarter.
If we did that much, no nation on earth could compete.
We have huge thorium reserves, and thorium power is cheaper than coal!
And we could have hydrocarbon, (energy) reserves to our immediate north, to probably rival the entire known middle East! At least that's what all the mystery oil slicks are telling us!
Returning water to the real owners, rather than completely unproductive profit demanding water barons, will bring down the price of that commodity.
There's so much more, but a usual, I run up against word limits!
Rhrosty.
Posted by Rhrosty, Friday, 18 April 2014 6:48:22 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Rhian; It depends on what you mean by "better off"
The simple life that you probably think is bad, without working in noxious conditions and having to live away from the home in a poisoned environment can be better.
OK they might have to labour in the fields and live in semi primitive conditions but health wise and stress wise they would be better off.
My problem with using 3rd world countries as our supply is that it is not the level playing field that the economists and pollies promise.
We have to have our timber monitored for FC to sell it abroad so that must be applied both ways.
Any goods entering Australia must be certified as being produced by workers on an equivalent wage and living in good conditions and not creating pollution.
If that is not done then a tariff should be applied.
1st world companies are only shifting to the 3rd world to maximise profits, not for any altruistic reasons.
Posted by Robert LePage, Saturday, 19 April 2014 9:34:58 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
"Free trade" is only the name of the "agreement", and has nothing to do with free trade. It's about big business being able to place their manufacturing off-shore, and get it back into the country for less than it costs to produce here, and market their goods here with a higher profit than if they were made here. Also, "free trade" is about incresed profits for big business by pushing the cost of labour down due to being able to keep unemployment high from sending manufacturing off-shore. So big business improves its bottom line in two ways...decreased cost of labour and decreased cost in manufacturing. The added cost of import/export, is nothing compared to their savings.
Posted by Dick Dastardly, Saturday, 19 April 2014 9:04:25 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
As long as the price of energy keeps rising, so will the cost of transporting goods around the world. And there simply has to be a cutoff point, where transport costs outweigh any illusionary or temporary savings.
With our huge energy, thorium and uranium deposits, could reap considerable profits, just by utilizing our huge natural advantages, create a fleet of nuclear powered ocean going, semi-submersible, roll on roll off bulk freight forwarding vessels.
Bulk freight forwarding remains one of the most profitable business models in the world!
Making them nuclear powered, would enable cruising speeds in excess of 40-50 knots!
Compare that with the current 14-15 knots of current bulk forwarding shipping.
Making them semi-submersible, would enable them to be much longer than traditional surface shipping, allowing one mile long double Decker trains to be rolled straight on, as still coupled trains, seriously limiting cost and double handling, as well as putting them out of the reach of most pirates, and conferring an armchair ride, regardless of the ferocity of surface conditions, even during the height of a category 5 cyclone!
Our ability to compete would be further enhanced by very rapid rail, an inland shipping canal, and flood gates at the northern end, that utilized huge northern tides, to continually flush the system, and move all untethered shipping around (in and out) via a large two lane, one way system!
We'd not only cut thousands of miles off and quite massive energy consumption, but critical time a well!
Anyone who has run any business will confirm, time really is money!
Some of the savings could be passed on, to make our better products and commodities, much cheaper to the end user, than just about anybody else.
We need to take a leaf out of a war-torn and basically bankrupt post war Japan, grab cooperative capitalism, and thinking like a united country, against the rest of the world!
Rather than just a few precocious, not too bright individuals, trying to get rich via the lowest common denominator!
Rhrosty.
Posted by Rhrosty, Monday, 21 April 2014 11:42:28 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Rhosty and Shockadelic

Your theory that free trade is all about cheap imports is not supported by the data. All of Australia's most valuable import categories are high value-added goods and services, or fuels. Our second and third largest import sources are Japan and the USA - hardly cheap labour economies. Australia's most valuable imports are, in order: travel services, crude petroleum, passenger vehicles, refined petroleum, freight transport services, telecommunications equipment, medicines, goods vehicles, transport services, computers, and technical and other services.

Nor is it true that you can't trade services - six of australia's top 20 import categories, and five of its exports, are services.

http://dfat.gov.au/publications/tgs/index.html

Peasant

Most of Australia's agricultural product is exported, and imports represent a very small portion of our use of agricultural products. Tariffs also add to input costs on things like machinery and fertilisers. On balance, Australian farmers are far better off in a world of free trade, than one of protection.

Robert,
The simple life you extol was nowhere near as idyllic as you suppose. Look at health, infant mortality and life expectancy data in agrarian economies.

Denying third world countries the right to export will make the poor even poorer.
Posted by Rhian, Monday, 21 April 2014 11:43:09 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
While we make cars here as good as anybody, our compartmentalized fabrication, makes them dearer than they should be!
You see, dozens of companies make our cars.
In construction, ours are basically metal press shops or body builders.
Each one of these smaller companies, making component parts, pay various taxes, all of which cascade through the entire process, and add thousands to the eventual retail cost!
This only serves as our car manufacture model, due to our extremely complex tax system.
If for example, we had just one low unavoidable expenditure tax, that applied to all expenditure or capital outlays, then the compartmental model would not produce the lowest tax outcome but the highest!
If however, the total car was made on a single site, by just one very streamlined company!
And if you repealed other taxes, like say a no longer necessary payroll tax, PAYG, PAYE, fuel excise and the Ubiquitous GST, we might be able to reduce the end user price by as much as 30%! Another 10% (min) would be made available, by employee co-ops!
And another 20%, by developing economy of scales via an export industry.
There is a niche global market,[ a very large one,] for right hand drive electric vehicles.
We could make them here utilizing our own ingenuity! We lead the world in molded carbon fibre.
We invented the NG powered ceramic fuel cell!
The NG fuel cell is much lighter than the half a ton of batteries it largely replaces, adding a new power to weight ratio, that would seriously complement, the fact that the ceramic fuel cell has an energy coefficient of around 80%, the highest in the world?
Moreover, gas power, would allow these things to be fully recharged, in the time it takes to consume a coffee!
And for the environmentalists, the exhaust product of this NG/ceramic fuel cell combination, is mostly water vapor!
I'm told, that once you have driven an electric car, you'll never want to return to an petrol or diesel variant!
Rhrosty.
Posted by Rhrosty, Monday, 21 April 2014 12:26:18 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
We do nothing to deny third world countries the right to export!
We need to be an economy that still makes things, least we follow Britain, which ditched most of its manufacture, in favor of services, and paid a huge price when the GFC hit!
Besides, sourcing locally, limits the total carbon foot print.
Yes we do import petroleum products!
In fact we import around 91% of our current requirements, and most of that is originally sourced from the M.E.!
And at a cost of at least 26 billions annually, even as we have cleaner green supplies under our virtual feet, which in common usage, create four times less carbon than that we currently import!
Third world countries with their much lower pay rates and virtual slave labor conditions, can export where they like, except those countries, that have imposed a commercial boycott on child or slave labor.
I see nothing wrong in that boycott, and would see it remain, until, decent living wages and more humane conditions become par for the course, in some source countries.
I remember well, the political blurp that accompanied the quite deliberate wind-back of our own homegrown textiles and footwear industries and the loss of around 60,000 jobs.
We were told, sourcing these products offshore, would enable the average consumer, much lower retail prices.
In reality, the only real changes, were engorged middle man profits, and or, additional profits mostly padding already bulging pockets!
One local manufacturer innovated, with CAD and automatized cutting, and a direct sale fully fitted paradigm. That saw the consumers buy direct from the factory, eliminating virtually all the middlemen.
Unfortunately, piece work, and new migrant middle men, and no choice migrant labor, working for far less than the award, and out of their garages etc, killed that innovation!
Just this much rampant exploitation, means we need to keep and empower unions, the only ones that were just decent enough, to stand in the way!
Of course we need free trade and commerce, but only that which is genuinely reciprocal, rather than that, which simply entrenches dehuminising exploitation!
Rhrosty.
Posted by Rhrosty, Monday, 21 April 2014 1:02:32 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Rhosty

Australia’s main indirect tax, the GST, is designed specifically not to cascade in the way you describe. Payroll tax will not cascade, assuming labour costs are similar in distributed and non-distributed industries. Nor will PAYG or PAYE; and anyway, these are effectively withholding taxes on income, not costs of production. Our fuel excises are among the lowest in the world (USA excepted).

There is no evidence I am aware of suggesting that Australia’s car industry is more heavily taxed than other countries’. On balance we are a relatively low-taxed country compared to most developed economies.

Perhaps there really are wonderful technological opportunities there for the taking as you imagine; perhaps these technologies are more difficult and expensive to bring to commercial reality than you envisage. Either way, there is nothing in Australia's or our trading partners’ tariff structures to prevent this from happening
Posted by Rhian, Monday, 21 April 2014 1:18:41 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Rhosty, You say: “Third world countries with their much lower pay rates and virtual slave labor conditions, can export where they like, except those countries, that have imposed a commercial boycott on child or slave labor. I see nothing wrong in that boycott, and would see it remain, until, decent living wages and more humane conditions become par for the course, in some source countries.”

Child labour and extreme exploitation are symptoms of acute poverty. The only solution to poverty is development, and trade is a necessary and integral part of development.

When threatened trade boycotts caused Bangladesh to close down child labour in its garment factories, the displaced children went to work in even worse conditions, including in quarries an the sex industry:
http://www.unicef.org/sowc97/

Unless we can offer workers, including child workers, a realistic prospect of better living conditions, I see a great deal wrong in boycotting third world products.
http://www.ingentaconnect.com/content/aea/jep/2005/00000019/00000001/art00011?crawler=true
Posted by Rhian, Monday, 21 April 2014 4:18:38 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
But Rhian,

You need to take a longer term view. If parents can't profit from renting out their children for child labour, then they will have fewer of them, to the ultimate benefit of the whole society. Enforcing compulsory education would also have benefits where children are being used as unpaid labour on the family farm. Why do you blame us if children end up in quarries or brothels and not the parents of those children or the different layers of government in their countries? Perhaps we could ban goods produced by child labour, but also put more of our foreign aid into programs to provide free meals in schools.
Posted by Divergence, Tuesday, 22 April 2014 1:22:53 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Divergence

I don’t “blame” us if children end up in quarries, but I do point out that our well-meaning actions can have serious unintended consequences, and we have a responsibility to think these through. If you read the article in the second link, it points out that countries where child labour is common are typically extremely poor, without the resources to police child labour laws effectively or to provide free schooling, let alone free meals.

Third world parents who send their kids to work in factories aren’t evil or stupid – they do so because their alternatives are even worse. The evidence is that when living standards start to improve so families can survive without a child’s income, and where school is a real option, parents far prefer to send their kids to school than to work. Just as we do. Incidentally, as countries become richer, their birth rates tend to fall – a rather more humane way of encouraging slower population growth than intensifying poverty, I suggest.

So, it is precisely a long-term view that I am taking. The changes needed to raise very poor countries from poverty take decades. Economic development is the only proven way to provide better alternatives to child labour in the long term, and trade is necessary for economic development.

Unless we provide poor workers with a better alternative – and I mean a real concrete alternative which the individuals affected can access – taking away their jobs will make them worse off. So yes, we can use aid money to compensate families for loss of income and provide schools and meals, but this will not generate the kind of economic transformation that is needed to sustainably give poor families better options.
Posted by Rhian, Tuesday, 22 April 2014 2:20:11 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Rhian,

You are suggesting that the resources exist to make 7 billion people rich without deal-breaking environmental damage and critical resource shortages, let alone the 10-11 billion that are expected under the UN medium projection. I believe that this is a pipe dream. What will make the world's poor better off is to have fewer babies, to support honest and competent leaders who will look after their whole country and not just their own ethnic or religious group, and to change aspects of their culture that have become dysfunctional.

Once having lots of babies doesn't pay, the numbers will come down quickly, as they did in Iran and Thailand (without compulsion, mind you). There is currently a tragedy of the commons situation, where the poor people as a whole would be better off if the population were smaller, but the parents who have lots of children to rent out are still better off than their neighbours with smaller families. See

http://ideas.repec.org/p/wpa/wuwpdc/0507002.html

There are small ways in which we can help, such as with free school meals programs, which benefit the child, but not the parents, and by refusing to buy goods made with child labour, but the main effort has to come from the poor people themselves.
Posted by Divergence, Tuesday, 22 April 2014 2:56:21 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Divergence,

Your position presupposes that raising the poor from poverty is not sustainable and that population growth is the biggest threat to third world sustainability. I disagree, but we have argued these points before, so there is not much point re-covering old ground.

I do respect, however, the coherence of your argument if your assumptions are correct. If development is not sustainable, then policies such as free trade that promote development should be discouraged. However, this is a far cry from the more common argument in favour of trade boycotts, which assume some undefined superior alternative path to development.

I would still argue, though, that banning child labour to deprive poor families of their children’s wages and so promote lower fertility is a pretty blunt, indirect and harsh instrument
Posted by Rhian, Wednesday, 23 April 2014 11:13:55 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
  1. Pages:
  2. 1
  3. 2
  4. 3
  5. 4
  6. All

About Us :: Search :: Discuss :: Feedback :: Legals :: Privacy