Dr. Williams Speaks Out On Foreign Trade.

ViRedd

New Member
Foreign trade angst
By Walter E. Williams
Wednesday, October 18, 2006


Patrick Buchanan's recent syndicated column titled "New Deal for U.S. Manufacturers" stokes the fires of misunderstanding and panic. Mr. Buchanan, my longtime friend, is right about a lot of things, but he's wrong about trade.
First, he laments, "Europeans, Japanese, Canadians and Chinese sell us so much more than they buy from us, because they have rigged the rules of world trade." But so what? I buy more from my grocer than he buys from me. It wouldn't make a difference if I lived 2 feet south of the U.S.-Canadian border and my grocer lived 2 feet north of it.
Like many, Buchanan worries about our foreign trade deficit, pointing out that it's reaching an annual rate of $816 billion, and that means "dependency on foreigners." Actually, the foreign dependency is a two-way street. I'll explain it, starting with the alleged trade deficit I run with my grocer.
When I purchase $100 worth of groceries, my goods account (groceries) rises by $100, but my capital account (money) falls by $100. That means there's really a balance in my trade account. By the same token, my grocer's goods account (groceries) falls by $100 but his capital account (money) rises by $100, also a balance in his trade account.
Mr. Buchanan writes, "Imports surged to $188 billion for the month [of July], as our dependency on foreigners for the vital necessities of our national life ever deepens." That means we imported $188 billion worth of goods. Do foreigners keep all those dollars they earned under a mattress? They are not that stupid. They use those dollars to import capital goods such as U.S. stocks, bonds and U.S. Treasury notes.
They might use some of it to build factories in the U.S. such as Honda, Novartis and Samsung. The dollar amount of those purchases is going to equalize the value of what we import. We sport a huge surplus in our capital account with foreigners. As such, they are dependent on us for a safe and profitable place to invest their earnings. That dependency contributes to our economic growth.
Then there's Buchanan's worry about U.S. manufacturing job loss. U.S. farming has a similar history. Farm employment peaked between 1840 and 1870. In 1900, 40 percent of American workers were employed in farming; today, it's less than two percent. Technological advances made that possible. U.S. manufacturing employment reached its peak in 1950 and has been in decline ever since.
This has more to do with technological innovation than outsourcing. It's a worldwide phenomenon. Since 2000, China has lost 4.5 million manufacturing jobs compared to the loss of 3.1 million in the U.S. Nine of the top 10 manufacturing countries, who produce 75 percent of the world's manufacturing output (the U.S., Japan, Germany, China, Britain, France, Italy, Korea, Canada, and Mexico), have lost manufacturing jobs, Italy being the exception. Because of technological progress, manufacturing output has risen while manufacturing employment has fallen.
I'm one of those whom Pat calls "robotic free-traders." That might be another label for those of us who support peaceable, voluntary exchange, and I plead guilty. Buchanan, like so many others, points to the government subsidies and tariff protections given to businesses in other countries, a practice from which we can't plead complete innocence. Protectionists call for "free trade but fair trade." They call for a "level playing field."
In effect, they're saying that if other governments rip off their citizens with business subsidies and import duties, forcing them to pay higher prices, our government should retaliate by using the same tools to rip off its citizens.
The next time I see Pat, I might ask him what he would do if we both were at sea in a rowboat and I shot a hole in my end of the boat. Would he retaliate by shooting a hole in his end?


Dr. Williams serves on the faculty of George Mason University as John M. Olin Distinguished Professor of Economics and is the author of More Liberty Means Less Government: Our Founders Knew This Well. Be the first to read Walter Williams' column. Sign up today and receive Townhall.com delivered each morning to your inbox. Sign up today!


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medicinaluseonly

Well-Known Member
I hope if he shot a hole in his end of the boat you'd shoot one in yours. Lets talk about China and the Un-balance of trade. With the extra money China gets in the trade wars, what do you think they're doing with it? They are building their Military machine! They are buying US bonds, They are investing in American corporations. Whether you admit it or not. China is not our ally. When they assume the major power status that they are seeking, I'm pretty sure they'll let us know how the cow eats the cabbage as in we'd like to collect our debt, pay up! Remember, China has nukes and is building more as we speak, No nuke inspectors in China. Their govt is tough and on top of the monetary flow. I don't know the exact figures (and I'm not about to look them up) but a significant amount of the cash flow to china goes to the Govt., you might say we're building their military for them! So hold on to your huevos, there's a big surprize comin in the future!
 

AllMeatNoPotato

Well-Known Member
med you cannot just say that it is us. china supplies the world with inexpensive products due to cheap labor. their military is built. just look at the size of the populus. yes china is seeking world superpower status and they are on the verge of getting it. but that should not scare you. they are not going to push the nuke button. they have too much wrapped up in the world to say hey i want to kill you. the people that I worry about is the russians. now that they are not a superpower, they are selling everything to turn a quick buck. and yes that means nukes and the technology to go along with it. i think it will be some extremist that will start something bad just to get their name on the map. although who knows?
 

medicinaluseonly

Well-Known Member
You may be right about reckless containment of nukes by Russians, But I still believe China wants to be the ruling super power, and they are on the right path. Every dime that goes to china upsets the trade balance between us, makes them stronger and us weaker. If they called in their debt, what would we have to pay them with? U.S. real estate is the only answer I can come up with, Maybe some of our most secret weapons, but even I don't think our govt is that stupid. The Chinese have longed for world domination for centuries, they are just smarter than most of the rest of the world. They bide their time. All conditions are going their way now. If we don't change our trade policys with China, I'd say within 20 years they'll be #1, Richest, largest standing army, most nukes etc.! Lets hope that the Russions get it together and the US does the same with China. It won't be long before we hold no sway with China. The rest of the world is buying their products also!
 

medicinaluseonly

Well-Known Member
Why would China want to destroy their best customers?

Vi
because of national pride! and the rest of the world is beating a path to their door anyway. I doubt if we have 10 years of dominance left (USA) China is a tiger and just waiting to pounce. Once they have ruined our economy with the trade deficit, and built thier military up to our standards, whats to stop them. If you had to pay the trade deficit off, what would you use for collateral, I think real estate is what, National parks and forests etc. but since you're not conversing with me I guess the youngsters will just have to make up their own minds about my posts, Adios!
 
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