Joined: Sat Oct 16, 2004 10:53 pm Posts: 20537 Location: The City Of Trees
thodoks wrote:
Farmer John wrote:
One's good and one's bad, right?
*rubs hands*
Haha.
It would first help to point out that things like NAFTA, WTO, etc, do not represent free trade. True free trade would not require any such agreements or organizations.
Fair Trade is free trade. What we call free trade are really just highly regulated trade agreements that allow for everything but fair trade. Our free trade agreements enshrine the right of government subsidies in industries and are generally built with a mandate of keeping the strong countries strong at the expense of developping countries.
I'm more for fair trade trade but am greedy enough to admit that since I'm in a relatively strong country that frre trade agreements work for me too.
Joined: Thu Dec 16, 2004 1:54 am Posts: 7189 Location: CA
Third world farmers wouldn't be in such a need of 'fair trade' programs if Uncle Sam didn't fudge with the world market for agricultural goods. How has the WTO not ruled against the US more often considering all the agregious practices that clearly harm other countries?
the fundamental flaw with "fair trade" is that its supporters mistakenly assume that the premium paid by customers for fair trade goods somehow trickles backwards through the production chain and reaches the original producers. it simply doesn't work that way.
but for arguement's sake, let's say that it does. what then? at the current, pre-fair trade premium price (let's say $3.00 per cup) there are a certain number of coffee growers growing coffee (let's say 1,000). fair-traders decide to tack on a $.50 premium for each cup, raising its price to $3.50. supposing that this $.50 somehow then reaches coffee growers (which it doesn't), this has the effect of raising coffee growers' profits. all things equal, producers of other agricultural products will now cease growing cotton or soybeans or papayas where profits are at X% and switch to coffee, which now has a profit of X% + the fair-trade premium. those extra producers (let's say there are now 200 additional coffee producers, bringing the total to 1,200) and additional coffee apply downward pressure to profit margins, prices, and most importantly, wages. additionally, those 200 producers who switched from products A, B, and C to coffee contribute to higher prices in the A, B, and C industries because of the reduction in each of their respective supplies.
additionally, the increased profits have a gentrifying effect. because wages are artificially stimulated, more skilled producers, and producers with more advanced equipment and methods, enter the market. fair-trade premiums, at the margin, encourage established, technologically sophisticated producers (read: agribusiness) to grow coffee and underemploy (or unemploy) individual coffee growers.
a question: if you were to design a formula for a developing nation to become productive and prosperous, should your goal be to help ossify agriculture and insure that as large a percentage of the population as possible remain in agriculture?
the posters above have absolutely identified that our trade policies are particularly harmful to developing countries and third world workers. politically managed trade is just that - politically managed. those w/ connections to the politically powerful (read: corporate farms, farm lobbies) benefit at the expense of those without such connections (read: you, me, and haiti).
Joined: Sun Oct 17, 2004 4:01 am Posts: 19477 Location: Brooklyn NY
thodoks wrote:
politically managed trade is just that - politically managed.
I don't see how it couldn't be. But go ahead, I'm listening.
_________________
LittleWing sometime in July 2007 wrote:
Unfortunately, it's so elementary, and the big time investors behind the drive in the stock market aren't so stupid. This isn't the false economy of 2000.
Joined: Sat Oct 16, 2004 10:53 pm Posts: 20537 Location: The City Of Trees
Honestly, I think there's a good amount of folks that would want neither free trade nor fair trade. For example, I'm sure environmentalists would love a heavy tariff on, say, beef that is grown in the Amazon when it can be grown in less biodiverse places like the Great Basin in Nevada. Obviously that's not free trade, but it's also not fair trade for those who live in the Amazon who could make more money off of beef than other products.
politically managed trade is just that - politically managed.
I don't see how it couldn't be. But go ahead, I'm listening.
que? i'm not sure what you're getting at.
are you saying you don't understand how trade can be conducted without being managed by some third party? that something as complex and important as global trade needs some oversight?
Joined: Sun Oct 17, 2004 4:01 am Posts: 19477 Location: Brooklyn NY
thodoks wrote:
glorified_version wrote:
thodoks wrote:
politically managed trade is just that - politically managed.
I don't see how it couldn't be. But go ahead, I'm listening.
que? i'm not sure what you're getting at.
are you saying you don't understand how trade can be conducted without being managed by some third party? that something as complex and important as global trade needs some oversight?
So...you're suggesting that global trade occurs in a vacuum, and anything aside from supply and demand laws seeking a role in it is authoritarian or condescending oversight. That's funny, I always considered those things as "laws." I thought that complexity which you speak of simply demands it.
_________________
LittleWing sometime in July 2007 wrote:
Unfortunately, it's so elementary, and the big time investors behind the drive in the stock market aren't so stupid. This isn't the false economy of 2000.
politically managed trade is just that - politically managed.
I don't see how it couldn't be. But go ahead, I'm listening.
que? i'm not sure what you're getting at.
are you saying you don't understand how trade can be conducted without being managed by some third party? that something as complex and important as global trade needs some oversight?
So...you're suggesting that global trade occurs in a vacuum, and anything aside from supply and demand laws seeking a role in it is authoritarian or condescending oversight. That's funny, I always considered those things as "laws." I thought that complexity which you speak of simply demands it.
What is complex with trading with another country?
In all reality it's no different or more comples than trading with your neighbour. It's only our free trade and other trade agreements that add any sort of complexity to the puzzle.
So...you're suggesting that global trade occurs in a vacuum...
nothing of the sort. i thought my analysis sufficiently took into account trade's effect on all parties. where did you find it to be deficient? which part of the economic analysis do you disagree with?
glorified_version wrote:
...and anything aside from supply and demand laws seeking a role in it is authoritarian or condescending oversight.
i don't view it as "condescending." i view it as ineffective.
i do my best to try and illustrate that trade has consequences for not only the producers and consumers of good X today, but also producers and consumers of goods A - Z today and tomorrow. that is, i don't limit analysis to just the two parties involved and trade's impact on just their welfare. understanding supply, demand, and incentives informs my understanding of this issue, not the other way around.
i'll be busy for most of the rest of the night, but i'll edit this post later to discuss the role diffuse knowledge and spontaneous order plays in efficient markets and social welfare.
glorified_version wrote:
That's funny, I always considered those things as "laws." I thought that complexity which you speak of simply demands it.
trade absolutely requires laws and the legal system. trade can never materialize, and gains from trade can never be realized, unless there is a legal system in place to establish property rights and enforce contracts. but this kind of minutiae is cumbersome, unnecessary, and harms social welfare rather than helping it.
an excerpt from NAFTA Section 3B, Sub-Section 10 for those who don't follow the link:
Quote:
Section 10: Definitions
For purposes of this Annex:
carryforward means the allocation to the present year of a portion of the following year's limit, which must be accounted for by an equivalent decrease in the following year's limit;
carryover means the allocation to the present year of an unused portion of the previous year's limit;
category means a grouping of textile or apparel goods, as further defined in Appendix 10.1;
consensus means, when applied to recommendations of the Committee on Trade in Worn Clothing, a recommendation is approved if no member of the Committee formally objects to its approval;
consultation level ("level"), including designated consultation level, means a level of exports, for a particular textile or apparel good, which may be increased in accordance with the provisions of Appendix 3.1 as a result of consultations requested by the exporting Party, in contrast to a specific limit which is increased by the specific rates provided for in Appendix 3.1;
exporting Party means the Party from whose territory textile or apparel goods are exported;
flexibility provisions means the provisions set forth in paragraph 7 of Appendix 3.1;
importing Party means the Party into whose territory textile or apparel goods are imported;
integrated into the GATT, when referring to a textile or apparel good, means that good has become subject to the obligations of the General Agreement on Tariffs and Trade pursuant to any successor agreement to the Multifiber Arrangement;
non-wool fabric means fabric in chief weight of any fiber other than wool, except woven fabric in chief weight of cotton or man-made fiber, containing 36 percent or more by weight wool;
non-wool made-up textile good means a good in chief weight of any fiber other than wool;
oxford cloth means fabrics woven as plain weave except that two or more warp ends are woven as one (taped warp);
restriction means any import or export limitation, except for customs duties, taxes or other duties or charges, whether made effective through quotas, licenses, permits, import or export price requirements, or any other measure;
specific limit ("limit"), means a level of exports, specified in Appendix 3.1, for a particular textile or apparel good which may be increased only in accordance with the provisions and specific rates set forth in Appendix 3.1;
square meters equivalent (SME) means a common unit of measurement for textile and apparel goods; primary units of measure (e.g., units, dozens, kilograms) are converted to SMEs using the conversion factors set forth in Schedule 3.1.3 of Appendix 3.1;
tariff preference level (TPL) means a mechanism by which to apply the preferential rate of customs duty to imports of a particular non-originating good up to a specified quantity;
transition period means a period of 10 years from the date of entry into force of this Agreement; and
wool apparel means:
(i) apparel in chief weight of wool,
(ii) woven apparel in chief weight of man-made fibers containing 36 percent or more by weight of wool, and
(iii) knitted or crocheted apparel in chief weight of man-made fibers containing 23 percent or more by weight of wool.
sounds fairly micromanaged to me. and i'm sure there's no way politicians can craft these "free trade" agreements to protect pet industries. nope. no way.
Joined: Sun Oct 17, 2004 4:01 am Posts: 19477 Location: Brooklyn NY
thodoks wrote:
sounds fairly micromanaged to me. and i'm sure there's no way politicians can craft these "free trade" agreements to protect pet industries. nope. no way.
Interesting...I know we're going a little off topic but isn't the relationship between politics and industry kind of give-and-take? And I mean for the effects on the general public, not politicians themselves.
_________________
LittleWing sometime in July 2007 wrote:
Unfortunately, it's so elementary, and the big time investors behind the drive in the stock market aren't so stupid. This isn't the false economy of 2000.
Joined: Sun Oct 17, 2004 4:01 am Posts: 19477 Location: Brooklyn NY
More specifically, I mean in the case with subsidies
_________________
LittleWing sometime in July 2007 wrote:
Unfortunately, it's so elementary, and the big time investors behind the drive in the stock market aren't so stupid. This isn't the false economy of 2000.
Joined: Sat Oct 16, 2004 11:54 pm Posts: 12287 Location: Manguetown Gender: Male
simple schoolboy wrote:
Third world farmers wouldn't be in such a need of 'fair trade' programs if Uncle Sam didn't fudge with the world market for agricultural goods. How has the WTO not ruled against the US more often considering all the agregious practices that clearly harm other countries?
A couple of weeks ago, WTO judged against american cotton subsides.
_________________ There's just no mercy in your eyes There ain't no time to set things right And I'm afraid I've lost the fight I'm just a painful reminder Another day you leave behind
Joined: Sun Oct 17, 2004 4:52 pm Posts: 6822 Location: NY Gender: Male
I'm by no means an economics expert. Far from it. Would fair trade actually end up benefiting a diverse nation capable of producing many of the needs of their population? I mean, I never understand why the US exports large sums of a product, then pays to import that exact same product from another country. I always assumed it had something to do with selling a product at high cost to another country, and getting the same product at a lower cost from a 3rd country. Much of that dependent on tariffs, etc. But I'm pretty much clueless.
Please enlighten me.
Edit: My cluelessness dawned on me after my original post. Countries able to produce product at a far lower price, even adding in shipping costs, could flood a country with lower priced product and crush our domestic product. That said, wouldn't quality eventually win out in a free market? Probably too optimistic.
Joined: Thu Dec 16, 2004 1:54 am Posts: 7189 Location: CA
It seems that the US (and probably most other governments) see tariffs as the primary obstacle to free trade, yet regard subsidies as not being as significant. Is there any reasoning behind this?
sounds fairly micromanaged to me. and i'm sure there's no way politicians can craft these "free trade" agreements to protect pet industries. nope. no way.
Interesting...I know we're going a little off topic but isn't the relationship between politics and industry kind of give-and-take? And I mean for the effects on the general public, not politicians themselves.
glorified_version wrote:
More specifically, I mean in the case with subsidies
subsidies are a tricky thing, because they can take several different forms. for instance, the sugar industry receives a combination of a.) complex loans from the agriculture dept that guarantees sugar growers certain prices, b.) import barriers to discourage the importation of less expensive foreign sugar (current rules restrict sugar imports to 15% of the american market), and c.) domestic production controls reducing the supply of domestic sugar (in the domestic market, the agriculture department decides what total sugar production ought to be and allots 54% of production to beet sugar and 46% to cane sugar. the department then allots each sugar company a specific production quota. according to the government accountability office, 42% of sugar program benefits go to just 1% of sugar growers).
but aside from keeping domestic sugar farmers and sugar companies profitable, these measures hurt the public at large in any number of ways. high sugar prices harm manufacturers for which sugar is a primary input, most notably candies, chocolates and breakfast cereal. a 2006 study found that for each sugar industry job saved by the sugar program, nearly three food manufacturing jobs are lost. similar findings: 1.) employment in food companies that use substantial amounts of sugar is declining. imports of food products that contain sugar are growing because it is not competitive to make those products in the US, 2.) many companies have relocated to canada and mexico, where sugar prices are much lower. the commerce department estimates that the high price of sugar has destroyed almost 9,000 US jobs in food manufacturing since 1981. in 1990, brach's announced plans to close its chicago candy factory and relocate 3,000 jobs to canada because of the high cost of sugar here. thanks to the cutback in sugar imports, 10 sugar refineries have closed in recent years and 7,000 refinery jobs have been lost (the US has only 13,000 sugar farmers), 3.) since 1980, the sugar program has cost consumers and taxpayers the equivalent of more than $3 million for each american sugar grower, 4.) sugar sold for 21 cents a pound in the US when the world sugar price was less than 3 cents a pound. each 1-cent increase in the price of sugar adds between $250 million and $300 million to consumers' food bills. the same 2006 study estimated that the sugar program was costing American consumers more than $3 billion a year. and these kinds of policies also have security and immigration implications. quotas and import restrictions made sugar smuggling immensely profitable. at one point in the 80s, the justice department caught 30 companies in a major sting operation named "operation bittersweet". federal prosecutors were proud that the crackdown netted $16 million in fines for the government — less than one-tenth of 1 percent of what the sugar program cost american consumers during the 1980s.
so yes, the relationship between industry and government is give-and-take. and 99% of the time, it's at the cost of the public through higher taxes, higher prices, job loss, or some combination thereof.
It seems that the US (and probably most other governments) see tariffs as the primary obstacle to free trade, yet regard subsidies as not being as significant. Is there any reasoning behind this?
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