American Elephants

Free Trade Is the Goal, Will it be Achieved? by The Elephant's Child

What an odd day in the news, such as it was. Lots of articles criticizing Trump for his outrageous tariffs and threats, with long moans about how important good trade relations were, how Trump was hurting the farmers, etc, etc. etc.

At the same time, and at the same websites that contained all the whining about trade, came the announcement that Trump and Juncker had agreed to avert a transatlantic trade war, expand European imports of U.S. liquefied natural gas, soybeans, and lower industrial tariffs on both sides and to work towards free trade, with zero tariffs. I suspect that this is exactly what Trump intended in the first place.

Lefties are so infuriated with Trump that they do not recognize that Donald Trump is a very bright man who knows what he is doing. But then they never do. Today they were too busy celebrating the unknown person who attacked Trump’s star on the Hollywood sidewalk with a pick-axe.

The founders did not specify that future presidents should be graduates of impressive schools and have lots of practice at politics by being governors and hold other offices before that. Winning elections is seen as a prime qualification for higher office. And moving in the right circles is a plus. Americans are getting very tired of the political class. Working as a businessman in New York City, dealing with bureaucrats, unions, construction workers. the mob and endless rules and regulations and becoming a billionaire in the process is probably better preparation for the presidency than just being a governor and dealing with a legislature.

There are quite a few governors out there who are making a huge mess of the states they are in charge of.  You have seen lists of badly-run states, they are usually run by Democrats, whose somewhat socialist leanings don’t work well in a capitalist country. Democrats believe firmly in taxing big business whose evil CEO’s make way more money than their workers, and need more rules and regulations to force them to be better citizens and kinder to the environment. The idea that business, freed of punishing taxes, and unnecessary regulation can grow and invent and prosper, is inconceivable. Individuals can act on their hopes and dreams and create new start-ups and expand, and that is how an economy grows. If you regard the people, with exceptions for ‘celebrities,’ as “deplorables” or consider all that fly-over country between the enlightened coasts as useless, you’re not going to get a lot of innovation.

Americans are getting very tired of the political class, who can’t seem to get much of anything done, and do a bad job with the little they do get done. Government mostly moves at a snail’s pace, and custom and regulation, unions and the vast number of people who have to sign off on endless documents slow it further. Devin Nunes’ efforts to find out what the initial application to the FISA Court was that prompted all this messy investigation that has produced nothing at a cost of millions and eating up months and months of time and effort. An effort to impeach Rosenstein has begun, which may shake some information loose. It’s already clear that “there was no there there” in the application to FISA. The Intelligence Committee has been persistent and demanding. Sooner or later, the truth will out.

South Korea is In For a Treat, And Washington State Benefits Too. by The Elephant's Child

The free trade agreement between the United States and South Korea (KORUS), negotiated in 2007, passed at last in October 2011 after years of delays and re-negotiations. That’s good, and now the decision is bearing fruit —literally.

We need all the bits of good news we can find. As of this year, the cherry growers of Washington State have shipped 368,000 boxes of fresh cherries to South Korea. Usually fresh cherries can be found only in upscale supermarkets there at a startling $10 a pound. A real luxury treat. This year’s shipment more than doubles last years export of 171,000 boxes, and the Korean Free Trade agreement eliminated the tariff of 24 percent.

The price of cherries in Korea will go down and more people will be able to enjoy them. South Korea is the fourth largest market for Washington goods and last year represented $1.4 billion of exports. They grow good cherries on the other side of the mountain, and they’re a real treat in season. We can expect cherry exports to South Korea to grow.

Free trade is a huge benefit of economic freedom. Takes more workers here to grow and ship cherries, and South Korea gets great fruit at a more reasonable price. We are so accustomed to the marvelous trade that brings us fruit from the Southern Hemisphere in the Winter, and fruits that we have never known before, that young people don’t know that there was not always this plenitude.

I always remember a novel by MacKinlay Kantor, I think it was Spirit Lake, about early pioneers in the upper Midwest who got through the winter because they had a good crop of pumpkins that stored well, and every day it was pumpkins for breakfast, lunch and dinner.  Can’t remember much about the story, but I remember the horror of unending pumpkins. The variety offered by free trade is a blessing. And trade only happens if it is beneficial to both sides.

Whatever Labor Wants, Labor Gets! Howcome? by The Elephant's Child

President Obama, in his State of the Union speech in January, said this:

Last month we finalized a trade agreement with South Korea that will support at least 70,000 American jobs.  This agreement has unprecedented support from business and labor, Democrats and Republicans, and I ask this Congress to pass it as soon as possible.

That was then, this is now. This week U.S. Trade Representative Ron Kirk and White House economic aide Gene Sperling told journalists that Mr. Obama won’t send any of the pending free trade agreements — with Korea, Colombia or Panama, that have been languishing on his desk — to Congress for a vote until Congress also agrees to expanded subsidies for jobless union workers, and renews the canceled Trade Adjustment Assistance (TAA) program.

These free trade agreements represent some $10 billion in exports for American companies, and about 360,000 American jobs will be lost if the pacts don’t go through. Canada finalizes it’s pact with Colombia on July 1, so the U.S. will lose a big chunk of its Colombian market to Canada.

Congress dumped the $2.4 billion TAA program for 2011 -2014 because studies have shown it to be of “dubious value.” It encourages workers to blame all job losses, regardless or cause on trade, because it hands idled workers 156 weeks of “income support” on top of 99 weeks of unemployment, creating a five-year free ride instead of creating jobs.

Only three days ago Trade Representative Ron Kirk was testifying before Congress and describing free trade as a job-creating machine.

Big Labor’s political game is to put pressure on its puppet in the White House ahead of an election to extract the concessions they want. The White House plays political games, and the U.S. economy and U.S. workers suffer. Only 11.9 percent of American workers belong to unions, and it would be even fewer if more states were right-to-work states.

Orin Hatch (R-UT), ranking Republican on the Senate Finance Committee, said:

It makes no sense to shut the door on increasing U.S. exports by  over $10 billion in order to fund a costly program. With our economy struggling and our nation broke, it’s time to stop the excuses and give our exporters fair access to international markets.

Whatever the unions want the unions get.  You’d think the president would want to do something about the unemployment rate, but campaign donations trump common sense, I guess.

Protectionism is the Last Refuge of the Desperate Politician. by The Elephant's Child

A  Wall Street Journal/NBC News poll (Sept. 28) found that outsourcing was the top reason cited by Americans as the cause of the country’s economic problems.  And the same poll found for the first time in years that a majority (53%) of Americans say free-trade agreements have hurt the United States. Wrong villain.

That’s probably an understandable sentiment, but a very dangerous one.  Democrats are facing what purports to be a “wave” election, and they are desperate to shift the blame for the financial crisis that has created so much unemployment from Congress — where it belongs — to somewhere, anywhere, else.  They’re apt to pass legislation that will have dire consequences.  Trade wars are not pretty, and once started, hard to control.  Look up Smoot–Hawley!

The AFL-CIO produced a searchable database of more than 400,000 U.S. companies and their subsidiaries it says have shipped jobs overseas.  Organized labor is trying to stir up anti-outsourcing sentiment to energize union voters for the election, and creating a plausible enemy is one way to do it.  Politicians are happy to exploit an issue that seems to have some resonance with the public, even if it is economically stupid.

There are always unintended consequences.  Actions taken against another country prompt retaliation, including retaliation from companies abroad that hire American workers.

In 2007, Matthew Slaughter, an economist at Dartmouth’s Tuck School of Business published a comprehensive study of the hiring practices of 2,500 U.S.-based multinational companies.  He found that when U.S. companies hired lower-cost workers overseas, their parent companies hired even more people here at home to support the expanded operations.

Between 1991 and 2001, employment at foreign subsidiaries of U.S. multinationals rose by 2.8 million jobs; during that same period, employment at their parent firms in the U.S. rose by 5.5 million jobs.  For every job “outsourced” to India and other foreign countries nearly two new jobs were generated here in the U.S.

These new U.S. jobs were higher-skilled and better-paying — filled by scientists, engineers, marketing professionals and others hired to meet the new demand created by their foreign subsidiaries.  …

In 2002 those subsidiaries [of foreign-based multinationals] employed over 5.4 million American workers, nearly 5% of total private–sector employment.  They also paid American workers 31% more than their American nonsubsidiary competitors — an average of $56,667 per year.

That’s why we need some familiarity with economics.  So many things are counter– intuitive, just not the way you would at first assume.  NAFTA has been a great success, because it is not just the goods we import into this country— but the goods and services that Mexico and Canada buy from us, and they buy a lot.

Politicians are reacting to antitrade sentiment by enacting protectionist measures.  You cannot assume that a politician has much familiarity with economics.  During tough economic times, people are apt to look for comfort in protectionism.  This is true of other countries as well, and those countries  may well put up barriers against American investment.

But it’s important to know that a job outsourced to India may well create two jobs in Indiana.  Keep that in mind, and don’t fall for the boogeymen politicians create.

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