Free Trade with South Korea

[Michael Hardner]

I can hardly wait.

Communities worked together and set a baseline for what they would put up with, and "the" public gradually saw the issues as one of fairness. The case was made and fought in politics, and in the newspapers. The depression and WWII played into it.

By the 1950s the economy of the west was growing, in Europe and America, and the gains could be seen to be across the board.

[dre]

Think about it - manual labourers being able to afford a house did happen, at some point. Otherwise, we wouldn't be bemoaning the decline in their income.

It wouldnt have happened in an environment like this. Labor and work has been commoditized to the point where workers have a lot less power, and where work is valued way way less. Globalism has paved the way for the emergence of a new aristocracy, and radically altered the unwritten social contract between the working class, and the political and investment classes.

Trade can be a really good thing. If i can grow wheat and you can grow oranges then trade in this things results in a mutual benefit. But "free trade" as we know it has been almost entirely a scheme to drive down the cost of labor so that a small handful of people can get by far the largest benefit. Thats why wealth is concentrating so fast.

[Michael Hardner]

It wouldnt have happened in an environment like this. Labor and work has been commoditized to the point where workers have a lot less power, and where work is valued way way less. Globalism has paved the way for the emergence of a new aristocracy, and radically altered the unwritten social contract between the working class, and the political and investment classes.

You're missing the why and how. Why and how is today different ?

[hitops]

I'm not arguing in favour of tariffs or subsidies, just that they can't be one sided. BTW, you have no idea what advantages and incentives the Korean government gives its industry.

I also don't buy your assertion that everything Canadian sucks.

Then you're still missing my point. My point is that it's ok for the subsidies to be one-sided. You still benefit as the one with the fewer restrictions, even if the other guy has lots.

Edited March 18, 2014 by hitops

[Wilber]

Then you're still missing my point. My point is that it's ok for the subsidies to be one-sided. You still benefit as the one with the fewer restrictions, even if the other guy has lots.

Only if they are products your country doesn't produce. You bitch because you think our auto workers are being subsidized but you are OK with foreign workers being subsidized and putting Canadians out of a job as a result. A short sighted and two faced viewpoint.

[dre]

Then you're still missing my point. My point is that it's ok for the subsidies to be one-sided. You still benefit as the one with the fewer restrictions, even if the other guy has lots.

No if that condition results in a large trade defecit you absolutely DO NOT benefit.

[hitops]

No if that condition results in a large trade defecit you absolutely DO NOT benefit.

Wrong, the trade deficit is only one part of the equation. You can have amazing trade numbers, but huge costs on your population (China as the obvious example). If you don't factor in the costs, looking at trade numbers on paper is meaningless.

Keeping tariffs on Korean vehicles might slightly improve our trade numbers with Korea. But it also imposes increased costs on all Canadians, costs that you are not considering when you talk about the trade deficit. One narrow sliver of people benefit (people building cars), and the rest of us incur costs.

The Soviet union had a WAY better trade deficit than us....no deficit at all (they didn't trade with the west). Oh and 100% protection of their own workers and production. Worked great huh?

That's why you can't just look at trade numbers. Alone they mean nothing and reflect nothing about whether the status of trade is actually benefiting the population.

If you think, wrongly, that the government should act to improve the balance, there is a way easier way to do this than industrial protectionism. Just do what China does - keep the currency artificially low. Then our trade numbers will look amazing. Of course you'll devastate huge amounts of Canadians wealth and shred all of our purchasing power....but at least the trade looks good!

Edited March 18, 2014 by hitops

[dre]

Wrong, the trade deficit is only one part of the equation. You can have amazing trade numbers, but huge costs on your population (China as the obvious example). If you don't factor in the costs, looking at trade numbers on paper is meaningless.

Keeping tariffs on Korean vehicles might slightly improve our trade numbers with Korea. But it also imposes increased costs on all Canadians, costs that you are not considering when you talk about the trade deficit. One narrow sliver of people benefit (people building cars), and the rest of us incur costs.

The Soviet union had a WAY better trade deficit than us....no deficit at all (they didn't trade with the west). Oh and 100% protection of their own workers and production. Worked great huh?

That's why you can't just look at trade numbers. Alone they mean nothing and reflect nothing about whether the status of trade is actually benefiting the population.

If you think, wrongly, that the government should act to improve the balance, there is a way easier way to do this than industrial protectionism. Just do what China does - keep the currency artificially low. Then our trade numbers will look amazing. Of course you'll devastate huge amounts of Canadians wealth and shred all of our purchasing power....but at least the trade looks good!

You are failing to understand the basic economics in play. You claim that things cost less in such a scenario but they dont. In order for us to maintain a trade imbalance we need market financial instruments, and that results in public and private debt. So folks in the west have been thrilled that you can buy a DVD player for $20 but every single one they buy puts them deeper in debt. And the more we trade paper assets for real goods the less value our paper assets have, and the more debt we accumulate.

You keep claiming we get cheap stuff out of the deal, but we really dont. You claim we have increased purchasing power, but you are only looking at once side of the balance sheet.

[TimG]

You are failing to understand the basic economics in play.

In a free market trade imbalances are always temporary because currencies adjust to eliminate imbalances.

[hitops]

You are failing to understand the basic economics in play. You claim that things cost less in such a scenario but they dont. In order for us to maintain a trade imbalance we need market financial instruments, and that results in public and private debt. So folks in the west have been thrilled that you can buy a DVD player for $20 but every single one they buy puts them deeper in debt. And the more we trade paper assets for real goods the less value our paper assets have, and the more debt we accumulate.

You keep claiming we get cheap stuff out of the deal, but we really dont. You claim we have increased purchasing power, but you are only looking at once side of the balance sheet.

You're confusing two unrelated issues. One is that our government spends too much borrowed money paying for peoples votes, and this devalues our currency indirectly. The other is that China holds their currency down and this keeps their goods cheap. There is no necessary relationship between the two. If we had ZERO debt available for countries like China to buy, their goods would still be artificially cheap.

We do NOT put ourselves into debt with every DVD purchase. Maybe our government puts us into debt by their spending habits, but that is unrelated.

Edited March 18, 2014 by hitops

[Wilber]

We do NOT put ourselves into debt with every DVD purchase. Maybe our government puts us into debt by their spending habits, but that is unrelated.

Where did the money from that DVD purchase go and where did it come from?

[dre]

In a free market trade imbalances are always temporary because currencies adjust to eliminate imbalances.

But in the real word countries the real world the countries running large trade surpluses with countries like the US flood the market with their own currency, and use to to purchase US dollar denominated securities to keep the value of their own currencies low, and the currencies of the country they are running a suprlus with high.

[TimG]

But in the real word countries the real world the countries running large trade surpluses with countries like the US flood the market with their own currency, and use to to purchase US dollar denominated securities to keep the value of their own currencies low, and the currencies of the country they are running a suprlus with high.

What significant players have not seen this strategy backfire? Japanese manufacturing has been hollowed out by it high currency. They lowered it slightly but are now seeing trade deficits because of the high cost of necessary imports like fossil fuels. China has created the world's largest real estate bubble that will eventually pop - this is on top of high inflation which is increasing costs even if the currency is artificially low.

That said, there is no rational reason to expect every country to have balanced trade with every other country. If the US has surplus selling to resource supplying countries which have a surplus with China then everything can be in balance even with a Chinese surplus with the US.

Edited March 20, 2014 by TimG

[hitops]

Where did the money from that DVD purchase go and where did it come from?

Here's the path of money: Created out of thin air by gov (Bank of Canada), lent to big 6 banks, banks lend it out to borrowers. Borrowers include government itself, companies, individuals etc. Companies use to pay salaries. Salaries used to by DVD player, money for DVD player goes to Japanese company.

Meanwhile government gives handouts to remain in power, requires borrowing for those handouts. It can sell bonds to China to raise the money, or just print money, or raise taxes, etc.

[Wilber]

Here's the path of money: Created out of thin air by gov (Bank of Canada), lent to big 6 banks, banks lend it out to borrowers. Borrowers include government itself, companies, individuals etc. Companies use to pay salaries. Salaries used to by DVD player, money for DVD player goes to Japanese company.

Meanwhile government gives handouts to remain in power, requires borrowing for those handouts. It can sell bonds to China to raise the money, or just print money, or raise taxes, etc.

So all we have to do is just keep printing money and not produce anything? So why isn't every country rich if that's all it takes? Can't afford a printing press or paper?

Edited March 21, 2014 by Wilber

[hitops]

So all we have to do is just keep printing money and not produce anything? So why isn't every country rich if that's all it takes? Can't afford a printing press or paper?

No we can't. But we do to a certain extent. It's appropriate to do it when the the total wealth expands, to be reflected in the money supply. But gov's also do it to fake prosperity so they can pretend to increase funding for things (vote buying) and make it seem like the economy is moving again (such as in the US currently).

What does this have to do with tariffs, or the subject?

Edited March 21, 2014 by hitops

[Wilber]

No we can't. But we do to a certain extent. It's appropriate to do it when the the total wealth expands, to be reflected in the money supply. But gov's also do it to fake prosperity so they can pretend to increase funding for things (vote buying) and make it seem like the economy is moving again (such as in the US currently).

What does this have to do with tariffs, or the subject?

The value of a currency is directly related to the strength of a country's economy. Tariffs charged by other countries on our products directly effects our ability to generate wealth.

World currency markets don't give a crap about our gov's vote buying, they care about the relative strength of our economy. Our dollar is dropping vs the US because their economy is seen as recovering and ours as stagnating.

[hitops]

The value of a currency is directly related to the strength of a country's economy. Tariffs charged by other countries on our products directly effects our ability to generate wealth.

Right, but charging our own tariffs wont fix that.

World currency markets don't give a crap about our gov's vote buying, they care about the relative strength of our economy. Our dollar is dropping vs the US because their economy is seen as recovering and ours as stagnating.

You're splitting hairs. They care about vote-buying, because this affects the strength of our dollar. I'm waiting for your point in how this relates to the DVD purchase.

Edited March 21, 2014 by hitops

[Wilber]

Right, but charging our own tariffs wont fix that.

This is about a free trade agreement. Free trade agreements are not about one side unilaterally dropping its tariffs on items both countries produce, while the other side keeps theirs. That is economic suicide.

You're splitting hairs. They care about vote-buying, because this affects the strength of our dollar. I'm waiting for your point in how this relates to the DVD purchase.

Are you sure you aren't American Woman?

Vote buying can only affect the strength of our dollar if it does damage to our economy.

It relates to the DVD purchase in that your money needs to have value in able for you to make the purchase. The strength of your economy is what gives your money value. If you intentionally weaken your economy by giving your competitors an advantage that your own business doesn't enjoy, your money loses value and you gain nothing because imports become more expensive because your dollar is devalued and there is no domestic industry left to take advantage.

[Topaz]

I'm more concerned about any job loss and some people are saying it could produce over 4000 job losses if the S.K. cars flood this country, only time will tell, but on the other side, it could trigger a car price war among the auto makers.

[hitops]

This is about a free trade agreement. Free trade agreements are not about one side unilaterally dropping its tariffs on items both countries produce, while the other side keeps theirs. That is economic suicide.

lol so dramatic. No, it isn't. We don't help ourselves by trying to impose equal tariffs, we just hurt ourselves. The answer to Korea inefficiently shifting wealth from it's citizens to it's auto sector, is not to do the same to our own citizens just so auto trade looks better on paper. You forgetting that committing 'suicide' as you say, means performing a 'revival' in other areas.

Vote buying can only affect the strength of our dollar if it does damage to our economy.

Any vote-buying that requires deficit (which it virtually always does), affects our dollar. Markets don't like deficits in the long term. That long-term can be REALLY long if your currency is in high demand as the world's reserve currency, a luxury we do not enjoy in Canada.

It relates to the DVD purchase in that your money needs to have value in able for you to make the purchase. The strength of your economy is what gives your money value. If you intentionally weaken your economy by giving your competitors an advantage that your own business doesn't enjoy, your money loses value and you gain nothing because imports become more expensive because your dollar is devalued and there is no domestic industry left to take advantage.

What you're missing here: We are not intentionally weakening our economy by allowing one-sided tariffs by Korea. You believe we are, because you are assuming the auto sector is all that exists, and all that matters.

We are weakening the auto sector by allowing one-sided tariffs. We are not weakening the overall Canadian economy. While auto gets weaker, cars (both Korean care, due to lower import costs, and domestic due to need to compete with those lower costs) also get cheaper. Cheaper purchase price means more wealth in hand for Canadians, a benefit to the economy. There are costs AND benefits to imposing tariffs. You see only the benefits. This is true regardless of whether the tariffs are 'even'.

Responding with our own auto tariffs will not improve the overall wealth of Canada. It will just take money from you and me and everyone else, and give it to our auto industry. Yes, if you then only look at the auto sector balance sheet, you would think that's a net positive.

American woman? No I'm male, and Canadian.

Edited March 24, 2014 by hitops

[August1991]

August doesn't care if other countries keep our products out by imposing tariffs, as long as we drop ours so he can buy his Hyundai for 6.5% less, regardless of the impact on the Canadian economy. He must think he has a pretty secure job if he believes he can't be affected either directly or indirectly by such policy.

And Wilbur, I suppose that you object to me using sunlight - receiving warmth/light from a "foreigner" (the sun) for free - "regardless of the impact on the Canadian economy".

Should I cover my windows in daytime so that I will use more Quebec electicity? Should I open my windows in winter so that I will use more Albertan natural gas?

When I decide how to heat or light my home, should I refuse distant, foreign, low cost sunlight and instead "buy local" so that more Albertans/Quebecers will produce and have a job?

Wilbur, that is your logic. Yet both David Suzuki and Adam Smith disagree.

Edited March 25, 2014 by August1991

[Wilber]

You guys haven't read a word I have posted. I am against tariffs but I don't see how our economy can benefit if our industry has to compete in a world market with one arm tied behind its back because of other country"s tariffs. I don't see how allowing Korea to strengthen its industry at the expense of ours through tariffs on our goods benefits us in the long term.

hitops says it will come through a "revival" in other areas. Where is this "revival" going to come from if our products are kept out of foreign markets by tariffs? Where is the strength behind our dollar going to come from if we just become a service economy? You guys just want cheap goods any way you can get them without any thought of the long term consequences or the fact that they won't stay cheap if we can't compete on a world level because of tariffs.

[hitops]

I am against tariffs but I don't see how our economy can benefit if our industry has to compete in a world market with one arm tied behind its back because of other country"s tariffs.

They don't. One-sided tariffs does not = hand tied behind your back. That's what you don't understand.

I don't see how allowing Korea to strengthen its industry at the expense of ours through tariffs on our goods benefits us in the long term.

It's not at the expense of ours. One-sided tariffs does not = at the expense of ours. That's what you don't understand. You've been told it does, and chosen to believe it. The people who say that, are looking ONLY at auto, and nothing else, and that's why what they are telling you is wrong.

hitops says it will come through a "revival" in other areas. Where is this "revival" going to come from if our products are kept out of foreign markets by tariffs?

Our products are not kept out of foreign markets. This trade agreement will INCREASE our products going to foreign markets. It will have ZERO impact on auto exports. It will increase auto imports, and reduce domestic auto purchases. This will hurt our auto sector, and help other sectors.

Where is the strength behind our dollar going to come from if we just become a service economy?

The strength of our dollar has very little to do with whether we are a service economy. Stop believing the theory you like and look at real life history. Track our dollar value over the last 30 years. Does this correlate to the amount of manufacturing vs service in Canada? Not even slightly. It is almost entirely dependent on how well or poorly the US is doing. We went from $0.70 to $1 with the USD while losing manufacturing. We have since fallen to $0.88 in a single year, when almost nothing changed here at home.

You guys just want cheap goods any way you can get them without any thought of the long term consequences or the fact that they won't stay cheap if we can't compete on a world level because of tariffs.

Our own tariffs cause goods to be more expensive, not foreign ones. You've got it backwards. Cheap goods increases wealth for Canadians. With that wealth they can produce other activity in the economy. You ignore this. More wealth at home means more wealth for local investment. Forbes last year rated Canada the best place to invest in the world.

Your concern is correct.......but you applied it to the wrong area. It's not purchasing power that will suffer if we have cheap goods, it's the auto sector that will suffer if we artificially protect it. Again, leave the lefty theory, and look at historical reality. Auto has been protected, and has needed MANY bailouts. You are of course not factoring the cost to our country of having to bail them out. The weakness of auto, and subsequent need for bailout, is directly as result of protected them with tariffs or otherwise. We gave the big 3 more money per capita than even the US did in the last bailout. Do you put that on the balance sheet of cost/benefit? No, of course not.

[Wilber]

You obviously have no clue what tariffs are intended to do.