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View Diary: Trans Pacific Partnership is Bad for the Middle Class (11 comments)

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  •  Well, not really (1+ / 0-)
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    FG

    Capital also flows to countries that don't have free trade agreements with us, and the U.S. is, I think, still the top recipient of foreign direct investment.  I haven't seen a study looking at how FTAs affect the inflows and outflows of capital, but it would seem to be only one of many factors that would lead someone to invest overseas, or in the U.S. for that matter.

    I know you're going for a bit of hyperbole here, but you can't really say that any economies in the world have been destroyed or liquidated.  Foreign investment has helped lots of countries to develop and has pulled hundreds of millions of people out of poverty around the world.  The people behind these agreements tend to be from government departments and economic think tanks.  They have zero interest in harming other economies and personally benefit very little from them, other than having good jobs with great travel opportunities.

    Cynicism is what passes for insight among the mediocre.

    by Sky Net on Wed Apr 03, 2013 at 05:49:26 PM PDT

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    •  That's a hard claim to sustain given (0+ / 0-)

      the extreme trade deficits we always seem to run in perpetuity following agreements that mobilize capital.  A trade deficit is not an abstraction - it's net money flowing from one economy to another.  We've been hemorrhaging money to China ever since free trade was opened up with them, precisely because only Absolute Advantage matters under such a regime, not Comparative Advantage.  

      Our manufacturing sector was liquidated and the money went into establishing China's manufacturing sector, which was of course owned by the same people but without having to share any of the money with American workers.  But under free trade theory, that money should have gone into setting up an alternative industry in the US that would have had a lower opportunity cost.  That didn't happen.  We've simply lost the money that was once held by US manufacturing.

      Going faster miles an hour, with the radio on.

      by Troubadour on Wed Apr 03, 2013 at 05:59:27 PM PDT

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      •  trade deficits (1+ / 0-)
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        FG

        Actually if you look at the numbers (I use USITC's Dataweb), you'll see that we have trade surpluses with 13 of our 20 FTA partners, including some of our biggest trade surpluses.  In many cases, like with Peru and Chile, we went from trade deficit to trade surplus, or from small surplus to large surplus, soon after the FTA went into force.  No surprise, as in many of these agreements it's the other country that lowers trade barriers far further since ours are already pretty low.  Obviously we have some pretty big trade deficits with Mexico and Canada, but you can easily make a case that would have happened without NAFTA.

        We don't really have free trade with China, other than both of us being members of the WTO.  We have pretty open trade with the rest of the world, though our remaining trade barriers are directed against the products of poor developing countries like apparel and agricultural products.

        Yes, manufacturing's taken a hit in the U.S., at least the employment side of it.  Part of that is due to trade, but part also to the more widespread use of machines instead of human labor.  A lot of that switch would have happened anyway had we stuck with higher trade barriers.  Nevertheless, we're still a manufacturing power, manufacturing more than we ever have before, just using fewer employees to do it.  Kind of like our agricultural sector.

        I'm sure you've heard the stories as well of companies "reshoring" manufacturing back in the U.S., partly due to the shale gas revolution, though that seems to be overplayed.  Don't count manufacturing out yet.

        Cynicism is what passes for insight among the mediocre.

        by Sky Net on Wed Apr 03, 2013 at 06:29:54 PM PDT

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        •  Under free trade theory (0+ / 0-)

          there shouldn't be any large-scale net movement of capital across borders, but not only has such movement been significant, it's been devastating.  The money in industries that fail to compete is supposed to be reinvested in new domestic industries with lower opportunity costs, but that didn't happen - both the jobs and the money that funded them went overseas, most of them permanently.  

          This is not even "trade", but a zero-sum redistribution of wealth from one country to another and from the worker base of one country to its capitalist class.

          Going faster miles an hour, with the radio on.

          by Troubadour on Wed Apr 03, 2013 at 06:42:04 PM PDT

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        •  I made this very point in a post linked above (1+ / 0-)
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          marina

          Most FTAs have seen us improve our trade balance, but most are small potatoes.

          Using machines instead of human labor can also be substantially about trade, too - i.e., it's the only way to compete against low-cost labor. That was Adrian Wood's argument back in 1994.

          We need to see more systematic evidence about the wages paid in reshoring. Jeff Faux reported in The Servant Economy that GE used to pay $22/hour in Louisville, but that it reshored jobs there at $13/hour. If that's the norm (and I don't know if it is; that's why I say we need more evidence), then reshoring is not that great a development.

          •  Surpluses (0+ / 0-)

            Most of our trade surpluses are relatively small, but most people don't know that we have surpluses with more countries than we have deficits with.  However, the trend is clear.  Trade agreements tend to lead toward stronger US exports and resulting smaller trade deficits and even trade surpluses.  Mexico's the obvious exception.

            Regardless, I don't judge FTAs by surpluses or deficits.  That's not the right scorecard.  More goods and services exports is the goal, but more imports are good, too.  The TPP is a chance to make trade work better in the region.

            Cynicism is what passes for insight among the mediocre.

            by Sky Net on Wed Apr 03, 2013 at 10:51:35 PM PDT

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