M. Adam Davis wrote:
>> Xiaofan Chen wrote:
>> > Certain protection of certain industry is inevitable. Even for those so
>> > called
>> > "free trade" countries, there ought to have some kind of protection.
>>
>> I've never heard a rational, logical explanation why the above statement 
>> is
>> true.
>
> 1. The government is charged by the public to maintain and improve the
> economy of the country.

[snip]

As Cedric has pointed out, it's not the government's job to maintain and 
improve the economy. Not in a capitalist country, anyway. And when the 
government does make it its job, you get USSR and North Korea.

> 2. The economy is affected significantly by certain sectors.  Auto
> manufacturing, for instance, steel, and many decades ago textiles were
> *very* important to the US economy.  Right now the internet (which
> revolves around computers and programmers) is very important.

The reason this logic doesn't make sense to me, is because if you're good at 
what you do (make steel, write programs, et cetera) YOU DON'T NEED 
protection. If you need protection, YOU'RE NOT GOOD at what you do.

> So a situation arises:
> Steel becomes vastly cheaper overseas (reasons are complex, but let's
> ignore that for now).  Now we have a choice - we can either allow tens
> of thousands of American workers lose their jobs,

I don't buy the "tariffs protect jobs" argument, for reasons summarized in 
"The Blessings of Free Trade":

http://www.freetrade.org/node/82

Specifically, here is why I believe the pro-tariff argument is wrong, as it 
is applied to steel:

- A job in the steel industry is saved at the cost of many jobs lost in 
other industries* that consume steel. In one study, it was found that 
keeping one steel worker employed costs four jobs in the automotive 
industry.

- Steel is HEAVY. Local producers already have a vast competitive 
advantage -- they don't have to transport their steel over tens of thousands 
of miles.

- Like any tax, tariffs result in a deadweight loss, and hurt both consumers 
(higher prices) and producers (lost sales).

- Tariffs stifle innovation. Why bother to develop new technologies, or more 
efficient production methods**?

- Nobody really wants to work in a steel mill. It's dirty, it's noisy, it's 
hot. For that matter, nobody wants to have a polluting, acid-rain-causing 
steel mill in their backyard, either (if you want to debate the issue of 
whether or not this is fair to other countries, please start another 
thread -- there are answers for this question, too).

The real solution to "soften the blow" and protect the workers, is to give 
them an education. In reality, it is many times cheaper to give every one of 
the steel workers free college education, than to keep them employed in the 
steel mill.

> allow hundreds of
> millions of dollars leave America to be sown into another country's
> economy, and allow all the side effects to occur (trickle down,
> trickle up, etc.).  These are sectors that if hit hard enough will
> significantly shake the economy.

I'm sorry, I don't buy this argument either, because I cannot follow your 
logic (what does "trickle down", "trickle up", etc mean in this context, 
anyway?)

Trade is not a zero-sum game. Everybody who plays the game, wins. You sow 
millions of dollars into another country's economy, and that country turns 
around and sows millions into yours. In fact, there are BILLIONS of foreign 
capital invested in the US economy. Toyota has plants in the US, and 
*directly* employs tens of thousands of workers (it employs many times that 
indirectly -- by buying parts from American suppliers). My 2006 Sonata was 
built by American workers in a Hyundain plant located in Birmingham, 
Alabama.

IMO, xenophobia is the reason why most people are opposed to free trade.

Vitaliy


FOOTNOTES

    * Like many other small business owners, I can attest that the 2002 
steel tariffs hurt my company, and resulted in lost jobs. We no longer use 
steel enclosures for any of our new products as a result, although it used 
to be more economical to use steel enclosures for short runs. A number of 
steel consumers testified before the Congress, and one made the argument 
that it's not fair for his employees to lose their jobs, in order for the 
steel workers to keep theirs.

    ** By the way, in the book "Good to Great", the steel company Nucor is 
one of the 11 companies that made the list. It developed a new technology 
(mini-mills), and maintained a "farmer's ethic" culture. Nucor was used as 
an example of a great company that, unlike the comparison company (Bethlehem 
Steel) wasn't pointing fingers at external factors, and whining that they 
needs tariffs to protect it from the competition. 

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