QuoteOriginally posted by: CuchulainnQuoteFree trade is also about long-term equality with everyone having equal opportunity to buy from and sell to everyone else. I was not aware of this. It's a nice theory.And it seems to be what is actually happening.

QuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: CuchulainnQuoteFree trade is also about long-term equality with everyone having equal opportunity to buy from and sell to everyone else. I was not aware of this. It's a nice theory.And it seems to be what is actually happening.Concrete examples?

QuoteOriginally posted by: CuchulainnQuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: CuchulainnQuoteFree trade is also about long-term equality with everyone having equal opportunity to buy from and sell to everyone else. I was not aware of this. It's a nice theory.And it seems to be what is actually happening.Concrete examples?More than a dozen:UN Human Development Index 2012 vs. 1990

A few thoughts:- From Stiglitz book (globalisation and its discontents):supports Pat's idea that protectionism is necessary (in early stages at least) for development of local industry. Otherwise they get killed by big foreign companies. These things have happened in many places. It;s not just theory it is facts.In fact one could argue that free trade/gl;obalisation is just an excuse for big companies to get more markets.Also advocates of free trades like the US do not apply it to themselves (eg the US).Similarly people often think of the US like a small state model. It is not. The state is actually quite big in the US (think of all the research coming out of defense industry).- Today countries like the UK (the birthplace of the industrial revolution!) and France have got their industry destroyed. Some say great, french and brits can buy cheaper clothes etc.... True, but all those job losses, plus in the long run they lose because they'll have to pay taxes for them.What next? Food?- Free trade goes with free movement of capital, and transnational companies paying their taxes where it's the cheapest to do so.- True free trade doesn't exist. At the end of the day when you are big and powerful you can get things your way.

QuoteOriginally posted by: HerdA few thoughts:- From Stiglitz book (globalisation and its discontents):supports Pat's idea that protectionism is necessary (in early stages at least) for development of local industry. Otherwise they get killed by big foreign companies. These things have happened in many places. It;s not just theory it is facts.In fact one could argue that free trade/gl;obalisation is just an excuse for big companies to get more markets.Also advocates of free trades like the US do not apply it to themselves (eg the US).Similarly people often think of the US like a small state model. It is not. The state is actually quite big in the US (think of all the research coming out of defense industry).- Today countries like the UK (the birthplace of the industrial revolution!) and France have got their industry destroyed. Some say great, french and brits can buy cheaper clothes etc.... True, but all those job losses, plus in the long run they lose because they'll have to pay taxes for them.What next? Food?- Free trade goes with free movement of capital, and transnational companies paying their taxes where it's the cheapest to do so.- True free trade doesn't exist. At the end of the day when you are big and powerful you can get things your way.Good summary.

E.g. how did Google get started? They got a huge government grant. That's just one example.

It is a good question, a question I ask myself.But it is so hard to get to an independent point of view, partly because of all the ideologicaly/politicaly poluted answers.Also, let's not forget that this globalisation is the second one.In the first one (which took place up to WW1), the UK was in the role played by the US today, and Germany was playing China's part (UK domination and Germany catching up).In some sectors where you have only like 2 or 3 companies, it is in fact more like a monopoly than competition. And there are many such sectors.Eg mobile phone operators (but many others too!). I'd rather have a state monopoly to a private onwned monopoly.But back to free trade, and the idea of comparative advantage, and every country doing what they're best at. This is book stuff to me... Do people really think it happens that way?Besides when you read the original books making the case for this, the financial system was different and so you have silly arguments going like "It's fine buying from a foreign owned company, because you buy in pounds, so the company will have to spend the pounds anyway and so it will be good for the country since some other products will be bought"!!...These new idols, the transnational companies, are stateless. They pay their taxes where it is the cheapest for them to do so. You might have notice that when they are in trouble, when they need to be bailed out, they remember their nationality. They know which government they should ask money!Another point, let's take Starbucks. So they pay their taxes outside the UK because they have the right, being transnational.But is it fair competition for a british entrepreneur who wants to open a coffee shop and has to pay higher UK taxes?Of course, one solution, the one advocated by people like Bertrand Russell or HG Wells, would be world government. Then, these arbritrages would disappear.It is the objective of some (a minority though!) of those federal EU supporters (eg Jacques Attali).

Pat cites the rise of Japan amongst other nations that grew during a time of import restrictions.Perhaps we ought to include Britain, who in much the same period enacted much the same sort of barrier.It went from one of the top manufacturing countries in the world to near economic collapse.India also had import barriers in this time period, GDP per head growth was miserable.Germany and the USA in this period had fewer barriers and grew much more strongly.Britain lost manufacturing jobs to countries like Germany and the USA that higher hourly wage costs, its harder to compare properly Japanese hourly rates but the loss of UK jobs to Japan was not based upon Japanese people being cheaper.France had similar issues as did Italy.Then we must look at what happened to Japan...GDP per head surged up to the point where people were saying much the same things about the rise of Japan that we now hear about China.Then growth just stopped.The problem is that import protection is a tough drug to get yourself clean from.It must necessarily be selective, else you try doing something as stupid as growing Tobacco in Northern Europe....ooops yes that happens. During WWII the Germans did this, because it couldn't get cheap American tobacco. The EU still subsidises this as a "temporary measure to allow farmers to adjust". Creating a trade barrier is creating a lobby and since every "widget" in Pat's example could be made at home you have the classic problem that the lobby cares a lot because it is 100% of their issue but the harm is spread over the economy."Protected" companies must make decisions on resource allocation that include paying "campaign funds" to senators or employing retired Eurocrats, none of which benefit the consumer and resources that could be used for R&D or paying workers.One of the best EU examples was a punitive levy on matrix printers, back when they were a big thing, to protect the EU matrix printer industry.Sadly there never was an EU manufacturer of these devices and despite the "protection" no one even tried.to start one.EU standards on TVs are explicitly set to benefit pathetically overpriced and under-teched firms like Phillips.

I too was taught that free trade is good for everyone in all circumstances. But when I try to develop my little models of the economy (which include the demand side as well as the supply side), the numbers don't work out that way ... at least in all circumstances.As an example, consider a widget produced for $10, of which $5 is labor costs. If we off-shore it, then perhaps the labor costs are $1, and half the cost savings flow back into the prices, making the new price $8. (The other $2 being taken up by increased transportation costs, increased number of middlemen, etc.). So this represents a direct benefit to the economy of $2 x N, where N is the number of widgets consumed in the old economy. But since widgets are cheaper, there will be more uses for widgets, and thus an additional benefit to the economy. The benefit per widget is less than $2 (otherwise is already been part of N), so let's assume that it is $1 and that M additional widgets are in use. So the economiic benefit of the price reduction is $(2N + M). The loss on the demand side is $5N, and again there is a multiplier effect (since wages are spent on other economic goods). Even without figuring out the multiplier, it is apparent that free trade has reduced net economic activity in the first country.The actual argument and modeling has to be subtler, since all those overseas dollars have to go somewhere; the question is how they re-enter the economy: much of it seems to be re-enterring as debt and investment. This seems to require stratified modeling, in whiich the distribution of the money becomes significant.I think "Free trade is good" or "Free trade is bad" is too simplistic. Better would be, "under which circumstances does the benefit of trade outweight the liabilities of trade"

QuoteEU standards on TVs are explicitly set to benefit pathetically overpriced and under-teched firms like Phillips. Update: Philips don't make TVs anymore and they closed their last CRT factory a couple of years ago.BTW yours truly's first job in Eindhoven was numerical simulation (black body radiation) of CRTs using FEM.QuotePerhaps we ought to include Britain, who in much the same period enacted much the same sort of barrier.It went from one of the top manufacturing countries in the world to near economic collapse.The demise was not caused by barriers, nor lack thereof, IMO. Margaret Thatcher did no good for British industry.

QuoteOriginally posted by: PatI too was taught that free trade is good for everyone in all circumstances. But when I try to develop my little models of the economy (which include the demand side as well as the supply side), the numbers don't work out that way ... at least in all circumstances.As an example, consider a widget produced for $10, of which $5 is labor costs. If we off-shore it, then perhaps the labor costs are $1, and half the cost savings flow back into the prices, making the new price $8. (The other $2 being taken up by increased transportation costs, increased number of middlemen, etc.). So this represents a direct benefit to the economy of $2 x N, where N is the number of widgets consumed in the old economy. But since widgets are cheaper, there will be more uses for widgets, and thus an additional benefit to the economy. The benefit per widget is less than $2 (otherwise is already been part of N), so let's assume that it is $1 and that M additional widgets are in use. So the economiic benefit of the price reduction is $(2N + M). The loss on the demand side is $5N, and again there is a multiplier effect (since wages are spent on other economic goods). Even without figuring out the multiplier, it is apparent that free trade has reduced net economic activity in the first country.The actual argument and modeling has to be subtler, since all those overseas dollars have to go somewhere; the question is how they re-enter the economy: much of it seems to be re-enterring as debt and investment. This seems to require stratified modeling, in whiich the distribution of the money becomes significant.First, M might be much higher than you think. One study of compact cars found an elasticity of -2.8 suggesting that a 20% cut in car prices would boost sales 56%Second, there's also the incremental economic output required to build a new factory in the country with $1/widget labour. Machine tool exports probably went up prior to widget imports increasing. (Given that the asset turnover ratios of manufacturers can be less than 1, the economy enjoyed a boost equivalent to more than one years sales of widgets in addition to the widget sales. The new capex would cover five years of losses on the price difference.)Third, there's the unmeasured benefits of trade: users/consumers of widgets gain 2*N in surplus from getting widgets that are worth $10 for only $8. The economy may be financially poorer but it's correspondingly utility-richer. In fact, the consumer surplus term entirely negates the losses in measurable GDP whilst the expanded demand is accretive to the economy.QuoteOriginally posted by: PatI think "Free trade is good" or "Free trade is bad" is too simplistic. Better would be, "under which circumstances does the benefit of trade outweight the liabilities of trade"Agreed!

QuoteOriginally posted by: Traden4AlphaThird, there's the unmeasured benefits of trade: users/consumers of widgets gain 2*N in surplus from getting widgets that are worth $10 for only $8. The economy may be financially poorer but it's correspondingly utility-richer. In fact, the consumer surplus term entirely negates the losses in measurable GDP whilst the expanded demand is accretive to the economy.That's the thing: there is a short term benefit for most consumers.But long term it is a different story, because of job losses, disindustrialisation...Are cheaper technological gadgets and fashionable trainers worth the long term consequences?

How about including free-trade & protectionism of labour in this?(eg Polish plumber can come to UK, but Chinese plumber can't) Edit - terrible spelling

QuoteOriginally posted by: MHillHow about including free-trade & protectionism of labour in this?(eg Polish plumber can come to UK, but Chinese plumber can't) Edit - terrible spellingYou are no talking about free trade, but about free movement of people.More on free trade:See here for a criticism of the coming transatlantic deal (not sure what to think, but this adds to the debate).

QuoteOriginally posted by: HerdQuoteOriginally posted by: Traden4AlphaThird, there's the unmeasured benefits of trade: users/consumers of widgets gain 2*N in surplus from getting widgets that are worth $10 for only $8. The economy may be financially poorer but it's correspondingly utility-richer. In fact, the consumer surplus term entirely negates the losses in measurable GDP whilst the expanded demand is accretive to the economy.That's the thing: there is a short term benefit for most consumers.But long term it is a different story, because of job losses, disindustrialisation...Are cheaper technological gadgets and fashionable trainers worth the long term consequences?The long-term seems entirely beneficial, too. Disindustrialisation is beneficial. Why would a country actually want all those icky smoke-belching, chemical-emitting, dangerous factories that force their citizens to become automatons? Admittedly, being a factory worker is better than being a subsistence farm worker so I can see why China or Bangladesh would welcome the factories. Moreover, free trade causes net job gains, not losses, because N low-skill, low-pay workers (plus the added jobs in transportation and intermediaries) take the place of 1 high-skill, high-pay worker.If your goal is to protect a few privileged people in the developed world from losing their jobs, then why stop at halting free trade? Automobiles caused job losses in a horse-and-buggy industry so we should ban cars. Computers caused job losses among clerical staff, so we should ban them. Telephone switching equipment caused job losses among switchboard operators. Plastic bottles caused job losses for can makers, etc. Innovation and productivity cause short-term job losses. But do you really want to ban that?