What should US economic policy be toward Asia?

With President Bush wrapping up his latest Asian tour, should any changes be made to US economic policy in regard to Asia, or are Bush's free-trade policies the right course?



MRB:

The discussion here concerns the issue of "Asian" challenges to our free-trade policies. The topic is, of course, much bigger than that. It's ultimately about worldwide free trade and what it means to us and everyone else.

But our dear Mr. Bush is currently in Asia as part of his annual foray into the foreign territory -- and I'm not just talking geographical territory -- of representing us at the Asia-Pacific Economic Cooperation meeting. If, in fact, Mr. Bush is there because he really believes in the free trade agreements then it will be the first time in six years I've ever agreed with anything he's said or done. I'm just not convinced. These meetings appear so awkward for him, like he'd rather be somewhere else. The reason I feel he always looks so out of place is that he has been trained in the now jeapordized neo-con school of thinking that we can just bludgeon the world into doing what we want by "punishing" any country we find offensive or which hurts a particular idea we hold dear or, worse than any of these, that beats us at our own game. Perhaps he realizes this tactic just isn't working. Perhaps the man is conflicted about what his intentions ought to be and just doesn't know how to act. He wants free trade, maybe, as long as it's our trade that's free.

The U.S. can no longer encourage an attitude of us against them. We are all in this together. Pissing on our own little fire hydrant and clinging to our territory with all our might is just plain stupid. Are jobs disappearing because of globalization? I've seen no decent study that proves this. There is job shifting, yes. Out sourcing, yes. But are we the United States of the "good 'ol days" when we could think of ourselves as totally self-reliant? No. We couldn't shop at our precious Wal-Marts if that were so. Then perhaps our new strategy, instead of taking the ball home when we don't get our way, is to become the United States of the World and be courageous leaders enough to see that if all people become economically successful we are all successful. That would be true world domination and the Republicans could dance in the street.

So, of course, from my perspective we have no choice in a multi-faceted world but to do everything to encourage free trade with the entire world, not just Asia. Central and South America is a hot bed of problems at our very feet that must be addressed. I'm convinced most of that region's hostility surrounds economic matters, not just run amock political posturing. Do the neo-cons really believe that the free market system really works? Then do it and lead by example. I am not saying that the current package of agreements is fair. That is what the art of negotiation and compromise is there to do. Unfortunately the world is driven by greed whether it's Democrat, Republican, Socialist or Communist or whatever. But do we just keep developing angry plans of first strike tactics and punishments (economic and militarily) to rule the world by fear? We should be smarter than how we've been acting.

KJW:

Proponents of protectionism have been around for thousands of years. Plato thought that allowing foreign traders into the polis would corrupt the soul. Aristotle thought that exchanging products for money had a corrupting influence, and thought that the best state was one that was self-sufficient.

Perhaps the main reason why protectionism has failed to die is because special interests -- auto manufacturers, steel companies, the textile industry, and so forth - - have much to gain by enlisting the aid of government to protect them from foreign competition, whereas the large majority of the population, consisting of unorganized consumers, have little to lose by any particular protectionist legislation, and may not even know that the measure is costing them money in the form of higher prices.

While it is obvious that protectionism results in higher prices and benefits the few (producers) at the expense of the many (consumers), perhaps the strongest argument against protectionism is the moral argument. The illegitimate use of a state by economic interests for their own ends is based upon a preexisting illegitimate power of the state to enrich some persons at the expense of others.

One of the more curious aspects involved in trying to restrict imports is trying to determine exactly where the product in question is coming from. Is there a difference between a Chrysler made in Canada and a Honda made in Ohio? Which one, if either, should we be protected from?

Some protectionists argue that they need government protection because some foreign government is subsidizing some product. But if this were true (and it sometimes is true), then it would be cause for celebration, because it means that some foreign government is paying part of the cost for a product that American consumers are purchasing.

A variation of the subsidy argument is the dumping argument, the belief that foreign manufacturers are selling their products in the domestic market for less than cost. Yet, oddly enough, consumers never complain that prices are too low. It is the domestic manufacturers who complain, and ask for government assistance in preventing or reducing the competition that they face.

Another argument that has been put forth in favor of protectionism is that the failure to protect domestic industry from foreign competition will result in the loss of jobs. While this is sometimes true, perhaps more importantly, if inefficient industries are protected from more efficient competitors, then government is being used to subsidize inefficiency, which has a retarding effect on economic growth and the standard of living.

Another argument is the trade deficit argument. The trade deficit argument (as well as many of the other protectionist arguments) begins from the implied assumption that domestic producers are somehow entitled to the business of the country's populace, and that foreign producers who do business with the local population are somehow stealing from the domestic producers. Is such an assumption logical? I think not.

Another oft-heard argument is that America is deindustrializing, that its manufacturing jobs are being replaced with lower-paying service industry jobs. Yet the evidence shows that the number of jobs in manufacturing in the USA has remained about the same for the past few decades, and production has increased because of the adoption of more efficient methods.

A variation of the deindustrializing argument is the low-wage argument, which takes the position that industrialized countries need protection because they cannot compete with third-world countries that have much lower wage rates. But what these proponents ignore is the fact that industrialized countries can afford to pay higher wages because their labor force is more productive, partly because of higher capital investment. And even if foreigners can undersell a domestic company in some labor-intensive industries, consumers benefit because they can buy what they want for less money, which means they will have more to spend on other goods and services.

So which way does the President lead us? Beijing is under pressure from Washington to revalue its currency to make Chinese imports more expensive and US exports cheaper. China's neighbors in East Asia fear that such pressure will be the prelude to US protectionism that will not only hurt China but crimp their economic growth as well.

There is no reason why labor-intensive industries should be protected, as competition with low labor cost countries is a losing battle. Instead, it is important to have a flexible society so that resources can be redeployed more productively in more competitive sectors of the economy. History shows that the depression during the 1920s was more severe and longer than it could have been because trade barriers were raised. Trade barriers tend to penalize those embracing change and to block job creation, while subsidizing those who do not adjust.

EJS:

President Bush is over hob-nobbing with communists in Asia in order to avoid the funeral for the Republican Party here at home. And where are these economic policies getting us? Are these free trade agreements really in the best interest of the American people? Or are they designed to help global corporations increase already astronomical profits? And could these policies be actually contributing to an already unstable security situation in the region and here in the homeland?

Kim Jong-Il still survives today for one reason: China. The People's Republic supplies the little dictator's godforsaken country with 90% of its' energy (oil). If President Hu wanted to, he could simply turn off the spigot and we could all be witnesses to the implosion of Kim's pesky regime. But he won't. And why should he. China is winning the economic battle right now with the United States. The trade deficit is at an all-time high, they refuse to revalue their currency, and Americans have a never-ending lust for their cheaply made shoes, garments, and anything else under the sun that can be made for pennies on the dollar over there. Bush does nothing but continue to give them 'Most-Favored Nation' status and run around Indochina in a kimono. North Korea also acts as a distraction for China; as long as Kim has us hopping from one foot to the other, we are less focused on China's military buildup. I support imposing tariffs across the board on all Chinese goods to balance the trade deficit and force China to cut off North Korea. While this may hurt consumers here in the short-term, it is the best action to take in regards to our own security, and should also help reinvigorate our severely damaged manufacturing sector.

Mangos for nukes. This one still confounds me: President Bush traveling to India to sell "civilian" nuclear technology. At the same time, Bush is holding on to ally Pervez Musharraf by a thread, who has been fighting with the Indians forever over Kashmir. He is playing both sides in this conflict; hopefully it doesn't cost us one of our biggest allies in the War on Terror. It also sends a poor signal to countries like Iran and North Korea, who see a double-standard in place as far as our policy towards nuclear proliferation.

What about these free-trade agreements, NAFTA, CAFTA, etc.? How many millions of jobs was this deal supposed to create in Mexico? Now we have more illegals streaming across the border than ever before. TEN PERCENT OF MEXICO'S POPULATION RESIDES IN THE UNITED STATES ILLEGALLY! Remittances from the United States accounts for Mexico's second leading source of income, after oil revenue. The trade agreements have also hurt the manufacturing sector, making it easier for manufacturers to outsource jobs to cheap foreign labor. Ford and GM are basically dead in the water, a sad commentary on the American manufacturing situation.

I hope if the Democrats do anything, they address the free-trade situation promptly. We need to adopt more of a "protectionist" policy economically or we face losing the economic war to the rapidly-expanding Asian market, and soon we could be a country of nothing but massage therapists and web designers (and illegal immigrants).