Trade: A reply to commenters
I get certain comments quite often, so perhaps I should reply in one place.
1. “You should not say “we”, you should say “the US government”.
Guilty as charged; it’s a habit that’s hard to shake. Thus when I say “I hope the US loses the trade war”, I actually mean I hope Trump loses the trade war, in which case the US will win.
In my defense, lots of people make the same mistake. They’ll say “The US beat Uruguay in the World Cup”, not the US football team beat Uruguay’s team at the World Cup.”
2. “Why do you say public opinion polls are misleading, then cite them when it suits your interests?”
When I cite public opinion polls, it’s generally to push back against the conventional wisdom on an issue. Thus if I cite polls showing that American’s increasingly support trade, it’s to push back against claims that Trump was elected because Americans increasingly oppose trade. The burden of proof is on those that make the original assertion.
Here’s another way of making the point. If you want to show that anti-trade feeling is on the rise, you must first find surveys that show that to be true, and then prove the surveys are not biased by the wording of the question. I simply pointed out that those fashionable Trump experts hadn’t even surmounted the first hurdle; the polls don’t even show what they claim. If they want to find alternative evidence they are free to do so (perhaps mind reading machines?), but thus far they’ve failed to find non-poll evidence for their claims.
3. “Even if free trade is generally good, shouldn’t the US launch a trade war to stop the Chinese from stealing IP?”
Probably not, for a variety of reasons. It’s almost inevitable that lower income places will steal IP from the rich. American teenagers used to illegally download songs and movies. They didn’t think they were doing anything seriously wrong—more like jaywalking. They certainly didn’t view themselves as being the moral equivalent of burglars.
When America was young we stole lots of industrial secrets from the UK. Europe stole the compass, gunpowder, paper and printing, porcelain, etc., from the China. That’s the way the world is. It’s not just the Chinese; the Indians, the Vietnamese, and other developing countries do the same thing.
Even if it’s bad, the average American suffers very little harm. Tech billionaires lose some profits, but if it helps China develop faster that actually helps average Americans, as we benefit in multiple ways from a world that moves from poor to middle class.
And even if we should retaliate, trade wars are a blunt instrument, unlikely to be effective and likely to hurt lots of innocent bystanders. If there’s proof that a specific China company stole IP from a US tech firm, then you might want to blackball that specific Chinese firm, in the way we’ve gone after Huawei. But not an all out trade war. The Chinese government probably couldn’t even stop IP theft if it wanted to.
We’d be better off focusing on positive initiatives, such as reforming our IP laws. How about reducing copyright protection from nearly 100 years to more like 10? Hollywood makes plenty of money from songs and movies in the first 10 years, after that allow America consumers to benefits from cheap goods that can be produced at near zero marginal cost. Remove IP protection from lots of dubious “business practices” that are far from the original vision of patent laws.
The trade war is hurting lots of people all over the world, including in America. It’s rarely the case that a four cushion shot in billiards will work, and it’s rarely the case that the indirect effect of highly destructive policies will eventually offset the upfront costs.
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15. October 2019 at 11:21
1) Common “mistake”. I might do the same sometimes when I talk about China. It’s just shorter. You can not write “the American regime” or “the Chinese regime” every time.
Besides, there are certain connections: If a certain amount of Americans would not support Trump, he would not be in power. The same goes for the Chinese and the CCP, and their dear leader-god-king Xi.
2) Not very convincing. Public opinion polls are either misleading or they are not. You still just cherry pick.
15. October 2019 at 11:37
I totally agree on IP. Our Constitution says that the government can issue IP rights “for limited times.” Copyrights were originally good for 14 years. Now it’s the author’s life plus 70 years. Trade secrets are even worse. There was no federal concept of a trade secret until the 90s. The whole concept of trade secrets is largely a way to get around the 20-year limitation on patents, and essentially creates indefinite IP protection. How can we expect people in other countries to follow our IP laws when we are constantly extending them and inventing new forms of IP? I think there should be no legal protection for trade secrets, and copyrights and patents ought to be limited to 20 years.
And with regard to China, most of the IP infringement is due to the fact that it’s impossible to police so many people. China is the world’s largest source of counterfeits, but also has tougher enforcement than many countries—for instance, Chinese customs is one of the only customs agencies in the world that will seize outbound counterfeit goods. People’s views toward China seem to be shaped by this false idea that the Chinese are this hive mind and their government directs everything they do.
15. October 2019 at 11:54
Christian, Logic was never your strong suit.
15. October 2019 at 12:44
Since this post is about replying to commenters, is there a reason to be so rude? I certainly agree that your reason to cite polls makes perfect sense, but the way the critique was phrased doesn’t seem to warrant the above response. It’s also not likely to change Christian’s mind since it increases the cost of admitting to be wrong.
15. October 2019 at 13:16
Well said.
BTW, this is the best, and most data-driven, piece on why The Donald got the votes he did by someone who is not remotely an admirer of The Donald and wants the Democrats to do better.
https://policytensor.com/2019/10/03/why-did-trump-win/
15. October 2019 at 13:16
By “well said” I mean very good post.
15. October 2019 at 15:53
Well… this post and other posts sidestep several issues regarding international trade and open borders.
I think the perspectives of a Michael Pettis or Dani Rodrik are worth accommodating. Michael Pettis says that international trade also results in the lowering of labor shares of income in order for different regions to compete in global markets. In fact, Pettis says Germany became an exporter after it lowered the labor share of income inside Germany through labor reforms. In popular media, the beer-swilling German laborer who liked to work 35 hours a week, 46 weeks a year, was replaced by the Teutonic Titans.
Victor Davis Hanson, the Hoover Institution scholar, posits that open borders have lowered wages in the United States, in large part due to illegal immigration.
There is still the concern raised by the International Monetary Fund, that large and chronic US current account trade deficits result in heavy capital inflows that artificially boost asset values and thus create unstable financial systems. Think 2008. The IMF recommends the US cut its current account trade deficit in half, at least as a start. That is the IMF talking, not me or Trump. Other studies seem to show that nations with large and chronic current-account trade deficits also have exploding house values.
In developed nations, the employee class no longer reproduces itself. This problem is most acutely seen in Hong Kong, where the average woman has 1.2 babies. Housing is frightfully expensive limiting family formation. Yet the globalists tout Hong Kong as exemplary, a model to follow. Yahoo, let’s extinguish ourselves!
It is not a surprise that globalist elites sacralize immigration.
The globalists are glib and messianic in their proselytizing of their free trade theology. As they have the backing of multinationals, they are well-financed, whether in media, academia, in lobbying, in trade groups, in think tanks, or even in the financing of political campaigns.
So, people see what is happening to their living standards and they hear the globalist mantra.
And they will vote for Trump or Warren in 2020. We may yet see AOC in the White House, or a successor to Trump who makes Trump look milquetoast.
15. October 2019 at 17:14
Scott,
glad you addressed the issue of using “we” and other fuzzy generalizations. It’s one of the healthiest things one can do to not use the “we” for a country. It may be a bit cumbersome but it clarifies realities that most people are not actually aware of. Example: “China” doesn’t do anything. Ever. Neither do “Chinese companies”. Or “American Business”. “some” do… for sure. But never all.
The same is true for all generalizations. If you do this exercise, it becomes much easier to address polemics and populism. Most of these can only exist because of wild over-generalizations.
Examples. Some say “China steals IP through forced tech transfer” when in fact “China’s government passed laws that condition investment by companies not domiciliated in China, on sharing of technology with China-domiciliated companies they are partnering with.”
Some say “Europe is taken over by foreigners” when in fact “Some Europeans feel that the their cultural identity is at risk from disproportionate visibility of people on the streets that they don’t identify with as a cultural group.”
Some say that “Brexit restores sovereignty to the UK” when in fact “Brexit means that some laws and regulations that used to be decided by a political body sitting in Brussels and Strasbourg and that UK citizens voted for alongside the citizens of all other EU countries, will now be decided by a political body sitting in London and voted for exclusively by UK citizens”. /etc
I realize it can’t be done for all text … it loses its punchiness. But it is hugely instructive to sometimes do this exercise just to remind oneself what is actually happening.
15. October 2019 at 18:58
1. I wish you would spend less time worrying about semantics, and more time worrying about the economy. The fact that a number of these comments, particularly the last one, attempt to provide advice on word choice, and less on economic theory, says a lot about the nations failed academic system.
2. Trade is great, but only within reason. I wish you would spend time in the heartland, and see the meth labs, the homeless, the dilapidated houses, the crumbling roads, the abandoned warehouses, the hundreds of thousands who have been out of work so long they no longer count towards the unemployment statistics, and then ask yourself if maybe Ross Perot was right! It should be self-evident that if you ship the nations jobs abroad, and you let employers seek the lowest labor, then it will only lead to a very broken economy.
3. Trump has been incredibly soft on China! The best strategic outcome is NOT to avoid a trade war, but to place tariffs on all imports from China until Chinese factories begin to default, and manufacturers move to Vietnam, Laos, Indonesia. And Trump will do that if he is re-elected. The mini deal is only for show. It gives ammunition for the campaign, but you can be sure if he wins then the hammer will come crashing down. Trump is our best chance to crush the Chinese economy, and remove the growing threat. It is too late to bring jobs back home, but at least we can mitigate China’s rise by transferring the wealth elsewhere.
4. teenagers who download torrents on piratebay cannot be compared to nation states that force companies to genuflect for market access, and spend millions propping up dark web marketplaces to hack into company servers.
15. October 2019 at 19:03
1. Economists shouldn’t be worried about semantics, they should be worried about fixing our broken economy.
2. Trade is good, but only within reason. Visit the dilapidated heartland, and you will see why Ross Perot was right 30 years ago.
3. Teenagers who download torrents on pirate bay should not be compared to a nation state that forces companies to genuflect for market access, and prop up dark web marketplaces to hack into company databases.
16. October 2019 at 05:34
@Lorenzo
I think that PolicyTensor article is junk.
It was really data-driven… until the conclusions about race, antiracism, etc. What’s the piece of statistical evidence linking drug use and flight of the educated to racial resentment in Trump country? (In fact, the main statistical evidence he shares related to race seems to reject local immigration as a driver of Trump support.) I don’t necessarily disagree with the conclusions about racial resentment given my own anecdotal impressions of the conservative zeitgeist, but what’s the point of showing me a bunch of p-values about smart kids leaving dying towns if the interpretation is just going to be whatever intuitions that author has about race and its role as a driver in urban/rural relations? You’re not data-driven if the data isn’t driving, or at minimum supporting, your narrative.
16. October 2019 at 09:00
Scott,
that’s rich from the guy who can’t even read opinion graphs about China, and who also denies that he put Russia and China on the same negative kowtow level.
@Lorenzo
The positive approach of your linked article is that it searches for real reasons and not for some vague, badly definable politicized frippery. Of course, you can explain everything with “hysteria” (as Scott likes to do), but before that you indeed have to thoroughly rule out that there are no other real causes.
16. October 2019 at 13:52
Silver, If Christian doesn’t want insulting replies then maybe he should re-evaluate his style.
mbka, Good point.
George, Please stop plagiarizing Xu.
Christian, Repeating lies over and over again does not make them true.
16. October 2019 at 15:13
Derek, I am not sure what you are getting at. The piece I linked to concludes:
“But what does this have to do with racism? More pointedly: Why does the breakdown of elite-mass relations, now manifest in the Trump insurgency, exhibit the symptoms that it does? Why do people in Trump country, whose trauma is real enough, blame immigrants and minorities? Part of the answer is that people in Trump country regard Boasian antiracism as the hegemonic ideology of coastal elites—as indeed it is. Of course, they don’t call it that; they call it political correctness instead. Resentment of coastal elites, although driven by all-too-real decline of situated communities, is thus expressed as a wholesale rejection of the hated elites’ self-congratulatory worldview.”
So, racial resentment is explicitly not seen as a driver. So, why would he need data linking it to racial resentment that his analysis says is not the key issue. As he says earlier:
“Did counties where Whites are declining as a percentage of the population swing to Trump? That would be the implication of the racial resentment thesis—at least in as much as prejudice is driven by locally-visible demography. The answer is no. Change in the percentage of population that calls itself White (“DeltaWhite”) is positively correlated with the Trump swing. Although statistically significant, the fixed-effect is an order of magnitude smaller than that of our three main predictors. It is not that important a conditioner of the Trump swing.”
16. October 2019 at 16:02
Xu,
1. The semantic point in this instance is important because many people do in fact think of the government as the embodiment of everyone in a country. For example, people fail to distinguish between China and the Chinese government, which is why they think its appropriate to penalize the whole country of China for its government’s actions.
2. I’ve lived in the heartland (Western Pennsylvania) my whole life and there have always been meth labs, homeless, etc. here. Our regional population has been declining since the 60s and the 80s were when most people and jobs left—decades before NAFTA or China becoming a major trading nation. Trade was not the cause of these problems; to the contrary, trade has helped our region’s recovery in many ways, such as through natural gas exports and foreign students and professionals helping keep our knowledge industries alive.
3. It’s pretty nasty to want to crush an economy of 1.4 billion people. I doubt many people in China talk like that about the US. And even if that were your goal, how would tariffs transfer wealth or jobs out of China? The factories will still be there. They can produce things still. Tariffs can only hurt China if the Chinese run out of foreign currency to buy imports they need, but lots of Chinese imports are things like tourism that they can cut back on pretty readily.
4. Do you mean the Chinese government is funding dark web marketplaces (I’ve never heard of this)? Or random people in China? This seems to reinforce that point 1 is not semantic.
16. October 2019 at 16:20
Scott, Your definition of “lie” is very broad. Reminds me of Trump’s definition of “fake news”: anything that doesn’t fit one’s own opinion must be a lie???? –> Yeah, sure.
I might use polemics and poignancy here and there, but so do you. That’s not lying.
I personally wouldn’t say that you are lying. In order to lie, you first have to realize that you are wrong. =)
16. October 2019 at 18:47
Xu,
let me give you economic theory then.
1. Economic growth depends in increasing productivity
2. Increasing productivity depends on increasing specialization (division of labor), because what one specializes in, one produces better / cheaper
One consequence of 2. is that autarky (for a country) or naive homesteading (for an individual/family) is lunacy
3. Any division of labor between individuals, companies, or countries, implies trade. If you don’t produce everything at home or by yourself, you have got to trade
4. Increased trade is both a pre-condition and a consequence of more specialization
5. Since specialization indicates more productivity, trade indicates more productivity
6. The relationship between trade and productivity (economic efficiency if you will), works exactly the same whether the trading partners are located within the same house / city / region / country / continent / known universe
7. Restricting trade between individuals or companies solely because they are located in a different locale is based on wilful ignorance of points 1 to 6
8. Large countries can withstand international trade restrictions better than smaller countries because they tend to have have enough market size, economic complexity, and diverse resources.
9. Therefore, small countries tend to be more vulnerable to trade restrictions than larger ones
10. Because of 9., the US and China suffer less from the current outbreak of economic idiocy in international trade relations than countries such as Singapore or Korea
11. Point 9. is a major reason for the existence of the European Union and a major reason why Brexit is a risky idea
12. Nonetheless, even large countries benefit from trade
13. The benefits from trade through comparative advantage have been recognized by Ricardo about 200 years ago. He showed how trade benefits all nations, regardless of the competitiveness of their companies
14. Semantics influence what people believe. Warped wordings lead to warped beliefs.
16. October 2019 at 20:20
@Benjamin Cole,
I don’t think immigrants are lowering wages for people who are already here, because in a competitive economy, people are paid their marginal product, and I just don’t know of any examples wherein the presence of added immigrants lessened the productivity of workers who were already here.
It’s actually possible that immigration lowers the average wage even while everyone is making more money. Suppose we start in year 1 with 100 workers all making $25 thousand per year. Over the course of the year, they each get a raise to $26 thousand, but they are also joined by 60 immigrants each getting paid $10 thousand, which is still more than the $5 thousand they were making in their home countries. So average wage at the start of year 1 was $25 thousand, but the average at the end of the year is
(26,000*100 + 10,000*60)/160 = $20,000. The average wage has dropped by 20 percent even though everyone is making more money than before.
My example works because the immigrants are making less money than the people already here. In the real world, that’s actually true, so looking at average wage rates in the presence of immigration is misleading.
17. October 2019 at 06:59
@Lorenzo
My quibble is specifically with what you quoted as the conclusion:
“Why do people in Trump country, whose trauma is real enough, blame immigrants and minorities? Part of the answer is that people in Trump country regard Boasian antiracism as the hegemonic ideology of coastal elites—as indeed it is.”
Nothing in the piece shows me that there is any link between the purported Boasian antiracism of the coastal elites and Trump support. I don’t even see anything connecting resentment of the “hegemonic ideology” of the coastal elite to Trump support.
Instead, I see evidence that residents of left-behind towns tend to support Trump. It is impossible to infer causality from the data provided, but it could be either a) young people with opportunity are fleeing these towns (potentially as a reaction to conservative culture that leads to Trump support) or b) residents of left-behind towns tend to support Trump (potentially a manifestation of general reactionism or a more specific resentment of the dynamic urban areas that Trump explicitly disdains). I don’t really understand why the author’s concluding remarks focus on antiracism as representative of coastal elite cultural hegemony when the evidence presented is pretty much all socioeconomic trends.
17. October 2019 at 14:40
Derek: “I don’t really understand why the author’s concluding remarks focus on antiracism as representative of coastal elite cultural hegemony when the evidence presented is pretty much all socioeconomic trends.”
Because he has also been analysing the collapse of elite-mass relations. See this post:
https://policytensor.com/2019/08/17/net-confidence-in-national-institutions/
And because The Donald is so blatantly anti-PC and that is clearly much of the appeal that got him the nomination.