by Mish

Cathy writes ….

> Hello, Mish:

I love your blog – thank you, for all your efforts.

You speak about free trade, but what I have noticed throughout history is that free trade only exists immediately after everything has been destroyed in war. Then the carpetbaggers move in cheating, stealing, trying to get something for nothing. Subsequently, the same “business cycle” with all its attributes returns. People who can take advantage of the system do just that until it climaxes in war once again.

Thank you – have a great day!

Cathy

China Doesn’t Play Fair!

My inbox and comment box is filled with reader comments and emails telling me “China doesn’t play fair”.

As part of that allegation, many point out Chinese pollution. I’ve written about that many times myself. Yes, it’s disgusting.

Let’s assume for a second that China is the one and only nation that plays unfair, or if you prefer plays the “most unfair.” Let’s also assume China subsidizes its manufacturers.

Who Benefits, Who Loses?

The logical conclusion of such an arrangement is the Chinese government is robbing its people for the express benefit of citizens of the United States.

There is no other logical conclusion. To subsidize exports, every person in China has to pay a cost, via taxation, pollution or both.

The winners are US consumers.

Reader Stuki eloquently explained the math in response to one of my free trade posts. He writes …

> In order for a foreign government to subsidize one sector, it must necessarily pull the money from others, rendering them less competitive. Conversely, by subsidizing steel, the Chinese government is indirectly subsidizing each and every industry that uses steel as an input, in the US and elsewhere. While simultaneously taking that subsidy back from their home market companies, in order to pay for the steel subsidies.

So, the net result is the Chinese government subsidizing a low value-add, albeit politically well- connected industry at home, while disproportionately subsidizing higher valued add industries abroad.

Any way you look at it, it’s a better deal for foreigners than for the domestic Chinese. This shouldn’t come as a surprise, because, as Friedman has pointed out, the Chinese government is taxing its own people, in order to pay for free gifts to foreigners.

If we would only be so lucky…… Of course, the Chinese collectively aren’t nearly stupid enough to not understand that. So the whole “subsidize” gift we’re supposed to be getting from China is, in reality, nothing more than the figment of some congressman-on-the-take’s imagination, planted there by the lobbyists for whatever LBO shop happens to have bought the steel maker that paid for his campaign.

Sugar, Sugar

For all the pissing and moaning by the US about China, the US is one of the worst when it comes to agricultural commodities, especially sugar and corn.

Countless US candy manufacturers moved operations to Canada and elsewhere to avoid paying the US price of sugar.

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The US sugar lobby is among the worst in the world. Were it not for EU agricultural protections to preserve inefficient French farms, the US would be the worst.

It is a constant source of irritation to small countries of whom the US demands free trade on exports but will not allow them on agricultural imports.

Problems with Free Trade

There are no problems with free trade, but there are two rules that prevent free trade.

  1. Every country wants free trade for exports
  2. No country wants free trade for imports

Trans Pacific Partnership (TPP) Agreement Hits 5,544 Pages

As a direct result of those simple rules, the TPP Trade Deal Hits 5,544 Pages, Longer Than Obamacare PLUS Rubio’s ‘Gang Of Eight’ Cheap-Labor Amnesty Bill.

As a side note, only 20% of those 5,544 pages have anything to do with trade.

The rest pertains to global warming nonsense, corporations rights to sue governments for damages, and God knows what else because the whole thing is secret.

For more on TPP, Tariffs, the WTO, and free trade, please see …

Genuine Free Trade Agreement

A genuine free trade agreement would consist of a single statement: “Effective immediately, all tariffs and subsidies, on all goods and services, are removed.”

“Fair Trade” is a concoction by industries that seek or need protection via tariffs and import restrictions, to the damage of everyone else.

It would be idiotic to have everyone pay triple for underwear to “save 500 underwear manufacturing jobs” but that is precisely what the “fair trade” nut cases seek.

Fair Trade Irony

The irony in the “fair trade” argument is no jobs are saved by tariffs.

In the example above, the additional money spent on underwear means consumers would have less money to spend on something else (to the detriment of jobs in other industries).

Mike “Mish” Shedlock

Readers Question Free Trade; Does Nonreciprocal Free Trade Cost Jobs? Paul Krugman “Was” Right!

I received many questions and comments regarding Obama’s Trans-Pacific Partnership Fiasco vs. Mish’s Proposed Free Trade Alternative.

Reader Questions and Comments on Productivity, Stagnation, Protectionism, Jobs

In response to White Anger: Fed Helped Elect Trump; Tale of Two Job Markets, readers chimed in with pertinent comments on productivity, stagnation, and protectionism.

Brexit Question on Free Trade

A reader asks if my stance of free trade is consistent with Brexit.

Squawking Parrots vs. Mish on Free Trade

Microsoft founder Bill Gates is a “Unabashed Pro-Free Trade Person“.

China Spotlight: Capital Flight Intensifies, US Treasury Reserves Plunge, Capital Controls Increase

A reader pinged me the other day about China “dumping” US treasuries.

Reader asks “Is the Khan Academy’s Free Education Policy Socialistic?” Is Mish a Socialist?

Reader Drew wants to know if the Khan Academy’s free education policy is socialistic.

Trade Deficit in Pictures: China, Mexico, Canada, Germany, Japan, EU

Trump’s howling about the US trade deficit with Mexico, Canada, Germany, the EU, etc, has me thinking about how to portray the result in pictures.

Global Trade War Baked in the Cake: Boeing Faces China’s Wrath

I have been warning about the increasing likelihood of a serious global trade war for quite some time.

Reflections on the War on Cash

Pater Tenebrarum at the Acting Man Blog pinged me with interesting comments regarding my recent article War On Cash Escalates: Australia Proposes Ban on $100 Bill; No Cash Within 10 Years?