Someone tell me how "Free Trade Agreements" are a good thing?

[Vulcan]

Gawd you guys crack me up.

It goes a little something like this:
NZ has pretty much free trade. Lets say someone in India produces a Widget in a sweatshop and sells it to an importer for US$10. That importer doesn't pay any import duties (apart from GST, which is long to explain but its net effect to the importer is neglible). The importer then sells the widget to a store @ US$20. The store then sells it the you at US$30.

Then theres the US. The have import duties on widgets. So the importer has to pay US$20 per widget ($10 cost plus $10 tax duty). He sells it to the store for $40, who then sell it to you for $60.

Still in the US there is a widget maker, but his widgets cost $20 to make. He sells them to the store for $40 who sells it to you for $60.

Now whats the net effect of the import duty? Well in NZ the consumer pays $30, in the US the consumer pays $60. In the US the govt gets $10 tax, and the importer doubles his margin (which means he may be able to bribe or drop his price to get more sales from the store).

At the end of the day import duties only server to protect inefficient businesses or production and create a false economy. The only people who benefit are the goverment and those higher up in the food chain. The consumer loses out big time. So the consumer has less buying power and requires a higher income thus creating another ineffeciency in the US economy.

[Urchin]

Miko, thank you for responding.  One question however-  

You say "Second, as the unusually high profits attract more companies, the competition between them drives the prices down. That means that the real wages for all US consumers increase. Such increase in real wages allows employers to cut or not raise nominal wages and still leaves the employees better off. With lower nominal wages the price of the US products can be lowered.
With prices, US products become more competitive abroad. "

The U.S. imports far far more goods than it exports, I don't know the numbers but I know it is true.  I was also under the impression that for an economy to keep growing, it had to export more than it imported, is that untrue?

Also, I was under the impression that "real wages" had actually fallen since the 1970's.  For most Americans anyway, for the richest Americans it is up some absurdly high 3 digit number.

And by the way Grunherz... you need to take off your McD's or Walmart thinking cap and possibly do some thinking on your own.  Maybe you'll be able to think up some new catch phrases if you try real hard.

[DmdNexus]

WTO is about to slap the US with a 2 billion dollar fine for it's 30% Steel tarriffs... .which are ILLEGAL according to trade agreements signed by the US...

I guess the US and it's word doesn't mean watermelon to Republicans.

[midnight Target]

Our biggest dealer is in Canada. We export more product than we import from suppliers. NAFTA makes this process relatively painless. It's a good thing for us.

A little side bonus is all the cheap Mexican labor we use.



buahahahaha best of both worlds.

[Vulcan]

Originally posted by DmdNexus
WTO is about to slap the US with a 2 billion dollar fine for it's 30% Steel tarriffs... .which are ILLEGAL according to trade agreements signed by the US...

I guess the US and it's word doesn't mean watermelon to Republicans.

Sweet! I know NZ was doing the US over some trade breaches (lamb, steel, and forestry stuff).

[GRUNHERZ]

You know Urchin I just gotta laugh at that, being insulted on
economic issues by an ignorant communist like yourself...   as for inmdependanyt thought yoiu are the one sputtering back drivel from yiour communist profhesors, tell me again how evil are those corporations? Anyway dont be too hard on Wal-Wart or McDonalds, they will always be there for you when you need them because frankly you have no chance in the real world if you continue to think as poorly as you do on economics and business.   >
 
Still urchin I think your hostility towards me fully demonstartes that I was right and that you really arent willing to learn from these responses.  In fact I dont even know why i bother responding to this thread.

But I'm kinda ticked because I did try to give you a real life example of where tarrifs such as you prposed did great harm - but then you come back with insults..

Why ask in the first place if you intend to insult people who respond?

[GRUNHERZ]

Originally posted by midnight Target
Our biggest dealer is in Canada. We export more product than we import from suppliers. NAFTA makes this process relatively painless. It's a good thing for us.

A little side bonus is all the cheap Mexican labor we use.



buahahahaha best of both worlds.

Wouldnt you be better off if there were huge tarrifs stopping this evil corporate greed?

[Animal]

Originally posted by miko2d

 How is that scenario?

 miko

The way you picture it I have absolutely no trouble with, like I stated above, I am pro global economy, if it is done the way you have described.

But that is not the case with many companies.

Take Nike, for example. They are already a hugely profitable company, earning more than 1000% of the cost of manufacture their products.

These products, of cheap materials to begin with, are manufactured overseas by workers who get paid the equivalent of $1 a day, minus $.25 daily for food, if they want to eat during their 12 hour shifts. You see, Nike employees are not allowed to bring anything into the factory, including food, for fear of contraband, just as they are checked when they leave. The food they eat must be purchased at the factory for one third their daily pay. Each worker makes aproximately 40 pairs of shoes daily, at a cost of aproximately $5 each in materials. This product is then sold by Nike, to us, at a price of aproximately $100. For $.75, that worked made Nike aproximately $3,000 in pure profit.

They have been doing this for years. Their prices are still absurdly high - their product costs the same now as it did ten years ago.

Do you consider this ethical? moral?

Now consider this. $.75, what that worker is getting paid, is not enough to mantain a family of four. So the worker has to bring his wife, and one of his children, probably his eldest, to work with him, so that they can together earn $2.25, which would then be enough to mantain the family.

Picture yourself, your wife, and your eldest son (maybe 14 years old?) all together working for the equivalent of $40 a day in the US. Your eldest son cannot go to school, so you got no hope of him becoming a professional and getting the family out of the ditch. Not to mention your youngest offspring, which is probably growing up unattended, to be a criminal.

True, the situation is dire, and there are simply no other jobs for a man like you, and this one is stable, provided you dont miss work three times a year, or meet weekly productivity expectations, you will be stuck with this job for the rest of your life.

Now, when you finally get home and turn on your 12" tv, the irony kicks in: You see Michael Jordan who is paid more than the cost of 5 years operation of your factory for a 5 second TV comercial, dunk a basketball, with a cinematic closeup of the shining shoes you build every day.

This is the reality for many people.
This is how many companies are operating. Few of them operate under your idealistic model. I wish they did, but they dont.

[Hooligan]

I think some of you guys have a very false idea of Nike's profits.  I just bought a pair of New Balance running shoes yesterday.  My first observation is that they cost more-or-less the same price as Nikes.  In fact all the running shoes on the shelves tended to be in the $40 to $100 range for a pair.  This indicates that all the shoe manufacturers have similar production costs (which seems likely) or that Nike is too stupid to lower their prices to $20 a pair and monopolize the market.  Secondly I just looked up Nike stock and their profit margin last year was 7%.  Oh my..... that is truly obscene.  I also checked Reebok who made 4% in profits, so I guess Nike is kicking their bellybutton but its not like Nike is Making $10 on every pair of shoes while Reebok is making $.05.  I'm sure as hell not going to invest any money in a running shoe company, I can tell you that.

The sad truth is that there is no shortage of poor desperate people in the world.  You guys can do all the hand-wringing you want but the only way those people move up out of poor desperate status is via industry and development (such as Nike is bringing).  In fact there used to be a lot more poor desperate people in such places as Japan, Taiwan and Korea but over the last 50 years or so the cheap labor which was there attracted production which over time seriously raised standards of living in those locales.

Getting payed $0.75 an hour by Nike may suck, but it sucks less than getting paid $0.25 an hour or having no employment at all.  The sad reality is that in a lot of places in the world these are the only choices.

This idea about global standards on wages and working conditions is total idiocy.  The real effect of requiring Nike to pay $3.00 an hour to workers in Vietnam would not be to raise pay in Vietnam but to relocate their factories to Mexico (why pay to ship shoes halfway around the world if you are saving nothing on production costs).  Instead of helping the poor workers you have so much sympathy for you would be condeming them to starvation.

Economic laws are just as firm as the laws of physics.  Stalin could not, Mao could not and we cannot alter them by wishful thinking.  The 20th century was one long economic equivalent of a bunch of governments outlawing gravity then taking a sight-seeing tour of the grand canyon (the little pink splotches at the bottom are all communists and socialists).

Hooligan

[GRUNHERZ]

Originally posted by Hooligan
I think some of you guys have a very false idea of Nike's profits.  I just bought a pair of New Balance running shoes yesterday.  My first observation is that they cost more-or-less the same price as Nikes.  In fact all the running shoes on the shelves tended to be in the $40 to $100 range for a pair.  This indicates that all the shoe manufacturers have similar production costs (which seems likely) or that Nike is too stupid to lower their prices to $20 a pair and monopolize the market.  Secondly I just looked up Nike stock and their profit margin last year was 7%.  Oh my..... that is truly obscene.  I also checked Reebok who made 4% in profits, so I guess Nike is kicking their bellybutton but its not like Nike is Making $10 on every pair of shoes while Reebok is making $.05.  I'm sure as hell not going to invest any money in a running shoe company, I can tell you that.

The sad truth is that there is no shortage of poor desperate people in the world.  You guys can do all the hand-wringing you want but the only way those people move up out of poor desperate status is via industry and development (such as Nike is bringing).  In fact there used to be a lot more poor desperate people in such places as Japan, Taiwan and Korea but over the last 50 years or so the cheap labor which was there attracted production which over time seriously raised standards of living in those locales.

Getting payed $0.75 an hour by Nike may suck, but it sucks less than getting paid $0.25 an hour or having no employment at all.  The sad reality is that in a lot of places in the world these are the only choices.

This idea about global standards on wages and working conditions is total idiocy.  The real effect of requiring Nike to pay $3.00 an hour to workers in Vietnam would not be to raise pay in Vietnam but to relocate their factories to Mexico (why pay to ship shoes halfway around the world if you are saving nothing on production costs).  Instead of helping the poor workers you have so much sympathy for you would be condeming them to starvation.

Economic laws are just as firm as the laws of physics.  Stalin could not, Mao could not and we cannot alter them by wishful thinking.  The 20th century was one long economic equivalent of a bunch of governments outlawing gravity then taking a sight-seeing tour of the grand canyon (the little pink splotches at the bottom are all communists and socialists).

Hooligan

Excellent post, I was looking up Nike's financials just now but you beat me to it.  And you make a fantastic point about minimum wage laws as well - they cause unemployment and would do so in a unique way globally hurting most the very people they are intended to "help."

[Animal]

Nike's lack of profit comes from it growing too large for its own good during the 90's, and shady business practices.

They dont follow miko's economical model at all.

[GRUNHERZ]

Originally posted by Animal
Nike's lack of profit comes from it growing too large for its own good during the 90's, and shady business practices.

They dont follow miko's economical model at all.

"For $.75, that worked made Nike aproximately $3,000 in pure profit."


But a few posts ago you were saying they were raking in the dough... So which is it, are they greedy sadistic coldly efficient profiteers or bumbling idots barely staying afloat...

[Animal]

Ha! ask that to the fat cats in Nike's lavish upper ladder.

[GRUNHERZ]

You changing the subject and avoding your contraditory statemetns about Nike profitability....

[Animal]

How am I changing the subject? I am unable to answer your question. If Nike is not profitable it may be because of their own stupid business tactics - certainly not because they are paying their workers too much, or using expensive materials for their products.

I dont get it Grunherz. I am pro a global economy, and I agree with some of your views, but you defending a company such as Nike shows just how much you care about the  global  economy.