Trade Policy Considerations

Mark Thoma presented this NYTimes Opinion in his daily Reading list. It is something which should be read because it deals with a relevant issue in an intelligent manner. What worries me is that it presents the standard conflicted solutions; Ones which will not significantly alter the current state of affairs. It includes the first real Republican admission of the stagnation of American Wages, even though Productivity has expanded greatly. The Curatives offered, though, remain standard pap, unsuited for effective Change. I will state here for the Record that I did not want to espouse the following, as the classification will probably turn All against me.

I will first attack the Peterson Institute’s claim that Trade since WWII has added $1 trillion to the American economy, and is likely to add another $500 billion. My quizzical response is ‘in relationship to what Economy?’ The Answer will be in relation to the American economy of 1945. Here is the rub: It accepts as a Given that the American Performers in 1945 were bound to lose their Market share in the current Economy. It assumes that those Participants would not have expanded their Productive capacity to maintain Market share. It does not assess the inherent added Costs of Advertising, Marketing, and Distribution in a multiplex Product provision Market. It accepts as conclusive that American labor would have lost their Negotiation position in the current Economy anyway; i.e., that foreign Products would have flowed in to replace restriction of American Production. It contends that the current American Export levels would have disappeared entirely, if the American Import Trade had not grown. It believes that the outflow of American Capital and Technology would have occurred without restriction anyway. The basic thesis of the Peterson Growth theory is that the American economy would not have altered at all, in the face of an expanding Market and Production base, and the innovation of the American economy would not have come about without foreign intervention.

Any American economic response to the above-mentioned forces would have detracted from the Trillion Dollar gain from Trade. Proponents of Trade always mention Displaced Workers, but never put a numeral Cost to their forced extrusion from Production, or put a Cost reduction into their evaluation of Trade gain from this extraction. I would like to see an economic study which accounted the total lost Production from Trade since 1945. I would also like to witness a economic Study on the effectiveness of Advertising in a Product Market with an excess of ten Product variations; are Marketing efforts more costly and less effective? There is an economic Study needed to evaluate the added Cost of Capital equipment duplication in overall Product Price structure. Readers get some idea of the real issues involved, and Protests of Free Traders aside, an understanding of the arena where any Solutions must operate. lgl