Value of Trade

Students should read this Post by Greg Mankiw, who tries to define Paul Samuelson’s position on Trade, by citing the Bhagwati, Panagaryia, and Srinivasan (2004) rebuttal of Samuelson’s Paper. It sounds good, but may contain some elements of confusion (remember this comes from a individual who has read only parts of the Samuelson Paper, and none of the Rebuttal). The first Step in the Trade cycle develops, not necessarily because of Comparative Advantage alone, but also because of a lack of knowledge (Technology and Expertise) in the continuum of Sales in the Other’s domestic markets. The second Step is achieved with the Trader learns to effect Sales in the Trading Partner’s domestic markets, providing competition in those markets under the pressure of minimizing Production Costs. The third Step consists of domestic Producers learning to match the competition of their Trading partners effectively, and much of the value of Trade dissipates for both Trading Partners, with Trade reduced to basic raw Production materials. I happen to agree with Samuelson, and believe that the spread of Information and Technology will destroy any Comparative Advantage of Trade, except in the realm of raw Production materials, over the long haul.

Hillary Clinton may be mistaken on her views on Trade, but where has this ever stopped any Politician? My contention, possibly or impossibly backed by Samuelson, attests that Economists overinflate the value of Trade. My ideation fundamentally asserts that all Trade must be either discriminatory or confiscatory (as hidden taxation), based upon a lack of Information and technology spread. Even raw materials must be based upon a Worldwide Pricing system, with full spread of Information, to avoid this artificial taxation. The basic trouble with Ricardo’s Comparative Advantage lay in its excellent analysis of Costs; its basic failure comes in its inability to integrate Assets pricing successfully into the spectrum.

Economists will say the Above is a Question of Ethics, not Economics, and they will ignore the natural Cost pricing of discrimination. There is real reason why leading Trade partners invariably lose their preeminence in World Trade, which is basically the spread of technology and expertise. Great Britain was the leader in Trade in 1900, and trailed drastically by 1950. Japan was a major leader in the 1970s, and has been struggling since the 1990s. Is this some major loss of Comparative Advantage? Well, yes, but a specific loss through Information Spread; remember, Japan still remain as a technological leader. American Economists should realize that the United States needs to take the lead in some industrial advance–Computers and Boeing jets are getting a bit worn. lgl