The True Cheats

By “cheats,” of course, Gerard means that the Chinese find ways around artifices designed to restrict the damage from China

Corrected for accuracy. China is the wrongdoer for violating the regulations for which cover trade in our country.

What we are denying our people is junk, that is all.

When they learn to accept the non-economic freedoms along with the economic ones, then they should be allowed consideration. When you have a viable plan for dealing with the displaced on the displaced's terms, then they can be allowed to approach the table.

Unfortunately it will take another economic collapse for them to do so. Thankfully they're just a larger house of cards that is more fragile and will collapse even harder.

Is China cheating? Here is the National Trade Estimate Report on Trade Barriers for China: http://www.ustr.gov/sites/default/files/uploads...

Is China cheating on currency manipulation by tying their currency to the U.S. dollar as agreed to in IMF commitments? The ratio of difference between the value of the yuan and value of the dollar was zero and flat every day of 2009. This pegging is currency manipulation and in violation of IMF agreements.

Does China cheat by vilolating its WTO and individual agreements with the U.S. on piracy of U.S. intellectual property? Yes, according to the U.S. China Economic and Security Commission: http://www.uscc.gov/annual_report/2009/09_annua...

The truth of the matter is that some steel producers in both Canada and USA can compete favorably with Chinese steel. There is a reasonable trade-off between quality and price, and most consumers, when apprised of the difference, choose quality.

This fact increases the irony of the union President, for 'his' workers generally don't really care how the firms that employ them operate. Forming an inclusionary rather than adversarial relationship with the firm that pays you aligns incentives, increases creativity, and reduces cost in a continual search for efficiency. None of the firms that can compete with foreign steel include Mr. Gerard's workers.

Why are we not surprised?

Thanks, Jim.

I remember the 1970s and union contracts that gave people with over twenty years a fourteen-week vacation every fifth year. Tonnage bonuses were paid before the steel went through quality-control, so the steel would literally go out of the mill, tonnage would be paid, the steel would be rejected by QC, and sent right back in to be melted and made again for another tonnage bonus. Guys were making over $75,000 a year in 1978 to make steel that couldn't be sold, and the union would not budge on a concession to pay tonnage after QC.

You are correct that many North American mills can compete with Chinese mills on price (it's easier to do in a non-union shop, mostly because of stupid union rules). In specialty steels, the Chinese mills just can't compete for quality. Buy a Chinese-made knife and see how long it holds an edge versus American or European steel.

I neglected to mention that some of those steel mills are some of the most well run companies I've ever seen. I have nothing but great respect for the people that work there.

They're smart, they work hard, and they are creative as I've seen in both product and process technology. They are manufacturing at its best and they can compete with anyone in the world.

I have seen a number of American manufacturers in other industries triple their capacity with less people while they virtually eliminate set up times and so I have never automatically believed that US can no longer compete with cheap labor.

But my greatest respect is still for the steel companies. I have never seen such awareness of their competition and the ability to get where they need to be. I'm not sure Deming could teach them anything:)

Somebody posted a quote from Bastiat a few days ago. Socialists don't understand the difference between society and government. Could someone post that quote again?

Saudis fire 1400 rockets into Yemen

http://joshfulton.blogspot.com/2010/01/saudis-f...

Why not just test the word cheat?

In order for there to be a cheat there has to be an agreement that establishes a standard.

Is there such an agreement between the traders of the USA and of China?

No agreement, no cheating.

An agreement being violated, then there is cheating.

As an aside, it is ridiculous to claim that I can make an agreement with Brotio on trading, and then accuse Methinks of being a cheat because she doesn't use the standards in the agreement between Brotio and myself.

So, is China cheating?

Yes, it is the agreements under the WTO and the Most Favored Nation status that enable them to do so. Further, there are existing tariffs on the books that exist to correct issues that China will not address. Those are the agreements for which cover your inquiry.


If there were no agreements of the sort, then there would be no circumvention for what does not exist. What covers the nation covers the individuals and their activities.


That blows your "no agreement, no cheating" out of the water.

No sir, it confirms it.

You'll note that I said, "An agreement being violated, then there is cheating."

Then I said, "No agreement, then no cheating."

Which leaves the only determination to be, is there an agreement? You say there is, so in your mind there is cheating.

I don't know, and I am not certain I should take your word for it, so I can not say.

Are the real dinguses here Americans? China and India outcompete America for manufacturing thus freeing up Americans for higher-order manufacturing, e.g. spaceships, except can't figure it out and are thus stuck in the economic doldrums.

For those whom have not drank the Third World flavor-aid, our manufacturing outdoes theirs. They just wish to cheat, manipulatively devalue the RMB, and violate the law for the intent to flood junk. Period.

Before you decide to respond, state for what specific purpose and not any general, categorical purpose that these people will be "freed" to take up.

What are wanking on about ss? Isn't it true that as less people were required in the agricultural sector as technology improved (less people, more produce) there were more people able to be employed in other tasks, e.g. making automobiles, movies, TVs, computers, etc. I restate the problem is that Americans haven't been able to figure out higher order tasks over what the Chinese do.

Actually we have figured out the "higher order".

All of our surplus people have been moving into the fields of Grief Counseling and Community Organizing.

Thank you very much.

Not every citizen is going to be able to go through the whole process to get those advanced degrees. So what happens to the rest who do not have those degrees - or are you just going to dismiss them as "acceptable losses"?

Perhaps you should look at that, as this particular transition is not anywhere close to the one you trotted out. There were industries that people could move to with relative ease/low cost; no such luck exists today.

That will be a sizable enough sum that you don't just ignore, but you deal with them on their terms.

However if there's free trade then America gets undercut by China and Americans get laid off anyway because they can't compete with the Chinese.

So - you're pro-protectionist then?

Such undercutting is questionable at best, more truthfully said to be manipulative with respect to currency.

You seem to speak of things as if the transition were instantaneous and relatively pain-free. The reality is that it is anything but, and there is no willingness to work *with* the displaced, but to wait them out.

That is the relevant issue at hand, not whether you ask about a particular label.

I keep hearing about "McJobs" from lefties. How much % of actual labor consists of these really low-skilled jobs? I bet historically it's at an all time low, but because of the internet we know so much more about it.

Government statistics could provide an answer to your question, but my guess is the answer would be wrong. I'm fairly confident that, over my lifetime of 58 years, the portion of workers employed in food processing, food service, and retail jobs in the U.S. has increased. But that doesn't tell us very much. When I born, most food processing and food preparation was done by unpaid housewives in homes. A significant amount of clothes production was done by unpaid housewives on sewing machines in the home. Home permanents were the rule not the exception.

As many more women moved into the workplace in the 50's, 60's, and 70's, the low-skilled tasks they had been performing entered government statistics for the paid workforce. This work was now performed by "specialist" cooks, garment workers, and all the retail support groups rather than by the "generalist" housewives.

My guess is that the portion of workers in low-skilled jobs has not changed that much. But government statistics which have ignored the contribution of housewives may not reflect that.

The exports to China that were increasing at that time look very Third World for the U.S. Why isn't business software, music, movies etc. listed? I will give you the answer. Because it is not paid for; File:Copy.

Manufacturing figures for the U.S. should be broken down by foreign made and domestic made components for a truer picture.

BTW. China is large cotton producer and they could U.S. made Deere machinery for efficiency.

China has now spent $40 million on "Avatar" box office and will probably end up spending $70 million or more.

Yes, piracy is a big problem, but China is so huge that there is still plenty of money to make on content sales.

Whatever happened to Global Warming as the world gets burried under a pile of snow.

http://www.kusi.com/home/78477082.html?video=po...

Founder of the Weather Channel discusses just that.

It's politically incorrect to talk about AGW during snow storms or the coldest winter since the 1800's. Don't worry though, when spring hits, they'll be back saying "See the Earth got warmer since January, that PROVES man is the cause of global warming." To which I know you and I will just slap our foreheads and sigh.

Meh, I'll be slapping THEIR foreheads!

Don:

This article is just asking for a beatdown:

http://www.latimes.com/news/opinion/la-oe-green...


The byline:

"The American Bar Assn. allows unneeded new law schools to open and refuses to regulate them. The government should consider taking steps to stop the flow of attorneys into a saturated marketplace."

Haha this one is great. Note the last line:

"Mark Greenbaum is an attorney and writer in Washington." Shocker.

The real question is - does protectionism win elections anymore?

It does if you're in a manufacturing state like Ohio. International Trade is almost an obscenity for what it has done to the state.

Sherrod Brown has certainly made that a point and has finally spoken for the Ohio that has been displaced - whether you're from the Youngstown-Cleveland-Akron area, the Cincinnati-Dayton-Columbus area, or the entirety of Southeast Ohio.

The same with Strickland, for he has kept the state solvent and not sellout like South Carolina or Alabama.

You take away jobs, ship them to places that are not under the regulatory domain of the United States (much less Ohio), and there will be problems. You put the jobs within the regulatory domain of our government, the problem disappears.

Either you work with the displaced on their terms or this kind of thing will happen.

Well it wins nominations. Remember good ole Barry back during the primary and his protectionist rhetoric in Ohio, Michigan and Indiana primaries. He was for protectionism back then, that's what got me reading up on Smoot-Hawley, which of course lead to me stop being a Dem, but that's a whole different story.
Unions love protectionism. They don't care that society on whole is worse off as long as their membership roles are full which of course means more dues and more money for the union bosses.
Rhetoric + Econimically ignorant populous = Protectionism.

Does it win anything?

The real cheats are both sides of the relationship, but the greatest stupidity could be less symmetric. When was the last time U.S. banks bought piles of junk paper from China only to have the Chinese buy it back, well above the market price, and impose the losses on Chinese taxpayers?

Donaldlast said:

>> Moderation in all things, said the Greeks and that very much applies to free trade.

As Don Boudreaux has pointed out here many times: nations don't trade, people do. So, Donaldlast, exactly which people are you going to prevent from buying cheaper goods that they prefer from China (or Vermont, or wherever)? And what gives you the authority (legal, moral, take your pick) to prevent them from doing so?

You're perfectly welcome to only buy things from America, but I suspect that if you tried that: (1) you would have much fewer goods and services to choose from, and (2) you would run out of money really fast trying to maintain your current lifestyle. So how can you justify imposing those costs on everyone else?

Welcome to Cafe Hayak, donaldlast.
The only thing - empirically demonstrable - that has "hollowed out" American Manufacturing - still #1 in the world - is automation, so I quit my job smelting steel and started designing robots.

You may want to hit the archives to avoid becoming the troll du jour. Wanniski's "The Way the World Works" also makes short work of the populist myths of "fair trade" and protectionism.

To Prof. B or any of the bloggership who care, how do you answer free trade critics on Gerard's nominal point about government subsidies. Since we can't outlaw Marxism for those (foolish) electorates who choose it - WTO efforts to adjudicate notwithstanding - how can we ensure that private enterprises are able to compete with government-subsidized or -owned enterprises that have the ability to tax their heirs to artificially underprice?

r.B

The only way to ensure private over government subsidized is through innovation. Government do not innovate, they stagnate. The Market innovates and it is through that innovation that markets thrive and create wealth, whereas Government only confiscate wealth.
There is nothing we can do to ensure a culture of innovation, all we can do is try as hard as we can to keep the government from taking away all the profits, which are the incentives to innovate.

>>Don't Americans buy pots and kettles any more? And if they do, do those pots and kettles HAVE to be bought offshore?<<

Yes, when they want more -- usually they're relacements for ones that have been damaged.

And, no, they don't have to be imported.

So, my questions for you: should some people discourage others from making their own purchasing decisions? How far should that discouragement go; to the point where government is used to make policy?

Didn't we already go through this during Bush II's first term - using tariffs to protect the steel unions? As I recall it didn't take long to realize it hurt everybody else. Bush ended those tariffs later to little fanfare.

I remember those tariffs. As I recall, the EU responded by imposing (or threatening to impose-I can't remember exactly) tariffs on oranges. Oranges, of course, are made in Florida, which was a particularly contentious election state for Bush.

This is true up to a point but American manufacturing has been hollowed out by this dedication to free trade above any other consideration. Don't Americans buy pots and kettles any more? And if they do, do those pots and kettles HAVE to be bought offshore? Nor should one worship at the shrine of the "service economy". As Volcker once said: we cannot exist by flipping burgers for each other. Nor I might add, by bandaging each others legs. The few new jobs in the woeful payroll reports have been - you guessed it - health care, education and the public sector. A fat lot of good that will do for productivity and growth. In truth I think China has made a fool of America. They would NEVER sacrifice home production for a cheaper foreign alternative. Moderation in all things, said the Greeks and that very much applies to free trade.

If you look at the stimulus package, virtually all monies went to health care, education and the public sector. So in that sense, the stimulus worked and did what it was supposed to do; it increased the size of government and grew jobs where it was directed.

It also happened to repay large swaths of Democrat voters and filled the coffers of health care special interests during a time of health care reform. But I'm sure that is all coincidence.

I am quite surprised that the media keeps ignoring this fact; critics say the stimulus didn't work. On the contrary, it worked exactly the way it was designed.

"Moderation in all things, said the Greeks and that very much applies to free trade."

You, donald, are moderately dorky.

In your ideal society, does everyone have a factory job? 'Cause if so, that doesn't sound so "ideal" to me.

And why should I make pots when I can buy pots? Just so I can say that everyone is employed? 'Cause I don't care if everyone is employed. Not everyone needs to be employed.

The leftist theory is that more high-paying union manufacturing jobs prop up a town. These $30/hour workers will patronize local shops. Basically it's about pining for the old days.

That theory has worked so well for Detroit:

http://www.youtube.com/watch?v=1hhJ_49leBw

Theoretically, the USA could have imposed HEAVY tariffs on Japanese autos back in the 60s to have prevented the runaway success of the Toyota Corolla and thus break the hegemony of American auto in the consumer consciousness.

Essentially up until the 1960s America imported very little of anything except oil. It was very protectionist or there simply was no competing products. After all, since America literally had bombed Japan back to the stone age, they couldn't start competing industrially until the middle 60s.

But somehow the uber-protectionist mindset broke in that decade and it's never recovered. The union-lovers want to put the genie back in the bottle but they fail to realize they are a VERY tiny minority speaking in an echo chambers like Huffington Post, Air America, etc...

We cannot exist by flipping burgers for each other, but we can exist by flipping burgers for people in China if they'll trade us goods for the service ;)

"Flipping burgers" isn't the ideal example to use, but you get the idea. When we're engaged in free trade, you have to expand your view of the economy to all of the people we trade with. What happens just within our political borders is irrelevant.

"American manufacturing has been hollowed out by this dedication to free trade above any other consideration."

Less people in the U.S. are employed in manufacturing then there used to be - that much is true. Don't you wonder why? Do you know for sure it's because of Free Trade?

Even though our Manufacturing sector employs far less people then it did 50 years ago, they produce a great deal more. This fact would indicate that the loss of employment in this sector is at least partially due to productivity increases (from technology, from human capital, etc.)

Additionally, you should recognize that the domestic demand for manufactured goods has been dropping as we've moved into the current 'information age'. Consumer demand in advanced countries such as the U.S. and a few other big boys around the world has shifted from manufacturing goods (because once we all have a fridge, 2 cars, and air conditioning then other things become relatively more important) to services. This is why we see the service sector growing, because Americans are buying less manufactured goods then we use to because of our affluence and relative abundance.

Check this link for some graphs if you want. Manufacturing employment is at it's lowest since 1941, and yet our productivity has never been higher.
http://mjperry.blogspot.com/2009/12/manufacturi...

They would NEVER sacrifice home production for a cheaper foreign alternative.

This is absolutely false. It took me about 5 seconds to find the following with a google search:

China Imports from U.S.
Of the $55.2 billion in American exports to China in 2006, the following product categories had the highest values.

Semi-conductors … US$5.9 billion (10.6% of China from U.S. imports, up 74.7% from 2005)
Civilian aircraft … $5.3 billion (9.6%, up 39.7%)
Soybeans … $2.5 billion (4.6%, up 12.5%)
Plastics …. $2.2 billion (3.9%, up 18.8%)
Raw cotton … $2.1 billion (3.7%, up 47%)
Industrial machines … $1.97 billion (3.6%, up 29%)
Copper … $1.86 billion (3.4%, up 99.7%)
Computer accessories … $1.82 billion (3.3%, up 27.5%)
Aluminum … $1.7 billion (3.1%, up 90.3%)
Steelmaking material … $1.69 billion (3.1%, up 11.9%)
Fastest-Growing Chinese Imports from U.S.
Below are American exports to China in 2006 with the highest percentage sales increases from 2005.

Unmanufactured tobacco … US$61.4 million (up 3127% from 2005)
Corn … $22.6 million (up 2963%)
Oilseeds & food oils … $60.7 million (up 970%)
Precious metals … $305 million (up 205.2%)
Railway transportation equipment … $220 million (up 146%)


Read more at Suite101: Top Chinese Exports & Imports: Most Popular Products Traded Between China & America http://internationaltrade.suite101.com/article....>

To take one example, cotton. Cotton is one of the top 10 exports from the US to China. I am sure that China could grow its own cotton. Perhaps their climate is not conducive, but they could grow it in greenhouses. It would be expensive, but stupid. Apparently they are not as stupid as you assume.

The Chinese import those things which they cannot produce as cheaply. We should do the same.

Ah Comparative Advantage, got to love it!

America's manufacturing output reached an all time right before the recession (obviously it's down, but not because of the chinese). More things than ever are made here. You can look up the stats yourself. This may be put in jeopardy if American manufacturers have to compete with manufacturers elsewhere who can buy cheap chinese steel now.

Just because 'traditional' things like steel and cheap toys aren't made here anymore doesn't mean nothing is. Higher value goods are instead.

I for one welcome the Chinese taking away the pollution and brutal job that working right beside a blast furnace is. Now those workers can build buildings and other goods instead.

The problem is that such manufacturing would still be performed here, but with full respect to our labor/product safety/workplace safety/etc. laws.

It's a lot nicer here than any hellhole you call a Chinese factory.

@donaldlast: Substitute "Vermont" for "America" and "New Hampshire" for "China", and you'll know what everyone here thinks of your argument :-).

I've heard this comment made a bunch of times but you put it particularly eloquently (and yet snarky at the same time). I think the smiley face at the end is what did it for me.

Hope Donaldlast is not studying economics, because I am aFraid there would not be much moderation in his results.
The 'last' does point in a certain direction.

Please show us the evidence that American manufacturing is hollowed out.

I am sure Prof. Boudreaux could show you some that indicate that America manufactures like never before, and remains way ahead of China in that sector.
But maybe he's mistaken, who knows.

Perhaps Schulz & Kling are mistaken too in their economics 2.0 vision and Volcker is right. We'll see.

I am well aware that America's manufacturing capacity is still a dominant force in global manufacturing, if not the dominant (I can't recall the figure, 25% or so) but the fact remains that you are committed to free trade(very noble) and compete with others who are not, and who are mercantilists.
America has been running a persist trade deficit for many, many years in complete contrast to the pre-war period. This puts America in hock. In the end the accumulating debt limits America's power and influence. You may feel superior with your economic analysis but it doesn't buy power. You may think that China is the one with the problem owning so many Treasuries that it couldn't possibly unload. But... but..it is a sword of Damocles and that has your Treasury Secretary running to Beijing to assure them their money is safe.

Agreed that there is no way US wages could be deflated to a competitive level vis-a-vis China and other Asian wages except through currency adjustment - and that would imply a considerable reduction in the living standards of the average Americans. But there you are, that's reality. China and the Asians will not budge.
Meanwhile the US is accumulating many millions of unemployed, with total continuing claims and emergency unemployed benefit mounting by the month as people cannot find work. I doubt many of them are taking Econ 101 so your economic postulates are not going to cut much ice with them. Also it may not console the Administration and Congress who will be feeling the heat.

Nice that you posted your Econ 101 story right next to the link to Brian Caplan's book.

But thanks for proving his point over and over again.

but the fact remains that you are committed to free trade(very noble) and compete with others who are not, and who are mercantilists.

Mercantilism brings down every country that employs it, sooner...or later.

"but the fact remains that you are committed to free trade(very noble) and compete with others who are not"

Competing freely with others who do not is an advantage to the free trader. The trade protectionists hinder themselves, not the free traders they do business with.

Also note that America is hardly committed to free trade. Calling us a free trade economy indicates little or no understanding of what free trade means.

donaldlast - trade-deficit and budget deficit are different. Budget deficit is debt a trade-deficit is not.

@donaldlast: Substitute "donaldlast" for "America" and "local grocery store" for "China", and you'll know what everyone here thinks of your argument :-).

There is a theme here if you dig for it...

...which falls flat if you consider the regulatory domain between donaldlast and his local grocery store. They're both the same, unlike the ones covering the US and China.

He can have the local/state/federal government take appropriate action should the store wrong him in any way. Such actions cannot be taken between the US and China.

Thus it is our advantage to deal with the problem of China by denying them any reward for their actions. That means tariffs, formally calling them a currency manipulator, or other punitive action towards China.