Omigosh! Foreigners Are Investing More In America!

by Don Boudreaux on October 10, 2011

in Balance of Payments, Myths and Fallacies, Seen and Unseen, Trade

Here’s a letter to the Baltimore Sun:

Jim Case argues that NAFTA has been “bad” for the U.S. economy because, since that free(r)-trade pact first took effect in 1994, America’s trade deficits with both Canada and Mexico have increased (Letters, Oct. 10).

Is Mr. Case aware that his evidence for the alleged failure of NAFTA is that Canadians and Mexicans are now investing more in the United States?  (Such increased investment is exactly what a rising U.S. trade deficit means: foreigners invest more of their dollars here rather than cash these dollars out immediately on purchases of U.S. exports.)  Does Mr. Case realize that the rise in the U.S. trade deficit under NAFTA is exactly the opposite of what protectionists, such as Ross Perot, warned would happen if NAFTA passed, namely, that NAFTA would shift so much investment from high-wage America to, especially, low-wage Mexico that we’d be deafened by a “giant sucking sound” of investment dollars being inhaled by factories and plants across the border?

Protectionists simply cannot be taken seriously as long as they stubbornly cling to the inexcusably backwards myth that a rising U.S. trade deficit is a symptom of the failure of freer trade.

Sincerely,
Donald J. Boudreaux

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{ 94 comments }

muirgeo October 10, 2011 at 10:37 am

“Jim Case argues that NAFTA has been “bad” for the U.S. economy …”

What a dummy…. it’s obviously been GOOD for our economy…SEE… everyone is outside celebrating.

http://twimgs.com/financetech/art/_a//10_2011/crowd2_480w.jpg

Greg Webb October 10, 2011 at 12:01 pm

And, a silly picture that has nothing to do with NAFTA is the incompetent doctor’s evidence. More incoherent nonsense from George.

Chris Bowyer October 10, 2011 at 12:25 pm

This syllogism is missing the “when people are upset about something they’re always right” link. Which is kind of the most important part.

muirgeo October 10, 2011 at 1:06 pm

Is that a quote from King George to the Colonial terrorist?

Greg Webb October 10, 2011 at 1:17 pm

No, George. It is a quote from an intelligent person (Chris Bowyer) to an unlimited governmental power supporter (you).

Chris Bowyer October 10, 2011 at 2:00 pm

Just one logical fallacy after another, eh? Your first is that if people are protesting, they must be right. The second is that, when I point out the first fallacy, you make a straw man argument by pretending I said protesters are NEVER right. Both are vapid.

At some point you have to make an actual argument, guy.

muirgeo October 10, 2011 at 2:42 pm

At some point you have to come out of your hypnotic stupor and look at what is happening in the real world.

I’d bet anything your as big a hypocrite as any earnning your keep grifting off of others.

Chris Bowyer October 10, 2011 at 3:27 pm

I have no idea what that last sentence was supposed to mean. If you’re trying to say that I’m stealing from others, I must not be doing a very good job, because I’m not wealthy by any stretch of the imagination.

Not that that has a thing to do with what I’m saying. You still haven’t put forward any kind of argument: just two logical fallacies and then some flailing swipe at me, whom you know nothing about. Well done, dude.

brotio October 10, 2011 at 6:47 pm

I’d bet anything your as big a hypocrite

There is no bigger hypocrite than you, Ducktard.

You oppose corporate welfare – while supporting corporate welfare for ADM, Chrysler, GE, GM, SolarReserve, and Solyndra.

You oppose profit in health care – while reaping obscene profit in health care.

You oppose the emission of CO2 from human activity – while spewing horrific amounts of CO2 to embark on lavish vacations to exotic locales across the globe (paid for by reaping obscene profits in health care).

You really should beware of baseless accusations of hypocrisy when you constantly and ignorantly display your own hypocrisy for all to see.

muirgeo October 10, 2011 at 2:40 pm

Yeah, Chris cause Wall Street has nothing to do with our / their plight. REALLY are you THAT stupid or do you just rent seek like others on Wall Street?

YOU my friend are an apologist for thieves, corruption, fraud ,rent seeking and grifters of all sorts. And you have the obnoxius temerity to assuume you understand the reason they protest. Talk about a Big Brother-knows-whats-best-for-the-people attitude.

Chris Bowyer October 10, 2011 at 3:29 pm

Er…which part of this little rant explains either of the total non-arguments you’ve put forward, exactly?

Methinks1776 October 10, 2011 at 4:31 pm

Why, the capitalized bits, of course. That’s why they’re CAPITALIZED, CHRIS!!!!! For EMPHASIS. So you don’t MISS them. oKaY?

gAhaA!

Peter McIlhon October 11, 2011 at 1:24 am

You do realize that rent seeking requires government involvement to reduce competition or mandate certain outcomes, right? It’s a two way street buddy.

muirgeo October 11, 2011 at 2:32 am

When you have THAT much money you pretty much own the government and right the policy… especially with a supreme court that has declared money to be speech and corporations to be people.

Sam Grove October 10, 2011 at 12:54 pm

The simple view suits your simple mind.

vidyohs October 10, 2011 at 2:02 pm

Oooops “your simple mind” no facts in evidence the muirhuahua has even that.

muirgeo October 10, 2011 at 2:45 pm

Cept that i give you a logical ass whuppin anytime you step in the ring with me…. member the time you defended property rights and I showed you how there was no such thing with out a state…. and you tucked tail yelping like a toy poodle….that discussion is on here somewhere.

Rick Hull October 10, 2011 at 3:12 pm

Muirijuana: Even birds recognize property rights.

brotio October 10, 2011 at 6:51 pm

Muirijuana

LMAO!

If you ever prove a link between marijuana and Yasafi’s stunning lack of intelligence, the government would have no more use for paraquat!

vidyohs October 10, 2011 at 7:33 pm

Hmmmm, my little teacup intellectual muirhuahua, why does no one else remember that the same way?

You don’t show anyone here anything, yours is indeed the most vacant head that comes here. You keep rambling crap until people just get tired and wander off to do something more personally productive like rearrange a sock drawer, then you think you’ve won something? Every one here has experience with you and your bullshit just flops.

That’s okay, Don says he won’t ban you, and I don’t really give a hoot as I have other toys to play with.

Fearsome Tycoon October 10, 2011 at 4:33 pm

Trade’s been expanding since the 15th century. And yet there are more people working now than in 1450, not fewer. Imagine that.

kyle8 October 10, 2011 at 4:35 pm

All those jobs since 1450 are just low paying minimum wage jobs!

ErikOlsen October 10, 2011 at 10:45 am

Muirgeo does not understand much about correlation and causation.

muirgeo October 10, 2011 at 11:15 am

Yeah, you guys are ALWAYS telling me about correlation and causation…funny that.

It’s probably be nice for you guys to have correlation on your side just one… then I could remind you about correlation and causation.

But indeed there seems to be a strong correlation with your ideas not correlating with the facts.

So let me remind YOU… anti-correlation does NOT imply causation.

Methinks1776 October 10, 2011 at 12:00 pm

Yeah, you guys are ALWAYS telling me about correlation and causation…funny that.

And, yet, you and the other idiots here still don’t get that.

I can only imagine that if someone rolls into your clinic with a bruise, you diagnose a broken bone. Cough? Lung cancer. Facial urticaria and trouble breathing? Asthma. After all, correlation and causation are one and the same.

I diagnose you with hopeless moron syndrome.

Greg Webb October 10, 2011 at 12:08 pm

I diagnose you with hopeless moron syndrome.

LOL! Poor George. He tries so hard to pretend to be intelligent, but falls sensationally short.

Economic Freedom October 10, 2011 at 6:55 pm

I diagnose you with hopeless moron syndrome.

HMS is fatal!

Thank God, that you, Methinks1776, are the vaccine!

ELO October 10, 2011 at 12:27 pm

That’s a brilliant riposte.

I guess of you are constantly being told about your inability to understand simple statistical concepts, it makes sense to ignore it and just plow ahead.

Since NAFTA was enacted in 1994, any suggestion as to why it waited until 2008 to crater the economy, as you clearly believe?

muirgeo October 10, 2011 at 1:11 pm

Hmmm… maybe because it takes a little time to move 58,000 thousand factories to other countries.

vidyohs October 10, 2011 at 2:10 pm

NAFTA, dipshit, NAFTA.

Again you’re performing your roll as Village Idiot very well.

N(north)A(american)F(free)T(trade)A(association), get it dipshit, North American Free Trade Zone )(NAFTA)

North America = Canada, the USA, and Mexico.

The very fact that you believe that 58,000 U.S. factories were shut down and moved to Mexico (I guarantee you no one is going to Canada for cheaper labor and less regulation, Bwa ha ha ha) just cements your status of resident dipshit Village Idiot.

vidyohs October 10, 2011 at 7:18 pm

BTW muirhuahua my little dipshit, I am waiting for the ass whupping. Bwa ha ha ha ha.

Fearsome Tycoon October 10, 2011 at 4:34 pm

You don’t have correlation on your side. There is literally no correlation between the expansion of trade and the beginning of recessions.

Economiser October 10, 2011 at 10:46 am

Don and Russ, any thoughts on the announcement this morning of the Nobel Memorial Prize in Economics to Thomas Sargent and Christopher Sims?

Invisible Backhand October 10, 2011 at 12:33 pm

Another trophy for the Hoover Institution, Earhart Foundation better step up its game..

Invisible Backhand October 10, 2011 at 10:52 am

Ross Perot said jobs, not investment dollars.

Observer October 10, 2011 at 11:06 am

Perot was right

John Dewey October 10, 2011 at 11:52 am

Yes, Perot said that jobs would move to Mexico. But he also said that investment in manufacturing would move to Mexico as well. From Perot’s book, Save Your Job, Save Our Country, pp 11-12:

“Today, thousands more US companies are being urged to move their factories to Mexico by the Mexican government, by banks that want a foothold in Mexico, and by junk bond dealers.”
.
.

“Ultimately, NAFTA is not a trade agreement but an investment agreement. NAFTA’s principal goal is to protect the investment of US companies that build factories in Mexico.”

Perot was wrong, of course. NAFTA has increased jobs and investment in all three North American nations.

Invisible Backhand October 10, 2011 at 12:32 pm

Only video I could find. After describing the benefits of moving factories and 12 and $14/hr jobs for $1/hr to Mexico, he said “giant sucking sound” but then moved on.

http://www.youtube.com/watch?v=Rkgx1C_S6ls

So while I found the DB quote misleading, it wasn’t a clear foul.

Opinions differ on the benefits of NAFTA. Here’s an opposing view:

Looks Like Ross Perot Was Right About The “Giant Sucking Sound”
(You’ll have to google it since disqus only allows 1 link per post)

John Dewey October 10, 2011 at 2:34 pm

Nothing misleading at all. Ross Perot in his book said exactly what Professor Boudreaux claimed he argued.

Invisible Backhand October 10, 2011 at 9:53 pm

Find “giant sucking sound” in his book.

GP Hanner October 10, 2011 at 11:09 am

Who here is old enough, besides me of course, to recall when the same hand wringing was applied to Japanese and Saudi purchases of American real estate, among other assets? You don’t hear about that now.

Economiser October 10, 2011 at 12:03 pm

I was a kid then but I recall the fear about Japan taking over our economy. Now I guess it’s China…

Darren October 10, 2011 at 12:56 pm

My concern isn’t so much the competition from other nations, but the reduced competitiveness of our own over the recent years. I’m probably just being paranoid.

Chucklehead October 11, 2011 at 3:24 am

What about them damn Canucks with their strong dollar and Hudson Bay blankets? They covet our warmth and free speech. Soon they will migrate down with their geese, take over and force us to bonspiel and learn French.

muirgeo October 10, 2011 at 11:19 am

Yeah and people are investing in my stocks…. I had to sell them to buy food. So I’m not hungry and eveything is good.

Methinks1776 October 10, 2011 at 12:04 pm

You’re fat. You could forgo a meal or two and you’ll be better off.

Greg Webb October 10, 2011 at 12:10 pm

And, fat and stupid is no way to go through life, George.

yet another Dave October 10, 2011 at 12:47 pm

He does deem like the Neidermeyer type

Dano October 10, 2011 at 2:11 pm
brotio October 10, 2011 at 6:54 pm

HSIROTFLMAO!

Mesa Econoguy October 10, 2011 at 2:21 pm

LMAO, like you know how to grocery shop.

Dan H October 10, 2011 at 11:30 am

Muirgeo,

Why do you hate foreigners so much that you don’t want them to engage in commerce with us? Are you some sort of xenophobe? Some sort of nationalist? Are we some sort of master race and are they subhuman?

dsylexic October 10, 2011 at 11:50 am

you should love muirduck and his family more than any furriner friend of yours.didnt you read warren’s social contract?

Krishnan October 10, 2011 at 11:51 am

Re: Dan H – if you have not, by now, figured out who you are responding to, take the time and convince yourself that no matter what the data is and what you may write, you can expect the usual nonsense – there is no need to beat your head against the wall – all it will do is give oyu a headache

muirgeo October 10, 2011 at 1:23 pm

yeah because the data… the great state of our economy supports your ideas that low taxes, free trade and finacial deregulation are great things.

And you guys actually talk like you important thinkers.

The data kicks you in all your stupid asses everyday.

ArrowSmith October 10, 2011 at 2:44 pm

Please point us to this “data” that proves free trade is an unmitigated disaster for Americans.

muirgeo October 10, 2011 at 2:51 pm

Unemployment numbers, GDP, personal income, private debt, public debt….. really you think the data supports your concept of how great our trade agreements are? What do you guys do tkae LSD for breakfast. My God the data doesn’t matter one bit to you unthinking dolts. Its so funny to be called stupid by you guys. Total dam morons.

muirgeo October 10, 2011 at 2:54 pm

Arrowsmith,

What data are you looking at for Christ sakes? Give me ONE economic indicator that supports your delusion.

Stop watching the god dam Fox…. they OWN your little pea braim. Break the f”"”‘ free you poor nimrod.

ONE indicator.

Fearsome Tycoon October 10, 2011 at 4:37 pm

I remember the 90s being pretty good, economically speaking. First you love Clinton’s economic policy, then you hate it…which is it?

Fearsome Tycoon October 10, 2011 at 4:38 pm

Say, muirgeo, could you pretty please look up for me some employment numbers in the U.S. after the Smoot-Hawley tariff was passed? Maybe look up employment numbers after FDR signed the Wagner Act, too. kthxbye.

yet another Dave October 10, 2011 at 11:59 am

I second Krishnan’s comment. muirgeo is either simply a troll or one of the most profoundly stupid people I’ve ever encountered. He is best ignored.

Methinks1776 October 10, 2011 at 12:06 pm

I vote for one of the most profoundly stupid people you’ve ever encountered. I mean, even if he is also a troll, after six years of spraying this blog with his wizdumb, is there any doubt his IQ is negative?

Krishnan October 10, 2011 at 12:37 pm

Now imagine millions of people like this in the electorate – those that imagine that wealth is the money that the Fed can print at anytime – that all imports are bad and all exports are good – that it is good for us to work hard and make things for which we can expect to get pieces of paper that may or may not be useful to buy anything – that it is bad for us to buy things with our pieces of paper for which millions/billions around the world work hard to make things – that buying local is good no matter what – that killing thousands of birds using windmills is OK but not OK even if one bird is killed in some oil well somewhere – that oil and gas is evil while they consume ever more oil and gas – that Government always knows best – and that the best person in the world is one that works for nothing but the happiness of others while he sacrifices himself and all good things are taken away from him – that we should be able to take from those that have and give it to those that whine about it and demand it … you get the picture – there are so many people like that …

The only real solution is to demand that they experience the consequences of their actions and find out how looting from those that can make and create to give to those that whine and demand is not the way to prosperity – … They are able to have their cake and eat it too because those that can and do and innovate will continue to do whatever they can while those that cannot will simply whine and demand and demand and demand -

ArrowSmith October 10, 2011 at 2:44 pm

I don’t have to imagine it, it’s scary real.

muirgeo October 10, 2011 at 3:07 pm

And I am sure Krishan is a real innovator himself… selling out to some rent seeking corporation or grifting off others in some hypocritcal way.

brotio October 10, 2011 at 6:59 pm

in some hypocritcal way.

There you go with another H-bomb.

ADM. Chrysler. GE. GM. SolarReserve. Solyndra. Please tell us how your support of corporate welfare for these corporations proves your opposition to corporate welfare?

yet another Dave October 10, 2011 at 12:40 pm

That does seem the more likely diagnosis.

And I’m totally stealing wizdumb.

Greg Webb October 10, 2011 at 12:13 pm

George is the normal overly emotional, illogical, and mostly incoherent believer in unlimited government run by the political elite for the benefit of the rest of us who he thinks cannot take care of themselves. In other words, George is stupid.

muirgeo October 10, 2011 at 1:20 pm

And Greg is a true believer Republican willing to give them a pass on both of the depressions they presided over. Wow you are a big thinker…nothing gets past you.

Methinks1776 October 10, 2011 at 4:27 pm

Yeah, Greeeeeg! Nya nya nya nya!

Aren’t you delighted a thing like this is licensed by the diligent state to perform life-threatening procedures on you? Government looking out for you!

Greg Webb October 10, 2011 at 10:55 pm

:)

muirgeo October 10, 2011 at 1:18 pm

Dan H,

Why do you support communism over producing things in our own country?

Let me answer that… because moral and logical and even ideological consistency are subservient to your uncontroled idiotic animalistic instinct driven ego.
You are no more advanced then a dam rat.

Greg Webb October 10, 2011 at 1:23 pm

George, answer Dan H’s questions! And, do so politely. Your silly straw man Q & A argument, as well as your silly name calling, clearly reflects your overly-emotional, irrational, and unhinged nature. It is past time to grow up. After all, being fat and stupid is no way to go through life. (You would think that you would be in good shape after all that hiking that you say that you do.)

Dan H October 10, 2011 at 2:40 pm

I know its been said before, but using your logic, I should never go outside my house and buy anything. I should produce everything I need right inside my house and in my backyard.

Methinks1776 October 10, 2011 at 4:25 pm

now, hat’s log-ick Muirdiot can wrap his stupid around.

Dan H October 10, 2011 at 3:59 pm

“Why do you support communism over producing things in our own country?”

This guy thinks opening factories in Third World Countries is a moral imperative. Read the article. I think you’ve probably heard of this fellow.

http://www.slate.com/articles/business/the_dismal_science/1997/03/in_praise_of_cheap_labor.html

DMXRoid October 10, 2011 at 12:11 pm

Don, I’m curious as to why, when confronted by protectionists complaining about trade imbalances, you don’t simply take the stance that, regardless of any other factors, a trade imbalance in a mostly free market is the result of the willing choices of consumers of both capital and finished goods, who wouldn’t buy them if there wasn’t an advantage to doing so. Capital investment by foreign firms is nice, and a frequent occurrence, but it’s hardly a necessary response given that, in contrast to the protectionists claims of abstract harm, there’s concrete, undeniable evidence of specific benefit to people whose xenophobia doesn’t get in the way of finding the best price for the things they want.

John Dewey October 10, 2011 at 12:19 pm

” the opposite of what protectionists, such as Ross Perot, warned would happen if NAFTA passed,”

It would be good to remember exactly why Ross Perot opposed NAFTA. Fort Worth’s Alliance Airport was a joint development in the late 1980′s by the city of Fort Worth, the Federal Aviation Agency, and Perot’s Hillwood Corporation. In 1993, Perot was granted a free trade zone for the land Hillwood owned around Alliance Airport. Companies which located factories to the Hillwood free trade zone would be exempt from tariffs on goods imported from Mexico. This would provide Perot with a major advantage in negotiating with manufacturing companies.

NAFTA, of course, eliminated Perot’s advantage and cost him hundreds of millions if not billions of dollars.

Darren October 10, 2011 at 12:59 pm

So, the only reason anyone could be opposed to anything you would be in favor of would be for personal self-interest. Naturally, nothing so vulgar would affect your own motiviations.

John Dewey October 10, 2011 at 2:32 pm

“So, the only reason anyone could be opposed to anything you would be in favor of would be for personal self-interest.”

I didn’t say that at all, did I? But anyone who has followed Perot for a few decades would have to believe that the man does what is best for Perot. And I do not fault him for that at all. But I also wouldn’t trust him to act in my self-interests.

“Naturally, nothing so vulgar would affect your own motiviations.”

Very incorrect. I have recently admitted on this blog that I will vote my own self-interest.

sethstorm October 10, 2011 at 12:41 pm

Money is fine, influence is not.

In the case of NAFTA, Perot’s words were correct. They still are.

Martin Brock October 10, 2011 at 12:46 pm

… a trade imbalance in a mostly free market is the result of the willing choices of consumers of both capital and finished goods, who wouldn’t buy them if there wasn’t an advantage to doing so …

He does take this simple stance, but international trade is not mostly free in fact. For example, immigration law strictly regulates the trade in labor, and labor is the single most valuable factor of production (or category of factors), more valuable than all other factors of production combined (as an empirical matter), so these regulations alone rule out “mostly free”, and many, many other regulations exist.

For another example, financial instruments like Treasury securities are a large part of international trade. I am a party to these trades, because I’m obliged to pay taxes, and the buyer of a Treasury security simply buys entitlement to tax revenue; however, I am not a willing party to the trade, so the trade is not free trade. The buyer of entitlement to tax revenue may be free not to participate in the transaction, but I’m not free not to participate, and “free trade” clearly implies two free parties to a trade, not only one.

Trade in mortgage backed securities guaranteed by the government, either explicitly or implicitly, is similar. Trade in shares of Lockheed-Martin, which sells practically everything it produces to the Federal government and is practically a Federal agency for this reason, is another example. Trade in many monopolies granted by the U.S. Patent Office also belongs in this category.

So U.S. consumers buy many goods produced abroad, and I think that’s great, but these purchases are only half of each transaction. When the seller turns around and spends dollars on rent seeking in the United States, calling the entire transaction “free” abuses the language.

So how much international trade is meaningfully free? Half? One quarter? One percent? I don’t know. I can’t begin to quantify it. I can hardly know, because the rent seeking labyrinth is huge, and I can’t possibly know every corner of it.

Martin Brock October 10, 2011 at 12:49 pm

But acknowledging this reality doesn’t make me a protectionist.

DMXRoid October 10, 2011 at 1:46 pm

@MartinBrock
###
For example, immigration law strictly regulates the trade in labor, and labor is the single most valuable factor of production (or category of factors), more valuable than all other factors of production combined (as an empirical matter), so these regulations alone rule out “mostly free”, and many, many other regulations exist.
###
Labor is obviously an important factor, but to say that it’s empirically the most valuable is just false. It’s certainly the least-specific factor, but not the most valuable. Without land and capital factors, labor has nothing to work on, and without labor, land and capital factors remain idle.

Even were I to concede that labor were the most valuable factor of production, your argument doesn’t really fly. Immigration regulations aren’t restrictions on labor as a category, they’re restrictions on the shape the _domestic_ workforce takes. Regardless who the US decides to let in, I can hire labor in pretty much any country in the world without much in the way of interference. Or, if the labor I need has to be local to my facilities, I can always set up shop in another country.

Would the market be _more_ free sans immigration restrictions (assuming no domestic welfare state)? Yes, absolutely. Are immigration limits sufficient to declare an “unfree” market for labor? I don’t believe so.

The rest of your arguments aren’t against international trade, they’re against domestic policies that allow for rent-seeking by investors of all nationalities. Treasury and mortgage securities are also a substantial portion of the domestic trade market, as is patent trolling. Domestic firms lobby and sell to the state more than foreign firms. These are problems, yes, but they’re irrelevant to the question of whether or not a trade imbalance is a good thing, or whether or not international trade as a whole is a good thing. There’s nothing about us buying goods from Chinese manufacturers that uniquely encourages more rent seeking by those companies compared to their domestic counterparts.

The political failings of any given country are completely irrelevant to the question of the benefits of trade. All other things being equal, it’s _always_ better for consumers and producers to have access to more markets than fewer. Yes, we’re all even better off if the political failings of any participants in an economy are fixed, but even if they weren’t, we don’t make ourselves any better off by cutting ourselves off from foreign markets.

libt October 10, 2011 at 5:40 pm

muirgeo is ranting about outsourcing to communists, Mexico is communist now ?!?

Martin Brock October 10, 2011 at 6:17 pm

Labor is obviously an important factor, but to say that it’s empirically the most valuable is just false.

You only need to compare total “earned income”, which is basically the return to labor, to GDP. Labor is the single largest cost in practically every business, even highly capital intensive businesses. Exceptions to this rule presumably exist, but they’re definitely exceptions to the rule.

It’s certainly the least-specific factor, but not the most valuable.

No. Labor is the most specific factor (which is why I added “category of factors”) and also the most valuable. A doctor’s labor and a mechanic’s labor are obviously very different, and both are highly specialized. In fact, “doctor” and “mechanic” are incredibly vague terms these days. A gynecologist is not a urologist, and a Honda mechanic is often lost under hood of a Ford. A Windows developer can’t write software for a Mac. In fact, “Windows developer” is an incredibly vague job category. I write Windows software for power systems engineering and geographic information systems, and “geographic information system” is also incredibly vague. You really need to know that I’m ESRI developer and not an Intergraph developer.

Without land and capital factors, labor has nothing to work on, and without labor, land and capital factors remain idle.

That’s true, but ask any practically any businessman whether he spends more on wages or land rents and other capital costs. You’ll get the same answer in the overwhelming number of cases.

Immigration regulations aren’t restrictions on labor as a category, …

They are, and you only need to look at typical arguments against immigration liberalization to see that, but even if the arguments weren’t so blatantly protectionist, the political rhetoric matters less than the effects.

Regardless who the US decides to let in, I can hire labor in pretty much any country in the world without much in the way of interference.

So as long as you’re free in this way, that’s enough? The laborer’s freedom to choose where he works is irrelevant? Chattel slavery is not a restraint of trade, because the master is free to trade the labor of the slave? This way of thinking is not libertarian.

Are immigration limits sufficient to declare an “unfree” market for labor? I don’t believe so.

I don’t say that the market is “unfree” in any absolute sense. I say it is much less free than it could be, and even calling it “mostly free” is nonsensical. What does “most” mean in this sense?

The rest of your arguments aren’t against international trade, they’re against domestic policies that allow for rent-seeking by investors of all nationalities.

The two are not separable, and rent-seeking at a distance could be more frequent than genuine investment more locally, if more local investors are better informed than more distant rent seekers, which seems a very reasonable assumption.

But you’re right. I’m not arguing against international trade. I advocate free international trade with no restrictions whatsoever, including unrestricted immigration (as it’s already unrestricted within the U.S.); however, once we start imposing restrictions, I don’t expect anyone to be happy as the sacrificial lamb. That’s the problem with forcible restraints of trade. One restraint invariably leads to another.

There’s nothing about us buying goods from Chinese manufacturers that uniquely encourages more rent seeking by those companies compared to their domestic counterparts.

I’m not sure that’s true. Chinese authorities with dollars to “invest” in the U.S. are more inclined to seek rents (which we sometimes call “investing conservatively”) rather than truly invest, compared with a domestic investor, because a Chinese investor is not here. Being here makes a big difference. Investment is highly knowledge intensive, and a foreign investor has less knowledge of domestic investment opportunities than a domestic investor, all else being equal. Can you tell me where to invest in China? Brazil? Down the street from you? In your own business?

The political failings of any given country are completely irrelevant to the question of the benefits of trade.

I’m not discussing abstract benefits of trade. I’m discussing real trade subject to all of the political failings of given countries.

PrometheeFeu October 10, 2011 at 6:35 pm

Well, the Chinese might just be buying LOTS of government bonds thereby encouraging further and further borrowing.

Marty Mazorra October 11, 2011 at 2:07 am

Plain and simply, the imposition of what the consumer will be fooled to believe are punitive (U.S. job saving) tariffs on foreign imports – per the coming proposal from a bipartisan (left and right merge on this one) band of manipulators (lead by Democrat Shumer and Republican Graham), at the behest of Presidential-wannabes Mit Romney and Michele Bachman – would, if passed, only serve to hurt Americans employed by American exporters, Americans who work for American businesses that benefit from our discretionary spending – and virtually every other American consumer through higher prices of everyday items…  I.e., the net result of protectionism is forever the taking of money from the consumer-at-large and the handing it to a select (politically powerful) few…

Martin Brock October 11, 2011 at 10:26 am

I agree that a retaliatory tariff likely destroys more jobs than it saves, but I can’t agree that a trading partner’s protectionism does not cost jobs and create malinvestment here. That’s the problem with a trade war. It’s a race to the bottom.

Yet I can’t fault people who resent bearing the cost of foreign protectionism. We need to explain to these people how various restraints of trade and other forcible impositions here compound the costs of foreign protectionism, and retaliatory tariffs don’t begin to exhaust these forces.

If the U.S. state does not retaliate and does not peddle rents to protectionists in other states, we’ve done the best we can to defend ourselves here. Foreign protectionism could still harm U.S. citizens and the U.S. economy more generally, but the U.S. government cannot solve every problem. It can’t stop the rain on a Labor Day parade either.

SMV October 11, 2011 at 7:20 am

My concern about the comments is not Muirgeo, but the attacks on him. Anyone that has visited this sight regularly knows that M is our local poltergeist. Shows up when least wanted and makes rude noises. But I frequently recommend this blog & Econtalk when debating those on the left or right. The comments attacking M surly turn people off. They reduce the value of the comments. If we can not shun him than banishment might be the best option.

SMV

SMV October 11, 2011 at 7:26 am

Sorry wrong thread -please ignore.

Jim October 11, 2011 at 3:39 pm

SMV: I couldn’t agree more and get equally annoyed by M and the people who attack him. Can we please, please, PLEASE ignore him? I’d rather read some good economic discussion instead of this noise litered in the middle of sometimes some very good thoughts.

Vishnu October 11, 2011 at 8:21 am

Hi,

Now i have a doubt in mind that has been nagging me for quite some time. now i get the arguments about the rising trade deficits in the usa against china is nothing to worry about. but now i would like to ask, suppose india and china are trading, and this trade is done in dollars, and there is a deficit due to the “currency manipulation” done by china, is that anything to worry about, since i am pretty sure china does not invest much in india, but the trade between the two countries in growing mostly tilted in their favour.

Keith October 11, 2011 at 3:59 pm

Is there any work exploring the impact of foreign investment with regard to whether it buys private plant and equipment or US treasuries?

I assume trade can balance with past goods (existing capital equipment/other physical assets), current goods and services, or future goods and services (direct investment or bonds/debt — which can be asset backed or not).

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