August 10, 2004

Doug Irwin on Free Trade, and on Baumol and Gomory

WSJ.com - Free-Trade Worriers: By DOUGLAS A. IRWIN August 9, 2004; Page A12

If there is one truth about the public debate over trade policy, it is that free trade is always under fire.... But recent free trade critics* are content to beat up on the idea of free trade and stop there, seemingly afraid to go the next step and embrace protectionism. Messrs. Schumer and Roberts state that "old-fashioned protectionist measures are not the answer," and Mr. Cassidy concedes that "economists are right when they say that protectionism isn't the answer to outsourcing."... So why are the recent critics so hostile to free trade while ruling out protectionist solutions? To hide the fact that they have no solutions to offer. The poverty of free-trade critics is that they fail to bring anything constructive to the table....

Many of the free-trade critics raise legitimate and important issues about wages and job creation in the United States. One would think the debate would focus on strengthening the economy or empowering workers in a difficult labor market. Workers can be empowered by allowing them to have portable retirement accounts rather than pensions tied to a particular employer. The portability of health-care benefits should be examined, as well as the design and incentive structure of current unemployment insurance programs. The tax-related costs that fall on companies that hire U.S. workers should be reassessed....

Rather than do some hard thinking about labor-market policies, the critics try to put forth reasons why free trade doesn't work in today's world because this or that condition does or does not hold anymore.... When these ruminations flop, as they usually do, the free-trade critics grope to find some intellectual respectability for their arguments elsewhere. Some have latched onto the book "Global Trade and Conflicting National Interests," by New York University economist William Baumol and Sloan Foundation president Ralph Gomory. But appealing to this theoretical work is very strange indeed. Messrs. Baumol and Gomory suggest that the United States has potential conflicts of interest in trading with France and Britain, and no such conflict -- trade is win-win -- with regard to India and China. This is exactly the opposite of what the trade-worriers want to hear. (And Mr. Baumol, apparently worried about the uses to which his work would be put, explicitly warns that "there is some danger that this book will be misunderstood as a protectionist argument, which it emphatically is not.")...

The easiest way to see what is going on in Ralph Gomory and William Baumol (2000), Global Trade and Conflicting National Interests (Cambridge: MIT Press: 0262072092) is roughly this: Baumol and Gomory have a two-country model with many industries, in which each firm in each country produces at constant returns to scale and in which the level of productivity in any country's industry is a function of the strength of that country's social community of organizational and technological progress in that industry. The stronger that country's community in that industry, the higher is its productivity.

When a new firm enters an industry in a country, or when an old firm expands production, that strengthens that country's social community in that industry, and raises productivity not just in the entering or expanding firm but in all of that country's firms in this industry. When a firm exits an industry or contracts production, that weakens the social community and reduces productivity.

Thus we have here a powerful externality: something important for the economy but unrecognized by the firm. Firms don't take account of the effects of their production decisions on the productivity of other firms in the industry. With this externality, we would not expect the market system to be a particularly good social planning mechanism.

Because, in Baumol and Gomory's model, national productivity at the industry level rises with production at the industry level, all the economy's stable equilibria have concentration in each industry concentrated in one of the two countries. But which industries locate in which country is completely arbitrary. It is best for the system as a whole to split the industries 50-50. But, up to a point, the more industries a country has, the better for it: its terms of trade improve as the share of industries located in it rises, and its share of world income is roughly proportional to its share of industries.

Since there is no government in the model, it is hard to talk about what kinds of government policies are optimal for a country and for the world. But there could be extensions of the model in which "Airbus" policies are good for one country: government expenditures and subsidies to pull industries which could go to either country into the home country's orbit. But such policies are counterproductive for the world as a whole, and work for the subsidizing country only if the other country does not respond.

There is a deeper point that governments can look out for and nurture the development of industry-specific social communities of technological and organizational practice in ways that firms cannot. But whether and how governments can provide a rocket boost rather than a stumbling block requires a theory of government failure (and success) as developed and clear as our current theories of market failure (and success). And that we--or at least I--lack.


*Irwin appears to be referring to a group made up of Senator Charles Schumer, Paul Craig "American Slaves Were Happy! Really! They Were!" Roberts, Lou Dobbs, and John Cassidy. I won't defend Schumer, Roberst, and Dobbs; and I agree that Cassidy does not think analytically enough to my taste, but from my point of view John Cassidy does get to a pretty good place in the end, and certainly does not suffer from the vice of which Irwin accuses him--that of "fail[ing] to bring anything constructive to the table" :

A truly enlightened trade policy would involve increasing federal support for science at all levels of the education system; creating financial incentives for firms to pursue technological innovation; building up pre-school and mentoring initiatives to reduce dropout rates; expanding scholarships and visas to attract able foreign students and entrepreneurs to these shores; and encouraging the development of the arts. In short, insuring our prosperity involves investing in our human, social, and cultural capital...

Posted by DeLong at August 10, 2004 09:19 AM | TrackBack | | Other weblogs commenting on this post
Comments

One of the more discouraging things about outsourcing, the silicon valley bust, and the related flight of students from computer science programs, is the destruction of an American technical community of unparalleled skill and innovation. I see this destruction and I know that politicians and economists do not understand what is at stake. It is interesting that there is now an economic theory that attempts to take the effects of such a community into account. However the theory is still in its infancy and the destruction continues apace.

Posted by: camille roy on August 10, 2004 09:52 AM

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[Wage Insurance] would have finally put some money where trade economists mouths are on the idea of the winners from global trade compensating the losers. And it would have done more than just say lets educate workers better --which is not a meaningful answer for this generation's middle aged workers.

Source:
http://econ4dean.typepad.com/lerxst/2004/08/wage_insurance_.html

Posted by: bhaim on August 10, 2004 10:04 AM

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I think you're correct in distinguishing Cassidy from the others. Nevertheless, Cassidy seems to have taken a whiff of whatever the others have been smoking, and the effect isn't becoming. I think there's an unfortunate tendency right now for otherwise sane people to want to associate themselves with populist ideas, perhaps in the hope that that populism will sweep away the current administration. It's a cheap trick in an election year, rather than a reasoned analysis, and it has the unfortunate side effect of giving the Robertses and Dobbses cover. Irwin is right to call Cassidy out on it.

Posted by: A Cassel on August 10, 2004 10:14 AM

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I'm the most guilty of the guilty, since I don't like what's happening and can't offer a solution. Since I am pretty marginal even within the Democratic Party, which is itself out of power at the moment, I would not be able to put my grand plan into effect even if I had one.

Free trade has been touted as a magic bullet which will solve all problems, and anyone who has quibbled has been branded a Pol Pot Luddite. Free trade has been institutionalized in a way which trumps and nullifies all other considerations -- environmental, labor, national, legal, communitarian, consumer-protection, military, etc. Recently, as we've seen here, free trade has been used as a blunt instrument to impose intellectual property laws on the world.

Free trade has always been marketted as part of a two-part package including various sorts of limits and ameliorations which softened its harsh effects. The second part of the two-part package has often been imaginary, and most free traders don't care. "Oh, gee. Who would have guessed?"

When push comes to shove, is there any reason why a free trader should care at all about the effects of free-trade on overpriced American labor? Shouldn't labor costs be allowed to fall until worldwide full employment is attained? The social and political effects on the U.S. and Europe would be horrendous, but do economists even notice that kind of effect?

Cassidy's plan is nice, but it hasn't happened and probably won't, and even if it did, do we know that it would be effective? Investing in IT education ended up being a big loser.

The Cato Institute doctrine is that American workers are Darwinian losers and parasites and nobody should care much about them. Politically, American workers lost when their supposed political representative signed on to a deal which left them out.

Perhaps from a global long-term point of view that's all to the good, but the specific interests of many Americans have been hurt. Sounds like nationalism, but shouldn't we have a national government? Some say it's the inevitable wave of history, but they're mostly people who have an axe to grind because they think history is on their side.

It seems to be generally accepted that the less prosperous half of the population has been stagnant or losing for thirty years now. The tea leaves available to me say that this trend will continue to get worse (especially with Bush's policies in place).

I do respect the attempts of DeLong, Krugman, and others to have the best of both worlds, but I have to doubt whether it will happen. For one things, as I see in the newspaper often, the same international competitive pressures that drive wages down also put pressure on governmental ability to collect taxes. During the same period, my state of Oregon has been granting tax breaks to industry at a fast clip, thus shifting the tax burden to homeowners and wageearners.

Posted by: zizka / John Emerson on August 10, 2004 10:36 AM

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Attention Earthlings:

---------------------------

"The system" is broken:

http://www.unwire.org/UNWire/20040108/449_11858.asp


If you TRULY (as opposed to rhetorically) want "free trade" to work in the REAL (as opposed to the "theoretical") world:

http://www.bea.gov/bea/di1.htm

http://www.levy.org/docs/stratan/stratan.html


Face the facts. Stop pounding the messenger(s) and blaming the victims. Wean your "systems" (economy(ies), politicians AND "investors") off "the strong (petro) dollar":

http://www.sdcia.com/msgboard.mv?parm_func=showmsg+parm_msgnum=1003491

http://ist-socrates.berkeley.edu/~pdscott/iraq.html


Soon.

---------------------------

That is all.

Posted by: Mike on August 10, 2004 10:43 AM

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Attention Earthlings:

---------------------------

The system is in crisis:

http://dieoff.org/page140.htm

http://www.iht.com/articles/125563.html

Face the facts. If you want to survive, wean yourselves off of fairly tales, nuclear power and fossil fuels:

http://www.bigeye.com/082202.htm

http://www.commondreams.org/views04/0809-06.htm

http://www.thesustainablevillage.com/partners/nrel.html

Soon.

---------------------------

That is all.

Posted by: Mike on August 10, 2004 11:12 AM

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"But whether and how governments can provide a rocket boost rather than a stumbling block requires a theory of government failure (and success) as developed and clear as our current theories of market failure (and success). And that we--or at least I--lack. "

James M. Buchanan's "Public Choice Economics" theory is an insufficient start on such theory?

As a non-economist working with no mathematical model at all (at all) I'd suppose that it is at least possible to work toward minimum gov't failure, if not maximum gov't success. So, open meetings and other exercises in transparency would be good -- back room deals in smoke filled rooms would be bad. Term limits and competitive elections would be good -- committee chairmanships based on seniority alone, and gerrymandered "safe" districts would be bad. Sunset laws and mandatory review of old solutions for effectiveness, however measured, would be good -- unthinkingly perpetuating programs designed in a time long gone under assumptions no longer true is probably bad.
States'-rights, local control, and consent-of-the-governed (allowing California to do things differently from Kansas, for instance) is probably good -- one-size-fits-all policies imposed by 50.1% of the most shrill policy-makers is probably bad.

All this, from both a social and financial perspective.

There would seem to be natural experiments to be reviewed... If a nation with, say, mandatory term limits has a better economy than one where one person or party has continuing power? If a nation with "revolving door" policy makers moving between business and industry is more productive than one of fixed classes of regulators and producers with high walls of separation ... If a nation with many variations of policy on, say, land use or union membership is more productive than a nation with a single, nation-wide, policy ...

Or is there an objection to Buchanan's work of which I am unaware?

Posted by: Pouncer on August 10, 2004 11:17 AM

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Want a constructive criticism? Ok, if trade between high and low wage countries causes wages in the high-wage country to fall ("factor price equalization") to be fair one should subsidize the wages of workers in the high wage countries out of the gains of trade. Otherwise, most workers in the rich countries lose, which, in the long-run, will make free trade unsustainable as a political policy. So if you really favor free trade over the long-haul, and want to head off protectionism,you need to tend to the problem of income redistribution. Is that constructive enough?

Posted by: Luke Lea on August 10, 2004 11:20 AM

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Want a constructive criticism? Ok, if trade between high and low wage countries causes wages in the high-wage country to fall ("factor price equalization") to be fair one should subsidize the wages of workers in the high wage countries out of the gains of trade. Otherwise, most workers in the rich countries lose, which, in the long-run, will make free trade unsustainable as a political policy. So if you really favor free trade over the long-haul, and want to head off protectionism,you need to tend to the problem of income redistribution. Is that constructive enough?

Posted by: Luke Lea on August 10, 2004 11:22 AM

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Want a constructive criticism? Ok, if trade between high and low wage countries causes wages in the high-wage country to fall ("factor price equalization") to be fair one should subsidize the wages of workers in the high wage countries out of the gains of trade. Otherwise, most workers in the rich countries lose, which, in the long-run, will make free trade unsustainable as a political policy. So if you really favor free trade over the long-haul, and want to head off protectionism,you need to tend to the problem of income redistribution. Is that constructive enough?

Posted by: Luke Lea on August 10, 2004 11:23 AM

____

It's not whether the anti-Kerry SwiftVets and other Viet vets are telling the truth, but rather it's:

WHY DO TWO OUT OF EVERY THREE VIETNAM VETS HATE JOHN KERRY?

What does this say about his leadership ability?

Would our military follow his orders with enthusiasm?

If he ever became president, would he, could he defend America from ther evil men committed to our destruction?

Make no mistake...

AL QAEDA IS CAPABLE OF DESTROYING OUR NATION.

People in the know think they already have several suitcase nukes. If placed strategically in NYC, DC, Chicago, LA, etc. not only would they kill untold millions but they would empoverish us all and leave us almost helpless.

The Swifties and Viet Vets should be considered like the canaries in the coal mine.

We ignore them at our peril.

We need a President who will defend America and doesn't give a crap about what the EuroSocialist eunichs in France and Germany think about us. They are like your wife during...

http://pep.typepad.com/public_enquiry_project/2004/08/its_not_whether.html


Posted by: Adrian Spidle on August 10, 2004 11:26 AM

____

It's not whether the anti-Kerry SwiftVets and other Viet vets are telling the truth, but rather it's:

WHY DO TWO OUT OF EVERY THREE VIETNAM VETS HATE JOHN KERRY?

What does this say about his leadership ability?

Would our military follow his orders with enthusiasm?

If he ever became president, would he, could he defend America from ther evil men committed to our destruction?

Make no mistake...

AL QAEDA IS CAPABLE OF DESTROYING OUR NATION.

People in the know think they already have several suitcase nukes. If placed strategically in NYC, DC, Chicago, LA, etc. not only would they kill untold millions but they would empoverish us all and leave us almost helpless.

The Swifties and Viet Vets should be considered like the canaries in the coal mine.

We ignore them at our peril.

We need a President who will defend America and doesn't give a crap about what the EuroSocialist eunichs in France and Germany think about us. They are like your wife during...

http://pep.typepad.com/public_enquiry_project/2004/08/its_not_whether.html


Posted by: Adrian Spidle on August 10, 2004 11:26 AM

____

Want a constructive criticism? Ok, if trade between high and low wage countries causes wages in the high-wage countries to fall ("factor price equalization") to be fair one should subsidize the wages of workers in the high wage countries out of the gains of trade. Otherwise, most workers in the rich countries lose, which, in the long-run, will make free trade unsustainable in a political democracy. So if you really favor free trade over the long-haul, and want to head off protectionism,you need to tend to the problem of income redistribution. Is that constructive enough?

Posted by: Luke Lea on August 10, 2004 11:26 AM

____

Want a constructive criticism? Ok, if trade between high and low wage countries causes wages in the high-wage countries to fall ("factor price equalization") to be fair one should subsidize the wages of workers in the high wage countries out of the gains of trade. Otherwise, most workers in the rich countries lose, which, in the long-run, will make free trade unsustainable in a political democracy. So if you really favor free trade over the long-haul, and want to head off protectionism,you need to tend to the problem of income redistribution. Is that constructive enough?

Posted by: Luke Lea on August 10, 2004 11:27 AM

____

It's not whether the anti-Kerry SwiftVets and other Viet vets are telling the truth, but rather it's:

WHY DO TWO OUT OF EVERY THREE VIETNAM VETS HATE JOHN KERRY?

What does this say about his leadership ability?

Would our military follow his orders with enthusiasm?

If he ever became president, would he, could he defend America from ther evil men committed to our destruction?

Make no mistake...

AL QAEDA IS CAPABLE OF DESTROYING OUR NATION.

People in the know think they already have several suitcase nukes. If placed strategically in NYC, DC, Chicago, LA, etc. not only would they kill untold millions but they would empoverish us all and leave us almost helpless.

The Swifties and Viet Vets should be considered like the canaries in the coal mine.

We ignore them at our peril.

We need a President who will defend America and doesn't give a crap about what the EuroSocialist eunichs in France and Germany think about us. They are like your wife during...

http://pep.typepad.com/public_enquiry_project/2004/08/its_not_whether.html


Posted by: Adrian Spidle on August 10, 2004 11:28 AM

____

The software has gone mad again.

And Adrian, you are off topic, and you have disgraced the Spidle name one more time.

Off-topic trolls deserve responses no more than panhandlers deserve spare change.

Posted by: zizka / John Emerson on August 10, 2004 11:40 AM

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Let us not forget what a load of hooey the "free traders" are working on right now.

1. The Doha round. I believe we have just agreed to the broad outlines on the parameters of how the discussion of first world agricultural subsidies will be addressed. Or something like that. It is all nonsense until someone points out a theory that describes an actual political future where this is even on the table in the US or Europe.

Two. The Australian deal. This deal is mostly focused on intellectual property issues. It seems to me to be just a boon for the pharmaceutical industry.

The free trade position is riddled with contradictions. The onus is not on free-trade opponents. So-called free traders should be specific about how they intend to deal with the food and pharmaceutical issues of the developing world under the current free-trade agenda.

Posted by: biztheclown on August 10, 2004 11:44 AM

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http://www.startribune.com/stories/535/4919400.html
The vision of America evolving into a global enter of wealthy, high-skilled workers is not materializing, new jobs numbers and projections indicate.

Only 37 percent of Minnesota's current job acancies require anything beyond a high school diploma, according to semiannual figures released Monday by the Minnesota Department of Employment and Economic Development.

Nationally, jobs requiring college degrees will remain stagnant at about 27 percent through 2012, said the Economic Policy Institute (EPI), a labor-funded think tank in Washington, D.C.

Both reports challenge the popular notion that this country can educate itself out of unemployment by replacing jobs lost to technology and off-shoring with highly skilled, highly paid work. They also suggest that a college degree is not the ticket to the American dream it once was thought to be.

"There is no pent-up demand that exists now or will in the future," said Lawrence Mishel, author of last month's EPI report, "Jobs in the future: No boom in the need for college graduates."

Posted by: me on August 10, 2004 12:15 PM

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Brad, quoting John Cassidy: "A truly enlightened trade policy would involve increasing federal support for science at all levels of the education system; creating financial incentives for firms to pursue technological innovation;"

I've been a math and hard science person all my life, and I have never understood the infatuation with pushing science as a panacea, as opposed to finance or business management or whatever.

Making everyone take biology in high school will not equip them to make breakthroughs in medical science or genetically engineer plants. We already have a substantial number of unemployed or underemployed people with advanced science and engineering degrees. In addition to the fact that you can't FORCE people to be either interested in technology or good at it, stuffing more people through that particular pipe would seem to increase the underemployment problem.

As for incenting companies -- I spent the last 15 years working for a Fortune 500 company. We didn't create technology for sale, but we purchased and deployed large amounts of relatively high-tech stuff to deliver services. We had a group of 20-30 people doing applied research. The group had a demonstrable impact on the company's business -- how new services could be deployed, studying how customers interacted with the services, one-off high-tech test and measurement to apply to problems that were otherwise not tractable, etc. The R&D tax credits made the effort almost free for the company. But when there was a profit crunch, the applied research folks were among the first to be laid off -- almost free wasn't good enough.

Building an organization that can "pursue technological innovation" takes time, effort, and commitment -- these are not people working an assembly line that you can lay off and rehire at irregular intervals. Please suggest ways to incent a company to maintain such an organization, through good times and bad, accepting that the price of some successful projects is that many projects must fail. And in some cases, almost all the projects may fail -- Microsoft spends a lot of money on their research organization, and appears to get very little in the way of new products.

Posted by: Michael Cain on August 10, 2004 02:20 PM

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I suggest that in the future commenters boycott posts on "free trade." Bloggers just post this stuff when they want a big comment thread. No one's mind is changed. These posts are getting rather tiresome. I think that things will get so bad, that the voters will demand change at some point. Who knows if it will be too late?

Americans have never liked globalization. Remember the Boston Tea Party? The colonists could see the East India Company juggernaut heading toward them and wanted to stop it. I would say that they were successful. The questions is, are we as smart, stubborn, and resourceful as our ancestors in fighting off corrupt government and greedy businessmen?

Posted by: Lynne on August 10, 2004 02:58 PM

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Americans have never liked globalization. The Boston Tea Party was a reaction against the East India Company juggernaut. Globalization is a choice rather than a necessity.

Posted by: Lacee on August 10, 2004 03:02 PM

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Lynne and Lacee -- really?????

Posted by: zizka / John Emerson on August 10, 2004 03:37 PM

____

A bad argument can fail on its merits, there is no need for a counter. In fact, that particular line "Well, what would YOU do?" is most often delivered to somebody who can't respond because his jaw is agape at the stupidity of what he has been presented with.

Despite that, I've offered an alternative several times: Democracy.

Sorry if it offends the people who know better than the rest of us. Make your case and let 'em vote, though, is the way we do it here. Again, sorry.

Anyway, this is stupid. Today Greenspan and cronies, who I didn't vote for, whose term doesn't even cycle with the Presidency, changed the prime rate. Seems like that's a pretty important economic decision, at least as much and probably more important economic decision than, say, a milk compact.

We are supposed to accept this power without comment. It just is.

Yet I have to defend why somebody under the direct control of an elected official should be allowed to fiddle with a tariff on a widget?

Give me a break.

Posted by: a different chris on August 10, 2004 04:31 PM

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I would like to take issue with this:
"Thus we have here a powerful externality: something important for the economy but unrecognized by the firm. Firms don't take account of the effects of their production decisions on the productivity of other firms in the industry. With this externality, we would not expect the market system to be a particularly good social planning mechanism."

There is an intermediate level of scope that needs to be considered: not just the firm and the economy, but also the industry. Enhancement of industry productivity created by actions of a firm are external to the firm but internal to the industry. It will increase profits and attract new entrants. Thus these benefits are captured and utilized by the industry even though they don't influence the decisions of the firm generating them.

Posted by: Ionides on August 12, 2004 11:41 AM

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I would like to take issue with this:
"Thus we have here a powerful externality: something important for the economy but unrecognized by the firm. Firms don't take account of the effects of their production decisions on the productivity of other firms in the industry. With this externality, we would not expect the market system to be a particularly good social planning mechanism."

There is an intermediate level of scope that needs to be considered: not just the firm and the economy, but also the industry. Enhancement of industry productivity created by actions of a firm are external to the firm but internal to the industry. It will increase profits and attract new entrants. Thus these benefits are captured and utilized by the industry even though they don't influence the decisions of the firm generating them.

Posted by: Ionides on August 12, 2004 11:48 AM

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sorry for the double post. the first attempt produced an error and i assumed it didn't make it.

Posted by: Ionides on August 12, 2004 11:55 AM

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I believe that trade (whether perfectly free, or perfectly fair) has the social benefits of increasing inter-dependance, and may cause reductions in the future rate of conflicts.

The current state of affairs is not trade - the US is supressing wages, moving capital investment where returns are greater, and mostly producing at the same steady growth rates of 4-7% to match population growth. Now most of the economic benefits will be held by fewer and fewer, as they are spread across a relatively infinite labor pool and an relatively finite capitalist pool.

50% of the trade deficit are goods manufactured by US multinationals and sent back to sell in the US markets.

System dynamics says that strong will get stronger in re-enforced loops and the rich get richer. The paper titled 'Wealth Happens' explains this perfectly.

Here is a proposed middle ground solution:
1. Split the WTO into 3 Regional Groups that will have one major power and support multiple developing economies.
a. North America/South America
b. Japan and Austrailia/Asia
c. Western Europe/East Europe and Africa

This would dampen out some of the very real externatlities that exist by trying to ingest 2 billion people into the labor pool in 20 years.

Posted by: nonecon on August 12, 2004 09:52 PM

____

Response to your post from 2003 regarding the euro and "Free Trade Worriers",


The value of the Euro has little if nothing to do with interest rates. The explanation is purely fundamental -- not technical. The gradual rise is attributed to the fact that the mark and frank and other former strong currencies have been consolidated against the dollar and have panned out over time. There has been a gradual rise overall ever since and you will continue to see an over all steady rise against the dollar over the next 5 years. I have no idea how interest rates are the main explanation for the appreciation of the Euro - that is "school book" talk from a "school book" economist.

Even from a technical perspective interest rates are only part of the overall picture. The value of the Euro has little if nothing to do with interest rates. These nations also follow different trade policies (US "Free trade" agreements VS the Duties and Vat taxes still going strong in the EU with no signs of letting down).

I noticed on your website you stated that Free Trade opponents have no solutions to offer. This is not True! There is an entire economic science already emerging and ready to play! This rhetoric is typical. I remember back in 2002 as I was leaving college ALL of my international business college professors feverishly embraced Free Trade and preached it to the utmost extreme! Yet when it came time to tell the other side of the issue they simply dismissed it with a waive of the hand as Spanish Galloons laden with gold crossing the new world and how evil antidumping and countervailing duties are. Basically that it was all "old fashioned" and "outdated" After I left college I found out the real truth and there is an entire area that supports Protectionist measures waiting to emerge. This new solution to free trade is completely fascinating and presents the best solution possible.


Thank you for taking the time to read my letter.

Good Luck!


Michael Cooke
LAripper25@aol.com
310-322-6945

Posted by: Michael Cooke on August 13, 2004 09:11 PM

____

Response to your post from 2003 regarding the euro and "Free Trade Worriers",


The value of the Euro has little if nothing to do with interest rates. The explanation is purely fundamental -- not technical. The gradual rise is attributed to the fact that the mark and frank and other former strong currencies have been consolidated against the dollar and have panned out over time. There has been a gradual rise overall ever since and you will continue to see an over all steady rise against the dollar over the next 5 years. I have no idea how interest rates are the main explanation for the appreciation of the Euro - that is "school book" talk from a "school book" economist.

Even from a technical perspective interest rates are only part of the overall picture. The value of the Euro has little if nothing to do with interest rates. These nations also follow different trade policies (US "Free trade" agreements VS the Duties and Vat taxes still going strong in the EU with no signs of letting down).

I noticed on your website you stated that Free Trade opponents have no solutions to offer. This is not True! There is an entire economic science already emerging and ready to play! This rhetoric is typical. I remember back in 2002 as I was leaving college ALL of my international business college professors feverishly embraced Free Trade and preached it to the utmost extreme! Yet when it came time to tell the other side of the issue they simply dismissed it with a waive of the hand as Spanish Galloons laden with gold crossing the new world and how evil antidumping and countervailing duties are. Basically that it was all "old fashioned" and "outdated" After I left college I found out the real truth and there is an entire area that supports Protectionist measures waiting to emerge. This new solution to free trade is completely fascinating and presents the best solution possible.


Thank you for taking the time to read my letter.

Good Luck!


Michael Cooke
LAripper25@aol.com
310-322-6945

Posted by: Michael Cooke on August 13, 2004 09:13 PM

____

Response to your post from 2003 regarding the euro and "Free Trade Worriers",


The value of the Euro has little if nothing to do with interest rates. The explanation is purely fundamental -- not technical. The gradual rise is attributed to the fact that the mark and frank and other former strong currencies have been consolidated against the dollar and have panned out over time. There has been a gradual rise overall ever since and you will continue to see an over all steady rise against the dollar over the next 5 years. I have no idea how interest rates are the main explanation for the appreciation of the Euro - that is "school book" talk from a "school book" economist.

Even from a technical perspective interest rates are only part of the overall picture. The value of the Euro has little if nothing to do with interest rates. These nations also follow different trade policies (US "Free trade" agreements VS the Duties and Vat taxes still going strong in the EU with no signs of letting down).

I noticed on your website you stated that Free Trade opponents have no solutions to offer. This is not True! There is an entire economic science already emerging and ready to play! This rhetoric is typical. I remember back in 2002 as I was leaving college ALL of my international business college professors feverishly embraced Free Trade and preached it to the utmost extreme! Yet when it came time to tell the other side of the issue they simply dismissed it with a waive of the hand as Spanish Galloons laden with gold crossing the new world and how evil antidumping and countervailing duties are. Basically that it was all "old fashioned" and "outdated" After I left college I found out the real truth and there is an entire area that supports Protectionist measures waiting to emerge. This new solution to free trade is completely fascinating and presents the best solution possible.


Thank you for taking the time to read my letter.

Good Luck!


Michael Cooke
LAripper25@aol.com
310-322-6945

Posted by: Michael Cooke on August 13, 2004 09:22 PM

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Response to your post from 2003 regarding the euro and "Free Trade Worriers",


The value of the Euro has little if nothing to do with interest rates. The explanation is purely fundamental -- not technical. The gradual rise is attributed to the fact that the mark and frank and other former strong currencies have been consolidated against the dollar and have panned out over time. There has been a gradual rise overall ever since and you will continue to see an over all steady rise against the dollar over the next 5 years. I have no idea how interest rates are the main explanation for the appreciation of the Euro - that is "school book" talk from a "school book" economist.

Even from a technical perspective interest rates are only part of the overall picture. The value of the Euro has little if nothing to do with interest rates. These nations also follow different trade policies (US "Free trade" agreements VS the Duties and Vat taxes still going strong in the EU with no signs of letting down).

I noticed on your website you stated that Free Trade opponents have no solutions to offer. This is not True! There is an entire economic science already emerging and ready to play! This rhetoric is typical. I remember back in 2002 as I was leaving college ALL of my international business college professors feverishly embraced Free Trade and preached it to the utmost extreme! Yet when it came time to tell the other side of the issue they simply dismissed it with a waive of the hand as Spanish Galloons laden with gold crossing the new world and how evil antidumping and countervailing duties are. Basically that it was all "old fashioned" and "outdated" After I left college I found out the real truth and there is an entire area that supports Protectionist measures waiting to emerge. This new solution to free trade is completely fascinating and presents the best solution possible.


Thank you for taking the time to read my letter.

Good Luck!


Michael Cooke
LAripper25@aol.com
310-322-6945

Posted by: Michael Cooke on August 13, 2004 09:23 PM

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Umm... Luke, do you really want people earning approximately US$1,000 a year to start subsidising people earning US$30,000 a year?

And what's wrong with giving access to third world countries in agricultural goods?

Free trade, like free market, is not perfect but it's not the root of all evil.

Posted by: Weco on August 15, 2004 12:58 PM

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Just to add: there's already a whole wealth of literature concerning protectionist measures. It's called the New Trade theory. Ask Paul Krugman.

Posted by: Weco on August 15, 2004 01:03 PM

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