Free Trade Failures Can't Be Fixed With Weak Dollars

March 6, 2008

Elaine Meinel Supkis

The NYT has another article about free trade. Unlike 99% of their articles, this one is anti-free trade. I am shocked. Just shocked. 99% of mainstream US media is pro-free trade, after all. Even so, the editorial is very weak and most of the comments following it are quite revealing. Many Americans are angry about free trade and frightened that it is destroying our nation. And it is. But suggesting solutions is verboten, of course. Nor does this editorial or the NYT mention the dollar amounts involved in this catastrophe.

Grand Old Protectionists

By ROBERT E. LIGHTHIZER

NOW that John McCain is, formally, the presumptive presidential nominee of the Republican Party, he can stop worrying about winning primaries and caucuses and start worrying about winning over conservatives. Mr. McCain still faces a large challenge from his right in the fall, as many conservatives suspect he isn’t really one of them.

To prove his bona fides as a conservative, Mr. McCain and his defenders often cite his support for free trade. A writer in National Review, for example, suggested last year that conservatives should support Senator McCain because he is, in Mr. McCain’s own estimation, the strongest free trader in the Senate since Phil Gramm (an adviser to Mr. McCain) left that body.
*snip*
Free trade has long been popular with liberals, and it remains so with liberal elites today. The editorial pages of major newspapers consistently support free trade. Ted Kennedy supported the advance of free trade. President Bill Clinton fought hard to win approval of the North American Free Trade Agreement. Despite some of his campaign rhetoric, Barack Obama is careful to express qualified support for free trade, even when stumping in the industrial Midwest.

This editorial does talk about some of the things I think are terribly obvious. He does note how tariffs and barriers were a Republican, conservative thing. But the modern conservatives are not that at all any more than liberals are libertarians anymore. Everything has been turned upside down...deliberately. Here is my reply to all this:

March 6th, 2008 9:40 amI run Culture of Life News and talk a lot about free trade. Free trade has not just been a failure in the US, it has become a total disaster! Any article discussing trade while leaving out the vital statistics about trade is a fraud.

Any comments about free trade that don't mention our trade deficit which has grown worse and worse and worse as trade gets freer and freer is a fraud. We must remind all readers of any free trade information, the US has had a trade deficit of the last 7 years of nearly $5 trillion. This is an immense sum of money. It now runs at around $700 billion a year and the only way to clip this is to go into a very deep recession or even a total depression.

Which is what is happening now. Just as the majority of Americans want the Iraq war to end, so do they want an end to this disaster we call 'free trade.' But look at who is left standing in this horrible election cycle: free trade maniacs and war mongers! They all want more wars, they all want to attack Iran as well as keep occupying Iraq. They all want more free trade and if they make statements to the contrary, we learn they are cynical about this.

The major media has always supported wars and free trade. And look where they brought our once-powerful nation: to our knees! The media dealt with any anti-NAFTA candidates by blacking them out. Or mocking them. The media guided the voters towards the candidates who are least likely to end the farce of 'free trade.'

All our allies and quite a few future enemies all have giant trade surpluses with the US. They are now using their sovereign wealth funds to buy into all our economic systems. Our nation is seeing Japanese automakers build factories here and turning us into their wage slaves. In the past, we had the Bretton Woods II and the Plaza Accords drop the value of the dollar in a vain attempt to fix our growing trade deficits with the nations we defeated in WWII. None of this worked at all!

This is because our trade partners don't buy our stuff. Japan is notorious at keeping out imports. If they have to produce a 'depression' while their GNP grows at 3.5% a year [the Japanese depression is totally fake] they can kill imports by claiming, no one in Japan can buy American goods, they are in a depression! So Japan and China both have huge trade surpluses and the US tries futile monetary manipulations to deal with this. Thus, the killing of the dollar. Which is raising the cost of energy here!

The candidates and the media have no solutions to offer. The idea that maybe we should use tariffs and barriers to protect us is laughed at and anyone suggesting this is often censored or simply ignored.

Tariffs and barriers are our friends! Until we fix our trade deficits, our only friends.
— Elaine Meinel Supkis, Berlin NY

Hey, I even made the 'editor's choice' today! Well, well, well.

The New York Times used to publish my letters and other things then they were told to stop doing this by Bush Jr and Haley Barbour. So they stopped. Maybe they will begin to publish me again?

I am still very angry, how we were moved step by step into supporting the only candidates that are pro-Zionist wars and pro-free trade. Some choice we have! The slender differences that put Obama on the anti-war, anti-free trade side of the aisle has suddenly moved him from being a saint and god to being a snake and sinner! Note how everyone who were nice to him are now shouting at him. And they will shout him down until he leaves the stage bare.

Then, instead of a selection between a Skull and Bones, New World Order warmonger # 1 and Skull and Bones, New World Order warmonger #2 like the last election we get....the exact same futile choice. Isn't this wonderful?

And the monetarist game will roll onwards. We will be told, yet again, a weak dollar will save America by making us so cheap, we will beat out Mexico in the 'cheap as a peso' category. Isn't that charming? So our empire floats on a sea of red ink and sinks. Thanks a billion, US media. Thanks.

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Comments

[EEngineer]

The Clausewitz quote "war is simply a continuation of political intercourse, with the addition of other means" keeps popping into my head. The inverse, of course, is also true. Just because there are no bullets doesn't mean that there is no "war".

What I see happening is that there's a war on for control of the worlds money and banking. On our side all we have are Stalin's (or Hu's) "useful idiot" free traders selling us into a future slavery or serfdom.

We're going to get a New World Order, but I doubt it's going to be the one these knuckleheads seem to envision.

[Elaine Meinel Supkis]

Chinese is a very hard language to learn. We might as well start now.

[Jean Roe]

I totally agree with your feelings, Elaine. Here is how we feel about NAFTA in Canada:

http://www.theglobeandmail.com/servlet/story/RTGAM.20080305.wcomment0306/BNStory/Front/home

[CK]

Allow me to intrude with some old economics.
Free trade comes out of the old theory of comparative advantage. Some nations could grow wheat better than other nations, some could grow wine better. But both could make each item. It is possible to show mathematically that if there are no impediments to trade, allowing each nation to trade without barriers with the other can maximize the amount of wine and wheat produced by the two nations.
Unfortunately there are a few assumptions built into this old model. The built-ins were just the way the world worked back when the model was first introduced.
1) First unstated assumption: Labour stayed home.
2) Second unstated assumption: Hard currency, no inflation, no balance of payments issues. ( Fixed exchange rates )
3) Capital did not go out of the country except to balance the balance of payments.
No running to lower tax rates, lower wage rates, easier environmental or investment laws.
4) Always unstated assumption, The state or Nation has complete control of its borders ( no smuggling/arbitrage ) and the total good of the state is what matters not the individual good of the citizens.
When labour and capital can't leave, then the only advantages different countries have is in the educational system that provides the workers and the climate and soil that provides the agricultural goods.
For most agricultural goods, the old comparative advantage model is still a decent model for free trade. For anything that does not require a fixed climate, the free trade model sucks. One can make a car as well in a factory in Harbin as in Detroit, all that matters is labour cost because knowledge is immune to borders.
So China has what the old economists called absolute advantage ...
As more things go into an investment decision: wages, demographics, legal systems, environmental restraints, transportation net modernity, infrastructure maintainence, educational attainments of the various populations, etc. the old comparative advantage model becomes less and less relevant and more and more politicially worshipped.
Canada has a comparative advantage with the USA in softwood production, Cuba in sugar production, mexico in chili production. Should ask those Canadians how that NAFTA is helping their softwood exports.

[Elaine Meinel Supkis]

Free trade is not possible if Japan wants one way trade. Period. The US allowed itself to become the destination of all trade. And to pay for this, we printed zillions of dollars that Japan and China held in FOREX reserves. Now there are too many dollars and they are everywhere at once. Thus, global inflation.

And we can't fix it by exporting even faster than we export dollars. We will NEVER catch up except by totally destroying the dollar. A very real possibility.

[rockpaperscizzors]

Well who'd believe that KBR, a receipient of miltary no-bid contracts, would try to stiff the US government with an offshore haven to avoid paying medicare and social security deductions? In fact Defense Department has known this since 2004. "The Defense Department has known since at least 2004 that KBR was avoiding taxes by declaring its American workers as employees of Cayman Islands shell companies, and officials said the move allowed KBR to perform the work more cheaply, saving Defense dollars."

Gee, I'm surprised....

Top Iraq contractor skirts US taxes offshore
Shell companies in Cayman Islands allow KBR to avoid Medicare, Social Security deductions
CAYMAN ISLANDS - Kellogg Brown & Root, the nation's top Iraq war contractor and until last year a subsidiary of Halliburton Corp., has avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in this tropical tax haven.
More than 21,000 people working for KBR in Iraq - including about 10,500 Americans - are listed as employees of two companies that exist in a computer file on the fourth floor of a building on a palm-studded boulevard here in the Caribbean. Neither company has an office or phone number in the Cayman Islands.
http://www.boston.com/news/world/articles/2008/03/06/top_iraq_contractor_skirts_us_taxes_offshore/?page=1

Power corrupts, absolute power corrupts absolutely

[rockpaperscizzors]

And to provide perspective: With an estimated $16 billion in contracts, KBR is by far the largest contractor in Iraq, with eight times the work of its nearest competitor.

And here's dessert with a cherry on the sundae: The largest of the Cayman Islands shell companies - called Service Employers International Inc., which is now listed as having more than 20,000 workers in Iraq, according to KBR - was created two years before Cheney became Halliburton's chief executive. But a second Cayman Islands company called Overseas Administrative Services, which now is listed as the employer of 1,020 mostly managerial workers in Iraq, was established two months after Cheney's appointment.

Cheney's office at the White House referred questions to his personal lawyer, who did not return phone calls.

[icemann]

You have mortgage loans resetting, food and fuel are inflating and the government is allowing speculation in these items. Does this sound like there is going to be a happy ending?

[Chris]

Yes. For the past 30 or 40 years the most important US export has been the $. The US exported $ fresh from the printing presses (i.e. at no direct cost whatsoever), and imported oil and luxury loot, even basic stuff from China. But now, that the US economic ship is sinking, the world has realized the $ is increasingly worthless, and that the $ never ever will regain it's value since all corners of the globe are already flooded to the gills with fiat dollars supported only by a military losing wars in Iraq and Afghanistan, run by madmen shouting how they are going to take over the world and put everybody under their boot heh. One power to rule them all... (Sigh)

The world sits on top of mattresses choke full of dollars that they need to put into circulation, but they cannot do that since adding to the surplus of real hard dollars already in circulation only will speed up the dollar inflation destroying the currency in the first place. And as the dollar dies so does the US dollar economy.

Thought: Maybe the Fed is deliberately driving down the value of the dollar out of fear of sovereign wealth funds taking over the whole shebang? How can anyone sane invest in the dollar economy when the dollar has lost 60 % of it's value since Bush became president and the real down ward momentum is only now starting for real?
But if they raise the rates and made dollar investment seriously worthwhile, they would have say a $ Trillion of hard foreign dollars take over huge chunks of the core US economy in a matter of months. The Sovereign Wealth funds would feast on the US economy.

The euro, and all other fiat currencies, are also losing value very rapidly every minute to inflation. But compared to the breathtaking crash of the dollar the € looks like a rock of stability.

Elaine has so clearly shown how throughout the dollars history, every generation or so, it has needed to be flipped from one level to the next (through various government actions to international accords like the Bretton Woods I and the unofficial II). The dollar desperately needs to find a new level to flip to, but it cannot find any, there is none this time. The Fed and US government are flipping like crazy, but they can't find anything the dollar sticks to. And the world is beginning to realize this.

Stick a fork in the $, it's done.

[Elaine Meinel Supkis]

The Germans inflated the Mark from 4 to the dollar to 4 billion to the dollar in just 4 years, still the world's record for inflation. Imagine a trillion dollars equaling a euro. Are we going to do that route?

I just posted a story about all this. Japan's FOREX reserves just shot over a trillion dollars. OUCH.

[Allen/Vancouver]

Xenophopic. NAFTA doesn't work for you so let's renegotiate.

Firstly, the Middle East is not the biggest supplier of oil to the US. Canada is.

So let's renegotiate. And water is off the table in any talks.

$1 billion crosses our border every day. And your problem is? Our forest industry is fucked by your housing mess. Your environmental standards have stagnated, but we have to breath the same air.

We are only too ready to renegotiate. We think the "level playing field" is very tilted to the US and we want a rebalancing. At the least your minimum wage will have to match ours, as will your heath care. Otherwise, go away and don't bother us with your whining.

[Elaine Meinel Supkis]

Allen, you are obviously not a long time reader here.

I was one of the first economic bloggers to discuss in great detail the business of energy, not just oil, coming from Canada. I also discussed how Canada is beating us in the auto industry thanks to the health care system of Canada. Then there is all the other important stuff: we have a HUGE trade deficit with Canada.

Because you have a lot of stuff we like to consume. And the weak dollar is killing you all. Now, do you want to be in a deal with someone who is cheating you on sales by giving you money that loses value the instant you touch it? Eh?

By the way, several government officials of Canada read me and send me information. Have some patience and hang out here a while longer. Better still, pass us information. I am a patriot but also expect YOU to be a good, patriotic Canadian. Sovereignty is important for YOU.

[CK]

The requirements for one way trade to be possible are:
1) One country has an absolute monopoly on a good and there is no substitute.
2) Both/all the countries involved as recipients of the one way trade agree to being recipients.
You may want one way trade but if there are substitutes for the good(s) you are trying to sell, or competitor producers. Your desires are thwarted. The only reason Japan has one way trade with any country is that a political decision was made to allow this. They may want, but it takes accomplices in the recipient country for desire to become reality. ( In this respect your cartoons are always spot one as you draw all the main actors as women, in the arena of one way trade, women are much like Japan ).
You write that "the USA allowed itself to become" and that is exactly wrong, the USA actively worked to become the destination of all trade. Smart enough to con the world for 63 years that paper dollars were the same thing as pistachios, datsuns, chrome. It was not some passive thing, not some "oh my how did all this stuff get here" discovery moment. Just as China now is working to become the home of all value added production, just as Japan worked to undermine the US industries and replace them with japanese factories on US soil, the Chinese are working to put the useful factories within the Chinese borders, and keep the labour at home.
Whether it is people or towns or nations, trade is inevitable, people trade with each other, sometimes the finished trade leaves both the buyer and seller better off and with a "bit of face" ( the ability of both parties to believe that they got the better of the deal and therefore will do the deal again ). Other times the trade is done at physical or metaphysical gunpoint; taxes, tariffs, non-economic barriers to trade are all fundamentally the same thing. Only one side is allowed to benefit.
The team with more guns always determines how the playing field will be levelled.

[live adult]

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