Has Foreign Trade Helped or Hurt

MarkBarbieri

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In discussions about our recent eceonomic troubles and the possible auto-industry bailout, the subject of trade keeps coming up. Some people think that trade has really hurt us and others think that it has helped. What's your view? And if you oppose our current trade model, is there a way to fix it?
 
If the trade deals are severely lopsided (benefits one but hurts the other), then it's bad. I won't pretend to know a lot about foreign trade but I believe in an open market. If someone wants your product bad enough, they'll buy it.
 
How can a trade deal be severely lopsided? If one party didn't like the terms of the trade, couldn't they just walk away?
 
How can a trade deal be severely lopsided? If one party didn't like the terms of the trade, couldn't they just walk away?

Tariffs.

Or something like this (from the article)

Even the 15-year-old North American Free Trade Agreement doesn't promote truly free trade. Among its protectionist provisions: 62.5 percent of an automobile's total parts must be made within the three member states — Canada, the United States and Mexico — in order for the car to cross a border.
 

There's nothing wrong with free trade as long as it goes both ways.

I remember back in the early 50's when anything "Made in Japan" was nothing more than cheap junk, and I do mean junk! Now, they make some of the best cars and electronics while some American companies are struggling to overcome bad reputations. Limiting free trade is not good for competition. The best example of that is the American auto industy having to get their act together and make a better car to compete with Japan. I hope it's not too little too late.
 
The best example of that is the American auto industy having to get their act together and make a better car to compete with Japan. I hope it's not too little too late.

What about number of cars imported and exported on each side?

Do you know the Trade Agreement regarding Japanese Auto Makers?

I would think you need to have that info to make a better educated opinion. I wonder what the numbers are.
 
Tariffs.

Or something like this (from the article)

Even the 15-year-old North American Free Trade Agreement doesn't promote truly free trade. Among its protectionist provisions: 62.5 percent of an automobile's total parts must be made within the three member states — Canada, the United States and Mexico — in order for the car to cross a border.

One of the trading partners that President Bush has been supporting, can't get through congress. Colombia. They could use Catapillar and other farm equipment and would be a good trading partner. Apparently they are good enough for Canada however. Here is an opportunity being missed.
http://www.canada.com/reginaleaderpost/news/story.html?id=2bbcc628-9448-4db6-a65e-31605b6e77d4
Canada, Colombia sign free trade pact
New market opened for Canadian beef, pork, potatoes: Government
David Akin, Canwest News Service
Published: Friday, November 21, 2008

LIMA, Peru - The leaders of Canada and Colombia signed a new free-trade agreement here on Friday that opens new markets for Canadian beef, pork, potatoes and other products in the South American country.

Prime Minister Stephen Harper and President Alvaro Uribe signed the agreement just before the annual leaders' summit for the Asia Pacific Economic Cooperation forum, which begins here Saturday.

The two leaders also signed side deals that will hold companies operating in either country to international labour standards, and encourage the use of voluntary codes to protect the environment.
Colombian President Alvaro Uribe, left, and Canadian Prime Minister Stephen Harper, in a 2007 file shot in Bogota, signed a free trade agreement between their two countries Friday ahead of an APEC leaders' summit in Peru.
Colombian President Alvaro Uribe, left, and Canadian Prime Minister Stephen Harper, in a 2007 file shot in Bogota, signed a free trade agreement between their two countries Friday ahead of an APEC leaders' summit in Peru.

"This unprecedented strong new agreement will benefit all Canadians by giving Canadian exporters, service providers, and investors in a number of sectors access to the growing Colombian market," Harper said.

Some human-rights campaigners, though, had voiced concerns about Colombia's ability to enforce its own laws, and had cautioned that trade deals must go hand-in-hand with new protection for workers.

Colombia has been beset by South America's longest-running internal armed conflict. Since the 1960s, thousands have been killed or kidnapped as government forces fought with left-wing insurgents and right-wing paramilitary forces. It's a conflict that worsened through the 1990s because of the cocaine trade.

After visiting Bogota earlier this month, United Nations human rights chief Navi Pillay said, "Colombia faces grave human-rights challenges in its ongoing conflict, including hostage-taking, extrajudicial executions and arbitrary arrest and detention."

Pillay said these incidents continue, despite measures taken by Uribe's government - including the dismissal of senior military officers engaged in such conduct - to protect vulnerable groups, such as women, journalists and union activists.

Harper said those concerns had been addressed through the deals.

"Human history is clear on this point. If you want to improve and lay the foundation for democracy and prosperity and rights in a country, one of the best ways to do that is open your doors and support a development, prosperity and commercial exchange between countries, and that's what we're doing here," Harper said.

Colombia's trade activity with other countries has risen dramatically since 2000 and, since 2002, Colombia's homicide rate has been halved.

"These types of agreements are great alternatives in order for Colombia to be able to get rid of these violations of human rights," Uribe said. "It is a real alternative for prosperity and entrepreneurship for the Colombian people."

Canadian officials heralded the deals, saying they will help Canadian exporters struggling through the economic downturn. Canadian companies sold about $600 million US worth of goods and services to Colombia last year, while importing about $400 million worth of goods, chiefly coffee, bananas, fuel and coal.

But it could be at least a year or more before the legislatures in both countries ratify the deal, clearing the way for its actual implementation.

Colombia tariffs on about 98 per cent of all Canadian imports by value will be phased out over a five- to 10-year period after implementation.

Canadian trade officials say their goal is to have implementing legislation approved by Parliament by January 2010.

The government also has a free trade deal with Peru waiting for ratification by parliament.

Together, the Peru and Colombia trade deals give Canadian exporters access to a market of about 70 million people.

The Colombian negotiations, which began in earnest after Harper visited Bogota in July 2007, were largely concluded in June.

Under the Labour Co-operation Agreement, one of the side deals that accompany the free trade agreement, Colombia and Canada agreed to worker protection standards adopted by the International Labour Organization. Among other things, those standards ban child labour and forced labour, and commit each government to respect a collective bargaining process.

The labour agreement provides for a dispute-resolution process. Violators of labour standards in either country can be punished, as well, with fines of up to $15 million.

The side agreement on the environment, however, simply says both countries will respect their own environmental laws and policies, and will encourage voluntary practices of corporate social responsibility when it comes to protecting the natural habitat.

Colombia, a country of 45 million people in the northwest corner of South America, covers an area about twice the size of France. It has a coastline on both the Caribbean Sea and the Pacific Ocean. Despite its Pacific coast, Colombia is not a member of APEC.
 
Tariffs.

Or something like this (from the article)

Even the 15-year-old North American Free Trade Agreement doesn't promote truly free trade. Among its protectionist provisions: 62.5 percent of an automobile's total parts must be made within the three member states — Canada, the United States and Mexico — in order for the car to cross a border.

I would assume (and I'm just guessing) that this restriction is to allow the NAFTA members to put meaningful restrictions on imports from non-NAFTA members without unduly restricting trade between NAFTA members. As an example, let's say that the US wants to reduce the importation of cars from Germany. They could do that by imposing a quota or a tarriff (subject to the restrictions of the WTO or other trade agreements). Without a rule like the one listed above, Germany could sell their cars to Canada where a trivial change is made to the car. Canada could then ship the car to the US without regard to the quota or tarriff imposed by the US on Germany. With the rule listed above, that would not be possible.

Another effect, given the way the rule is written, is that it prevents any of the three member nations from becoming a car assembler (rather than manufacturer) using foreign parts. In other words, the Koreans cannot ship all of the parts necessary to build a Hyundai to Mexico, have the car assembled there, and then shipped to the US.

It is clearly a form of trade protection, but one that restricts trade with nations outside of the trade block rather than within it. The US, Canada, and Mexico are all free to trade with whomever they want and they are all free to trade internally manufactured cars within the trade block. They are not free to trade externally manufactured cars within the trade block.
 
Foreign trade badly hurts those who lose their jobs, while delivering a greater overall benefit to everyone else. Look at the American textile industry, now almost entirely extinct; everyone enjoys the low prices because the jobs are now in Malaysia, but that leaves a lot of folks out of work.

Walt
 


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