Partially true wen comes to fed. gov't. Any real deficit? No.
Trade accounts always in balance. Aren't we indebited to foreigners/. How true?
$10 equipment from China; China won't buy back-->comes back in investments.
-buildings -stock -purchase debt
Possible Concern: debt Chinese/JapGerm investment
Amer gov't securities, gov't spends more than taxes
Chinese business, gov't can buy US debt, know get return
OK as long as $ used productively
BUT concerns are vastly overblown
Irony: worry China holds $1 trillion US debt build highways, steel, wood, wire
-no problem if buy goods directly
Political borders have no reasons if trade benecial or harmful Compare NY and MA or US and Canada
ex: 2 states secede, merge trade deficit, has anything changed? No.
Trade statistics are not meaningful entities.
"Buying Local"
100 mile radius, can source locally?
Result: 20 artisans, required 500 man hours to produce one suit
Costs $10,000 to produce locally, 8% of suit had to cheat (if worked 1 1/2 yrs could have been totally local)
-->compare global separization
Who Counts in Trade?
Forget political borders; look beyond US
What makes trading w/ local people more virtuous than non-local
ex: cost savings if fire lots of people (at the x-mas party! ah!)
outsource jobs in whirlpool in tennesee
-each job goes to India, devastated former employees
Job loss $100,000 per person
(including health benefits, pensions) increased divoreced rates alcoholism
Why do this? Save $?
--> lower price to consumers, $2 cheaper per product
-60 million customers -> $120 mill paid
==> $20 mill richer!
How Does One Det. what way to go?
(how Rizzo sleeps with himself at night)
-Moral Intuition: awful to destroy a job for $2, human cost too much
Consider: where draw the line? Boundary where trade matters?
What if jobs went to Ohio? What if town was enviro. friendly?
Is there an acceptable amount of money?
-->no way to be concrete, what standards?
What if product was life savings drugs?
Imagine if possible for every product, back to buying local!
So expensive! Poor quality!
Consider: Benefits of Indian employers
-->help poorest ppl on earth, they now have jobs, less divorce
-not considered by American poor
Protectionism uses poor as pawn
-Poor India helped more than hurt poor in US
Amnt satisfaction gained swamped by happiness lost
- how much each value $1, $2
Consider: slavery
-1863 more slaves than slave owners, benefits spread more thinly
Do the benefits of abolition outweigh the costs?
Obscene! no one makes that argument
1) congress impose $1 head tax on every man woman and child
-->imagine 1 big check distributed to Rizzo; make 1 person rich (hello new econ school)
2) Nothing unique about interna'l econ. trade
trade = simply non-technical form or product (e-books lost prints, vaccines prevent surgeons)
What About Trade Adjustment Assistance?
1)
2)
3)
Other countries will lower enviro/labor standards
-->wouldn't Us have to lower enviro/labor stand.
Nations w/ highest enviro. standards attract more investment
-advanced high-standard indu. econ
-Only 2% of costs environment
imagine no enviro stnad
->political institutions, poor electricity, poor infrastructure, weak protection of rights/property, power productivity of workers
==> where sensible to invest?
Trade helps
1) more enviro concious
2) produe w/ less resources, less erosions; don't ruin land in Maine trying to grow wheat
Remember what trade does:
-make stuff cheaper, more slices of pie
-->pay to camp! Go to nat'l park, more income, can spend more on enviro
Low-Wage Exploited Labor
China collect adv. b/c of "slave labor"
-slaves effective way to run manfu. plan
why not China more productive under Mao than today
1) Smithonian Nations: when specialized, spend less time learning generalize (Rizzo spends time reading econ, now chem)Knowledge and applied capital
2) Ricardian: diff skill knowledge, access to resources
-what giving up to do something less than if
Transactions Costs; physical imagine pre
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