Thread: Free trade or Protectionism? (split)

Originally Posted by Butterfly

yep, the Americans have the black population to deal with, but it seems to get better for them over there,

Not to mention Mexican population. Things are better for blacks in America but over time the cost of getting to this point has far exceeded gains from the cheap slave labor once thought so good by American businesses. The long term ROI is never good when importing cheap labor.

Sending your work to them doesn't appear to be the answer either, it seems.

Oh boy, there goes the theory of comparitive advantage and classical economics then.
You read it first at TD.

Originally Posted by sabang

Oh boy, there goes the theory of comparitive advantage and classical economics then. You read it first at TD.

Thanks. Just made it up today. Adam Smith's absolute advantage, to David Ricardo's comparative advantage to Norton's strategic advantage.

My clumsy attempt was intended to point out there are areas that should not be left to purely economic gain. IMO the ability to be self sufficient in food production and energy are key strategic areas nations need to consider. If a nation allows itself to become totally reliant on foreign supply it will pay higher prices and be subject to trade blackmail which in the end could well lead to a far more costly venture, war.

Or having critical components of your highly-scientific space program available only from sources abroad...

Originally Posted by Texpat

Or having critical components of your highly-scientific space program available only from sources abroad...

Noted and added to the food and energy list.

Originally Posted by Sir Burr

^^^
Rubbish.
India tried self-sufficiancy from 1947 to 1992. It was a disaster. Since abandoning that policy, their economy has grown, created wealth and has lessened the amount of people living in poverty.

As for higher prices, that is also bollox. Japan forbids rice imports to support its farmers. Consequently, the Japanese pay ten times the retail price for rice as the rest of the world. In the US, import of ground-nuts is not allowed. Americans pay for that.


As for economic black-mail, the world's economy is now too inter-linked for it to work.
You will find that the more trade there is between two countries, the less likely there will be a war between those two countries.

I am far from advocating trade isolations polices in general. Agree with you this will only lead to economic downfall as it did in India.

I am saying there are certain "free trade" decisions needing consideration of long term strategic consequences. In the case of Japan's rice policy, they have concluded the 10 times cost to consumers is justified based on long term strategic consideration. If Japan were to open it's market to cheap foreign rice, consumers would naturally buy only that. This in turn would destroy Japan's ability to feed itself. In the event Japan found itself in conflict with these foreign suppliers, they would be starved into submission if the supply was cut off. A far greater price to pay than a 10 times cost of rice.

If free trade in all areas was unfettered, the Nuclear Energy industry would make billions selling technology to anyone with the money to buy it. Does that mean a nation that has such technology should allow this to happen? I think not.

Economic blackmail is alive and well. What is the price of a barrel of oil these days?

The reason why rice is protected in Japan isn't because they are afraid that one day they will be held to economic ransom. That just doesn't make sense. There are too many countries that export rice. to think that all of them will refuse to sell rice to Japan isn't realistic.

The reason rice is a protected product in Japan is partly a traditional reverence to rice-growers, but, mainly, the farmers have political influence and use it to protect their livlihood.

The reason the oil price is so high is basic supply and demand. Since India and China have reformed their economies, their demand for oil is insatiable.
I've worked in the oil business for thirty years and have seen a few cycles of boom and bust. This boom is unique because it is demand driven. All the previous booms were caused by worries about supply. that is why this boom won't fizzle out after a couple of years like all the rest did.

Japan, desperate to maintain wa, goes to great lengths to keep unemployment low. Employing an army of rice farmers works wonders. But, at the same time, they have no problem allowing others to flex their military muscles on their behalf. Their constitution stipulates they're not permitted to engage in offensive military action. (Article 9 promises never again to fight other nations, has not been amended in 60+ years) They've outsourced any military option -- very unwise in my opinion.

Originally Posted by Sir Burr

There are too many countries that export rice. to think that all of them will refuse to sell rice to Japan isn't realistic.

For the moment this may be true but what if Thailand, Indonesia, Vietnam and some other leading exporters decided to form a cartel similar to the oil producing countries. Then Japan would be at their mercy if they were unable to produce enough rice for themselves.

Originally Posted by Sir Burr

The reason the oil price is so high is basic supply and demand. Since India and China have reformed their economies, their demand for oil is insatiable.

As long as the oil cartel keeps the supply low even though they could produce much more, China, India and other nations dependent on cartel oil are at their mercy. At the moment even the most anti western cartel nations find it to their advantage to keep supplying but who knows when or for what reason they might decide to cut back or cut off the supply.

Western countries are at their mercy now. Do we really think the US or EU would tolerate the behavior of nations like Saudi Arabia if they did not fear the thought of losing their oil supply? Or that the decision to invade Iraq was not to some degree driven by the same concern?

Years of western nation "non strategic policies", complacency, and short term economic gain by their oil industries are now "coming home to roost" with the emergence of the Islamic Fundamentalist movement. Should the Islamist's take control of the region, the oil would be cut off in spite of economic percussions to themselves.

All those countries with "insatiable demand" for oil better very quickly become self sufficient energy wise or be prepared to suffer the consequences.

Originally Posted by Texpat

Japan, desperate to maintain wa, goes to great lengths to keep unemployment low. Employing an army of rice farmers works wonders.

Agree. As SB mentioned the rice issue in Japan is one of tradition and political consideration. If I remember correctly in my Japan days, the farmers and the government did use the "Japan must be able to feed it's people" card as the reason for restrictions on imported rice. They also pointed out Japanese rice was superior to the imported junk. Other than a few grumbles, the general population seems to accept these reasons for paying higher prices for rice.

Originally Posted by Texpat

Their constitution stipulates they're not permitted to engage in offensive military action. (Article 9 promises never again to fight other nations, has not been amended in 60+ years)

Opposition to amending the constitution is still strong. The recent PM (forgot his name) that only lasted about a month in the job wanted to make changes to the constitution which would allow Japan's military to do more globally. Japan does rely heavily on the US for military protection but if you check, you will find Japan has arguably the best equipped military in the region, including China. I sure wouldn't want to be the commander responsible for invading Japan!

Japan has arguably the best equipped military in the region

There we'll agree to disagree. Generally, a military force grows with a country's economic might. Japan is the undisputable economic might in Asia but its Self Defense Force is miniscule compared to it's regional and economic influence. Taiwan is better equipped.

Originally Posted by Sir Burr

The reason why rice is protected in Japan isn't because they are afraid that one day they will be held to economic ransom. That just doesn't make sense. There are too many countries that export rice. to think that all of them will refuse to sell rice to Japan isn't realistic.

I am not sure this is the only reason. I always enjoyed Japanese rice better than other rice. Japanese have very high standard, so could it be that SE Asian rice are not as good as theirs ? Japanese will just "disadvantage" inferior products for that reason alone, can't blame them really.

They had the same arguments over meat imports from the US, they didn't want any of it.

Originally Posted by Sir Burr

The reason why rice is protected in Japan isn't because they are afraid that one day they will be held to economic ransom. That just doesn't make sense. There are too many countries that export rice. to think that all of them will refuse to sell rice to Japan isn't realistic.

And if by chance they did get held to ransom, lots of western countries would be willing to sell them bread as a substitute, followed by selling them low-carb diets.

And now...
Back to Basra.

^^ Actually Japan now imports a lot of rice from Australia, but continues to subsidise it's rice farmers.
Japanese rice is better, Australian rice is cheaper.

Japan also imports a lot of premium beef from Oz- it is called Wagyu beef, and it is great stuff. It was developed for the high value added Japanese market in close consultation with the Japs. You now see it cropping up in premium restaurants all over the world, except the America's.

As for trade, the problem with untramelled, unregulated free trade is that it leads to oligopoly- the big and financially strong forcing out the weak, and increasingly monopolising markets. Under this scenario, fledgling companies from developing countries in particular stand little chance. Thus, whilst fully recognising the economic benefits of free trade and the theory of competitive advantage, I believe a certain amount of protectionism (for it is that) is warranted.

^ Japan is all about quality and if they recognize something as good, they will import it, no fuss. There is no shortage of LV bags and French perfume over there