Who really believes tariffs are good business

[mikewof]

Once again you don't seem to realise that I'VE LIVED THROUGH THIS.

Australia had high tariff walls and all sorts of import restrictions to protect domestic manufacturing. Protection all round was the mantra.

It didn't work worth a damn. All we ended up with was inefficient industries with no incentive to get better & compete because they didn't have to, in bed with unions who could make wage demands way over the odds because their employers could just pass it on to the consumers, who had no choice.

Yes, protecting the supply of strategic stuff has some justification, but consumer stuff or commodity type raw materials? No.

As for the South American countries, IMO most of their problems are political screwing about with the economy. They have raw materials and educated people. Venezuela is a poster child for political interference and economic illiteracy. Their inflation rate is going to challenge Zimbabwe for worthless currency soon, if if hasn't already got there.

FKT

I get it, I can see why tariffs wouldn't work in Oz. But Oz is not the USA, your population is a fraction of our's, your heavy manufacturing is limited to mostly resource extraction, your export industry is obviously different as an Island-Continent. 

I didn't voice a word of support for protectionism on consumer items, nor commodity materials. And what I saw in Peru was the essential decimation of their manufacturing industries after the border protections were removed. Brazil took over South American manufacturing, but without a major quality of life improvement for their working class, and it left smaller manufacturing towns in Peru, like Chincha, with little more industry than Tico-Taxis and occasional guides for German tourists. That's just no way to live.

But wrt the U.S. economy and strategic materials, yes, tariffs can absolutely be good business. The reason that Apple has to mostly manufacture in China is because that's the most reliable way to secure their supply chain. It's not due to cost as much as people think, because the vast majority of the cost on that $1000 iPhone X is in the financing, the profit model for the distributors, the design and programming operations in California. They could manufacture those phones in Mississippi or Oklahoma if they were so inclined, at maybe just a a few buck hit on their production price. But they can't possibly do it, because China would choke the shit out of their supply chain. China controls about 96% of the world's rare earths metals market and production, and so many parts in that phone (or solar PV panel, or wind turbine or battery) are dependent on those REE dopants and electron transport. Manufacturing in China is Apple saying "we'll send you all this business, and you agree not to fuck us in supply chain, (odd, I just noticed that China and Chain are nearly the same word). Apple doesn't want people waiting months or even days for iPhones, they want as much stock as demand warrants.

Now, the USA had a rare earths element industry, and every President since Clinton has unsuccessfully tried to get it self-sustainable. All have failed. In large part, we don't have an REE industry in the USA because China is willing to sell REEs dirt cheap. But that cheap cost comes at the cost of them exercising total control of their exports. The USA did the same thing before WWII, we wouldn't sell Germany any helium, since it was a "strategic gas" and they filled their airships with hydrogen. We probably couldn't have another era of Texas Instruments and Motorola taking deep manufacturing positions in microprocessor production, because they need similarly deep supply channels for materials, and it's hard to justify investment in a pizza parlor if you don't know that you're going to get your cheese with some level of reliability.

If we have an industry that needs protection, a strategic industry that can't compete in the world economy without getting a few years to sell at a price that will allow investment and infrastructure build-out, then yes, it might be a good move. Manufacturing is a ripple ... the microprocessor fabricator won't invest in long-term build out if they can't be sure of access to the REEs. Board manufacturers won't invest in long-term build out if they can't be sure of access to the microprocessors. Products manufacturing won't invest in long-term build-out if they can't be sure of access to the component boards and batterisl. t's simplistic to the point of nonsense to dismiss any and all tariffs.

 

[Raz'r]

I get it, I can see why tariffs wouldn't work in Oz. But Oz is not the USA, your population is a fraction of our's, your heavy manufacturing is limited to mostly resource extraction, your export industry is obviously different as an Island-Continent. 

I didn't voice a word of support for protectionism on consumer items, nor commodity materials. And what I saw in Peru was the essential decimation of their manufacturing industries after the border protections were removed. Brazil took over South American manufacturing, but without a major quality of life improvement for their working class, and it left smaller manufacturing towns in Peru, like Chincha, with little more industry than Tico-Taxis and occasional guides for German tourists. That's just no way to live.

But wrt the U.S. economy and strategic materials, yes, tariffs can absolutely be good business. The reason that Apple has to mostly manufacture in China is because that's the most reliable way to secure their supply chain. It's not due to cost as much as people think, because the vast majority of the cost on that $1000 iPhone X is in the financing, the profit model for the distributors, the design and programming operations in California. They could manufacture those phones in Mississippi or Oklahoma if they were so inclined, at maybe just a a few buck hit on their production price. But they can't possibly do it, because China would choke the shit out of their supply chain. China controls about 96% of the world's rare earths metals market and production, and so many parts in that phone (or solar PV panel, or wind turbine or battery) are dependent on those REE dopants and electron transport. Manufacturing in China is Apple saying "we'll send you all this business, and you agree not to fuck us in supply chain, (odd, I just noticed that China and Chain are nearly the same word). Apple doesn't want people waiting months or even days for iPhones, they want as much stock as demand warrants.

Now, the USA had a rare earths element industry, and every President since Clinton has unsuccessfully tried to get it self-sustainable. All have failed. In large part, we don't have an REE industry in the USA because China is willing to sell REEs dirt cheap. But that cheap cost comes at the cost of them exercising total control of their exports. The USA did the same thing before WWII, we wouldn't sell Germany any helium, since it was a "strategic gas" and they filled their airships with hydrogen. We probably couldn't have another era of Texas Instruments and Motorola taking deep manufacturing positions in microprocessor production, because they need similarly deep supply channels for materials, and it's hard to justify investment in a pizza parlor if you don't know that you're going to get your cheese with some level of reliability.

If we have an industry that needs protection, a strategic industry that can't compete in the world economy without getting a few years to sell at a price that will allow investment and infrastructure build-out, then yes, it might be a good move. Manufacturing is a ripple ... the microprocessor fabricator won't invest in long-term build out if they can't be sure of access to the REEs. Board manufacturers won't invest in long-term build out if they can't be sure of access to the microprocessors. Products manufacturing won't invest in long-term build-out if they can't be sure of access to the component boards and batterisl. t's simplistic to the point of nonsense to dismiss any and all tariffs.

Imagine if Trump was placing strategic tariffs in place for certain industries or potential industries. Imagine!

 

[mikewof]

Imagine if Trump was placing strategic tariffs in place for certain industries or potential industries. Imagine!

He did give about the same lip service to our domestic REE industry as all the others before him, so I don't expect much to come of that.

But you might have noticed that I didn't attach any politics to my take on selective protectionism, because politics can confuse this stuff ... Lefties like me end up supporting bad protectionism that is proposed by Democrats or we oppose functional protectionism that is proposed by Republicans.

The solution is to get a handle on what makes good protectionism and what makes bad protectionism, then we can support well-thought policy regardless who suggests it.

 

[mikewof]

Tell us about when you worked on the Central Resource Planning Committee in Wakanda, Cliff.

It was an okay job. The pay sucked, no benefits, the long nights were annoying, but the foreman was porking your mom at the fish canning factory, so at least he was in a good mood most days.

 

[Raz'r]

Tell us about when you worked on the Central Resource Planning Committee in Wakanda, Cliff.

Oh, I thought he was the note-taker at Breton-Woods.

 

[Laker]

Wasn't anyone here awake when they took David Ricardo's "Law of Comparative Advantage" in Economics class?  Did it make sense?  I realize the math of the whole thing gets a bit complicated what with overlapping advantages and all.  Great application of fuzzy logic.  The sets are fuzzy, not the logic.  Lets take aluminum.  The US is at a competitive disadvantage in terms of making the stuff.  It is far better to let other people do it than subsidize the US industry that is working at a disadvantage and will eventually fail in a world market.  It is better to use the capital supporting something that the US is good at such as soy bean production.  If the US continues to support aluminum production through tariffs, it is putting its aluminum users at a disadvantage.   The amount of revenue obtained from the tariff is never covers the higher prices the public pays for the product.  This is because of the multipliers along the supply chain.  A small percentage of tariffed items don't do in an economy, but look at the attempts to support industry by the Brits in the late 40s through to the 60s.  Tariffs kill economies.

 

[Pertinacious Tom]

The USA did the same thing before WWII, we wouldn't sell Germany any helium, since it was a "strategic gas"

Why the past tense? We're still preventing those German airships from attacking.

https://en.wikipedia.org/wiki/National_Helium_Reserve

 

[Pertinacious Tom]

I love when you think you know your history, click on the link, and see your history's right and Tom was bullshitting again. Hint to Tom: it's got much more relevant modern strategic uses than dirgibles.

Boondoggles always have some use. I still agree with Barney Frank:

https://www.nytimes.com/2013/05/04/opinion/collins-an-ode-to-helium.html

Former Representative Barney Frank , who said in 1996 that if Congress could not manage to get rid of the helium reserve “then we cannot undo anything,” hasn’t changed his mind. “Everybody is against waste, but strongly defends this or that particular piece,” Frank said in a phone interview.

 

[Grrr...]

 We only have 2 major domestic manufacturers left in the US - GM and Ford. Chrysler is owned by Fiat. Ford makes cars for Europe in Europe. GM cared so little for it's european operations they sold them off cheap last year to Peugeot. We  have a thriving business for foreign automakers to make cars in the US right now. Most of this auto bullshit is just bullshit for the slug shitforbrainskis to cheer about.

The US exited lots of manufacturing because it was low margin, high pollution, declining business. The life of a Chinese manufacturer can be a hard low margin affair that businesses just don't want.

Me, if China wants to send me electrical energy in the form of refined aluminum for less than cost the more the better.

Ford has announced major cuts to their European organizations because europe has little growth in their automobile markets.

 

[SloopJonB]

I love when you think you know your history, click on the link, and see your history's right and Tom was bullshitting again. Hint to Tom: it's got much more relevant modern strategic uses than dirgibles.

Birthday balloons are strategic?

 

[Raz'r]

Ford has announced major cuts to their European organizations because europe has little growth in their automobile markets.

Ford can't make a competitive car. And it all goes from there....

 

[Laker]

Birthday balloons are strategic?

The strategic thing comes from such things as CAT scanners, electronic warfare, military aircraft sensors, physics research, ..........etc., all of which are valid

 

[mikewof]

that right there is exactly correct. If US manufacturers can't be competitive at current costs, what makes you think they'll be MORE competitive when costs are higher?

It depends on the industry.

If U.S. private titanium, REE roll deposition and vapor deposition industries are competing with heavily subsidized competitors in China and elsewhere in Asia, they can't possibly compete on an even field without protectionism.

I agree with you in regards to pedestrian products like steel, wheat and truck transmissions.

 

[Raz'r]

It depends on the industry.

If U.S. private titanium, REE roll deposition and vapor deposition industries are competing with heavily subsidized competitors in China and elsewhere in Asia, they can't possibly compete on an even field without protectionism.

I agree with you in regards to pedestrian products like steel, wheat and truck transmissions.

So, another country wants to perform central planning thru a very inefficient means, by taxing their people. You think the best counter is to tax?

how about being direct and just subsidize?

 

[mikewof]

So, another country wants to perform central planning thru a very inefficient means, by taxing their people. You think the best counter is to tax?

how about being direct and just subsidize?

Yeah, subsidies, grants, loan guarantees can work, and we do those through the DOE, DOI, Commerce, etc., but the voting public rebels when they don't work.

Remember Solyndra? My take all along with that one wasn't that we shouldn't have failures like Solyndra, but rather than we should have had ten failures like Solyndra, which would have corresponded to 90 successes, and then we would have had some parity with China's $40 billion/year subsidies on their solar industries.

And a tariff is absolutely not a tax. Unlike tax, tariffs are enabled by The Constitution! They are designed to protect nascent and sensitive industries in a way that tax could never accomplish. For sensitive industries, a tariff is more of a long term investment. 

How much of your opposition to these tariffs is due to Trump? Because Obama also used tariffs. Were you opposed to those?

 

[Pertinacious Tom]

ICBMs are strategic and so was the US Space program. The modern incarnation of the helium reserve stems from need for Helium for those weapons in 1960 - not so much German dirgibles. The Us was short helium for those weapons as well as projected future demand and the government decided instead of producing helium itself like it'd been doing, it'd contract with the oil&gas industry to have it recover the helium from wells - and then as times changed and demand decreased (lessened production of ICBMs, not much of a space race after the early 70s) the government still paid for the Helium from the gas industry.

In summary, an obsolete program (still) didn't go away.

Yes, I made a joke following on the dirigible comment, but even Barney Frank said 22 years ago that those justifications were dated at that time. He still thought so as of 5 years ago, as the NY Times article showed. And he's still right today IMO.

 Boondoggles get a life of their own and are like zombies, impossible to kill.

Former Representative Barney Frank , who said in 1996 that if Congress could not manage to get rid of the helium reserve “then we cannot undo anything,” hasn’t changed his mind. “Everybody is against waste, but strongly defends this or that particular piece,” Frank said in a phone interview.

 

[Raz'r]

Yeah, subsidies, grants, loan guarantees can work, and we do those through the DOE, DOI, Commerce, etc., but the voting public rebels when they don't work.

Remember Solyndra? My take all along with that one wasn't that we shouldn't have failures like Solyndra, but rather than we should have had ten failures like Solyndra, which would have corresponded to 90 successes, and then we would have had some parity with China's $40 billion/year subsidies on their solar industries.

And a tariff is absolutely not a tax. Unlike tax, tariffs are enabled by The Constitution! They are designed to protect nascent and sensitive industries in a way that tax could never accomplish. For sensitive industries, a tariff is more of a long term investment. 

How much of your opposition to these tariffs is due to Trump? Because Obama also used tariffs. Were you opposed to those?

I support tariffs, but only in a very limited way.

I believe the US has agreed that a clean environment, and a safe workplace are important enough to implement laws, some of which increase the cost of production. 

I believe ANY import to be subject to the same laws, and if it isn't, should have a tariff that attempts to level the playing field.

 

[mikewof]

I support tariffs, but only in a very limited way.

I believe the US has agreed that a clean environment, and a safe workplace are important enough to implement laws, some of which increase the cost of production. 

I believe ANY import to be subject to the same laws, and if it isn't, should have a tariff that attempts to level the playing field.

Okay, that's an aspect of tariffs that I haven't considered. And yes, given that, China would lose their edge in REEs, because they control the global market on those due their willingness to flush all the debris of the process into the rivers. Ditto with things like athletic shoes made in sweatshops.

I think the point of tariffs is that they can do what a tax can't, and that's target certain opportunities with a pinpoint precision. In a way, it was tariffs that led to the Civil War and emancipation. Was that the intent of the tariffs, I don't know, but it's undeniable that they can be an instrument of social change. What I saw in Peru supported the idea of protectionism. With protections, those people had profitable jobs and comfortable lives, at the cost of huge profits by multinationals. Without the protections, those people didn't have jobs and they didn't have comfortable lives, but the profits of the multinationals skyrocketed.

It isn't always this way of course, but in general, when governments restrict what corporations can do -- and protectionism can be an example of that -- the winners are often the individuals. When governments remove barriers to what corporations can do, then the losers are often the individuals.

 

[SloopJonB]

 When governments remove barriers to what corporations can do, then the losers are often the individuals.

FIFY

 

[mikewof]

1. Tariff's are taxes, Cliff.

2. Tariff's are taxes' cliff.

Your grammar was imprecise, so I corrected what you wrote to the two most obvious options ...

1. Not in the USA, according to The Constitution. And you're not Normy, thus I'm not Cliff.

2. Assuming you mean they're something of a precipice beyond the process of taxation, perhaps. But they can be managed with the tools available to Congress in a way that taxes cannot.