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Comment by franciscojgo | Hacker News Reader

Here's an article from 2014 that explains this "loophole" https://www.washingtonpost.com/news/storyline/wp/2014/09/12/...

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From the article:

> All this should be a reminder that any trade deal has winners and losers and unintended consequences.

Obviously, whoever you subsidize is a winner. If you're setting up barriers to trade (e.g. tariffs), foreign sellers/manufacturers lose. If you're subsidizing imports, domestic sellers/manufacturers lose.

Why can't we just not subsidize anyone?! Free trade is supposed to be just that, free. Instead, we have the TPP & TTIP, which will create yet new injustices and new sets of winners and losers.

Free trade requires both sides to be equally free. Tariffs are one of the defenses against another nation massively subsidizing an export. Getting all countries to play fair (in this case neither subsidizing or taxing) isn't going to happen. You also run into the interesting situation of what is a subsidy that impacts exports/imports?

For example, post great depression america started tax subsidy for farmers to ensure a stable food supply. That hurts imports of the same product. Another interesting example is minimum wage, it makes imports more attractive, as domestic labor costs go up. Not getting into what is right/wrong, simply that economic incentives are not uniform and may be defensive. Hence international trade tries to deal with that via accords, treaties, tariffs etc.

Not to mention to that tariffs are a source of revenue for the respective government.

The unilateral benefits of free trade does not require both sides to be equally free. When China allegedly subsidizes (a thing that happens much less frequently then claimed by industries seeking protection), that means China is sending us unusually cheap stuff. Yes, it's possible that this is a highly coordinated monopoly-building strategy, but much more likely is that China has internal reasons for doing this (such as building political stability, or internal regulatory capture by their industry) that don't have negative impacts on the US.

The purpose of these tariff-reducing trade treaties is much more about gathering political coalitions to break through public-choice failures resulting in (overall welfare reducing) protectionist policies taken by each side.

Hong Kong practices unilateral free trade, and it sure hasn't seemed to hurt them.

Assuming you benefit greatly from free trade. If everyone operated with completely free trade there would be big winners and big losers.

It is not a zero sum game. free trade lets specialisation scale better, and there are outcomes where everyone wins.

That is because Hong Kong makes a living primarily as a place where trades are executed, not as a significant trader itself. Hong Kong does not have large supplies of natural resources, huge manufacturing industries, or millions of acres producing agricultural exports. Pretty much the only economy they have is hosting relationships and taking a cut, so they have no economic reason to erect trade barriers.

Labor and environmental laws. They make manufacturing more expensive in the progressive countries that have them. Then they can't compete without tariffs or subsidies.

Right, but then you should set up specific restrictions for very specific circumstances. E.g. if a company in China is using coal power (that would be below EU/US standards of pollution), you apply extra "fair-market fees" to their imports. However, you also allow for "certification" - if a company proves they comply to the stricter laws, they don't need to pay the fee.

So what would you replace the UPU with? Bilateral agreements between every pair of national carriers?

No. I would replace it with no agreements; everyone pays the cost of sending their packets.

Markets => competition => lower price.

Good piece. Thanks for the link.

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