Conversely, cheap international goods can wipe out local industry, which can leave people in less developed economies permanently impoverished.
You consume way more than you produce. Don't fall for this trap. Otherwise, next thing you'll stop doing business with anyone else because it's better to live by your own means.
If you make a product X and someone imports product X from a country where labour is 1/10th of the price, you go bust. In a lot of cases countries impose customs duties to protect those businesses, because it's better to have a working industry than cheap goods.
Which part exactly is a lie?
One recent example in the US: a lot of small local business were suffering because the Chinese government was heavily subsidizing shipments to the US. So much so that it was cheaper in some places to get a product mailed from China than from across the street. The US started pushing back with tariffs while appealing too the universal postal union postal union. That kept the US businesses from going under while the UPU slowly went through the process of forcing china to follow their rules.
And that's ignoring pollution, all the negatives that happen for the whole population when an industry and/or small businesses collapse within a country, and other negative externalities
I was born in Brazil and lived there for most of my life. When I was young, it was, in practical terms, forbidden to import computers and cars to the country to protect the "nascent" national industry. I know very well from a close point of view how tariffs can make everyone's lives miserable.
My father had to import his first computers illegally. Knock-offs IBM PCs bought in Paraguay. Imagine in the early 80s to travel from NY to San Francisco to smuggle computers over the border because a mad man in the state decided you cannot trade goods with someone who lives far away. This is what customs is about.
Protectionism is not only dumb, it's vile! Pure evil!
Here in Norway you're allowed to import certain cheeses that are also produced locally, but you'll have to pay a 300% or so duty on them. So it's strongly discouraged but not banned. Similar for other food stuff.
And as I mentioned in another comment, there's quotas given for a lot of these food items, that exempts duty for a certain amount of imported goods. This way the government can give strong protection for the amount produced locally, while meeting consumer demand via imports. I feel this is a good compromise.
Textiles is another example which have a 12% duty, a relatively minor protection. And that's about the extent of our protectionism.
As in....do you not recognize that society might want to value having functional industries and employment above absolute freedom for businesses? And as someone else already pointed out - there are whole bunch of externalities that we all pay for by allowing this unfettered and unlimited trade. With your approach if it was cheaper to ship fresh salad 20k miles than buy local, it should be allowed because after all, why should you interfere with local businesses? Sometimes it is a matter of national security too, where one country knowingly attempts to destroy another's industry by dumping their product at cost prices - great for consumers I imagine you'd say. But again, you are being very short sighted.
henvic, you won't convince the dimwits here, I assure you.
That statement literally makes no sense whatsoever. No offence. Tariffs are paid by the importing entities, so the idea is to make it more expensive to import foreign goods than locally produced ones.
I am aware that some countries like the US use tariffs punitively but that's like using a hammer to make an omelette.
Seems those entities would likely raise prices to cover increased tariffs.
Notably, not to protect businesses in general - if your business is importing/retailing exclusively foreign goods, then tariffs are explicitly designed to disadvantage you versus someone retailing local products.
for instance, if there is a local alternative that's 10% more expensive, you might have that 10% leeway available to you to increase prices, but not if demand drops sharply (negative price elasticity) because substitutes exist or the good isn't as essential as it seemed.
We have import duties on beef, with quotas given throughout the year based on how large local production is versus how much local demand is. Tell me how this is not done to protect local meat producers.
I could list many more such examples from the agricultural sector.
This doesn't protect businesses who want to sell apple and beef based products for less money using foreign raw inputs.
And what retaliation are you getting in exchange for raising these tariffs?
That's an incredibly weird way of looking at it. Consumers don't have some god given right to cheap apples and beef. The government has a duty to protect both consumers and producers, because it's so closely interlinked - if you destroy your own industry to import cheap beef and apples what will you do if those foreign companies decide not to sell to you any more? Or if you can't import from them because there was a draught or a disease outbreak?
Like, you think that the only think we should optimize for, ever, is the final price for the customer, everything else is not important, right? After all doing anything else is "punishing" customers for the "crime" of wanting cheap produce?
Like, please take no offence, but that's incredibly short sighted.
Some reasons:
- Someone mentioned price elasticity below. The demand for the product might actually drop because of higher prices from local producers
- Local producers become less competitive, especially if the imported item was not cheaper because of lower labor cost but because of innovation
- The downstream high-value supply chain becomes less competitive if tariffs are applied to an intermediate/low-value product
There is a narrow space in which tariffs might work and that is when they’re temporarily used to shelter local producers from outside competition with the hope that they can quickly build capability and scale of their global peers.
Including the periods you can't import required/essential goods for various reasons and local production no longer exists due to previous cheap imports?
What's much more important is they have good industrial policy, export discipline, and that unreasonably good deal with the UPU that lets them send mail to the US for cheaper than we can send it inside the country.
That is in direct contrast to what economists have been suggesting to us (aka the decision of China to restrict multinational corps to deploy their high tech would limit their growth)
Its a self serving idea pushed by people who benefit massively.
Note that Yandex and VK exist in Russia without having to ban all competition.
The solution to me lies somewhere in between. I don’t understand why in the US we decided that using our youth to part time flip burgers and serve at restaurants is a better investment to our economy compared to having factories that make widgets, even if they are more expensive than Chinese widgets.
The specific reason is we had a run of bad economics for a few decades where we pretended industrial policy didn't exist, and we didn't read How Asia Works.
The restaurant just pays salaries to 100 people (with no specialized skills) and rent to the local real estate market (raw material and maintenance costs are very low).
On the other hand a plant would need to have trained manufacturing engineers, safety engineers, economists, quality control, managers, sales, technicians, and they would support a big part of the local economy (IT, welders, machinists, logistics companies etc).
A plant typically also has less personnel turnover, exactly because specialized labor is more scarce. That means that they have the incentive to provide full time jobs with good benefits to significant fraction of their workers.
It's difficult for me to see how this works for the farmers and textile manufacturers. Underdeveloped economies by definition don't have much advanced industry. If you wipe out local producers of necessities you have virtually nothing left and no base to build on to develop advanced industry.
I'm also not really sure this has turned out well for advanced countries like the US, but it definitely does make part of the country richer.
I'm leery of any argument that claims that any given economic policy is an unmitigated good with no contingencies or tradeoffs.
Do you really think that wiping out employment for a third of the population would improve the economy? It takes money to make money.
the econ 101 idea that tariffs are always bad (something that invariably comes up in these kinds of discussions) is only true in perfectly spherical, frictionless worlds populated by instantaneously rational actors. tariffs actually can work in the real world (to develop a fledgling industry, for example), but it can't be a one-off holy-grail policy, but rather part of a holistic, coordinated program.