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is that it only applies if there is full employment in both countries and zero cost to labor mobility...
http://internationalecon.com/T...
"The higher price received for each country's comparative advantage good would lead each country to specialize in that good. To accomplish this, labor would have to move from the comparative disadvantaged industry into the comparative advantage industry. This means that one industry goes out of business in each country. However, because the model assumes full employment and costless mobility of labor, all of these workers are immediately gainfully employed in the other industry."

Up until the 1950's, the US had the highest import duties of all the major countries.

This is an over-simplification. The US certainly did have high tarriffs during the Great Depression beginning with the Smoot-Hawley Tariff Act of 1930, which many economists feel deepened and further globalized the Great Depression. From 1913 until the end of World War I, the US had a low tarriff regime, and slightly higher one until Smoot-Hawley.

The US had nearly free trade with Canada because of the Canadian-American Reciprocity Treaty from 1855 to 1866.

It is true that US tariff rates were very high around the time of the Civil War, they fell mainly upon the South, and they were a secondary cause of the War.

Average trade-weighted tariff rates in the US between 1821 and 1995.

It is true that between 1950 and 1973 the annual real GDP growth of developed market economies averaged around 5% after the General Agreement on Tariffs and Trade (GATT) was signed in 1947 which lead to dramatic reductions in global trade barriers.

It should also be noted that early 19th Century Britain had the "Corn Laws" and other high tariff barriers.

For christs sake, wont people learn and get a brain cell these days.

If ONE drug dealer sells $10 worth of drugs to an addict, then that dealer pays two addicts $5 each to wash his car, then they later
buy $5 each of drugs, thats equal to $30 GDP from the same $10.

All total sales from 10000000s of companies != total dollars in circulation (go check your M1/M2 money supply)
http://internationalecon.com/v1.0/Finance/ch40/F40 -4.html

http://www.federalreserve.gov/Releases/h6/hist/h6h ist1.txt

The same one dollar can go back and forth lots of times, (possibly max 10-15 times before tax eats it into zero)

Theres the truth, TAXES are not there for the government to spend (they can borrow it), but its there to control inflation which the
central banks create, as they make all the money and are not owned by the governments.

Its like two mafias, one makes all the counterfeits, the other 'collects fees' for letting it happen.

If you make too many fakes, the taxes go up.

"I am a developer in India. All my college buddies are too. Not one of us gets less than $800 per month."

That's interesting. But to put the number in context, maybe you could tell us a bit about your cost of living? What is a flat per moth? What about cars and computers?

Domestic servants, hair cuts, medical service etc would be very very cheap. He would pay higher percentage of his salary than his US counterpart for things like diapers, rubber foam inner coil mattresses, cars, electronics, etc.

If any of you find a good source of PPP conversion factors for countries, especially with historical trends and fluctuations, please do post. Most of the links make assertions like "India is the fourth largest economy after adjusting for PPP" or "China jumps from fourth to second position after adjusting for PPP", without actually specifying the number. The PPP figure seems to be mostly popular with macro economists. In US one can find the cost-of-living adjustment numbers for any city quite easily. May be once a mobile global workforce develops such numbers will be availble for all countries and cities.

[1] http://internationalecon.com/v1.0/Finance/ch30/F30 -1.html

[2] http://www.economist.com/markets/bigmac/displaySto ry.cfm?story_id=2708584

China has seized to be communist

seize Audio pronunciation of "seize" ( P ) Pronunciation Key (sz) v. seized, seizing, seizes v. tr. 1. To grasp suddenly and forcibly; take or grab: seize a sword.

cease Audio pronunciation of "cease" ( P ) Pronunciation Key (ss) v. ceased, ceasing, ceases v. tr. To put an end to; discontinue: The factory ceased production. See Synonyms at stop.

Parent doesn't understand economics.

Free trade hurts individual workers in individual industries because it moves jobs around. These jobs can be outsourced in all sorts of ways -- either by companies directly preferring to hire overseas, or by overseas companies outcompeting local ones. No argument that free trade creates problems for individuals.

But that doesn't mean the grand-total economy is hurt. On the whole, the economy always benefits from free trade. The reason for this is that trade never occurs unless it is beneficial to both parties. Therefore, every time trade across borders occurs, the sum-total value of BOTH economies increases or at least stays the same -- were it not so, the trade would not occur.

For a more down-to-earth analogy, the problem with whining about how outsourcing destroys the US economy is that you're ignoring half the equation. The tech workers themselves are hurt, but the consumers of the products produced by tech companies benefit, mainly from lower prices. Additionally, in purely monetary terms, it can be shown that this benefit always exceeds or is at worst equal to the loss -- the reason for this is roughly based on the "trade does not occur except when mutual benefit is achieved" law.

There are cogent arguments against NAFTA, WTO, etc. Such arguments include national security (controlling critical industries within your own borders), dealing with problems of displacement, and plain old cultural tradition. But worsening of the economy is NOT a cogent argument.

My post is too short to fully explain why economies always benefit from free trade, so don't read it and assume this is the sum-total of the argument. If you want to seriously consider it, I highly suggest you Google the theory of "comparative advantage" and read some of the rants. There's a good one here

Yes this is true, but going the libertarian way is opening Pandora's box. The thing is if you are going to do that you need to go all in (IMHO). Most Americans (/. crowd included) don't really want that. The few that do are often seen as more conservative than the Republican Party.

Economics has something called The Theory of the Second Best that shows, among other things, that if you start with a regulated economy and then partially deregulate it, society can actually end up worse off then it was originally with the more fully regulated economy. I suspect that this partially explains why many deregulation initiatives are so hard to accomplish. On the surface the removal of an individual regulation often sounds like a good idea. But when the dereg is put into the context of a complete system, it is often a bad idea.

"the system AS A WHOLE benefits from free market economics. This DOES NOT MEAN that EVERY NATION benefits from this situation."

Actually, the economic theory of comparative advantage suggests that every nation benefits from free trade, or to be more precise, that free trade produces a Pareto improvement. (See also the wikipedia article on comparative advantage).

The main problem with this theory is not that some nations stand to lose from free trade per se, but that, as the wikipedia article puts it "Workers and capital may not be able to be transferred painlessly from one industry to another." Now whether this warrants supporting uncompetitive domestic industries is for you the US citizens to decide. However, I have the impression that as other people here have pointed out, many have already made that decision. For example, if people have a choice of buying expensive clothes from the US or cheap clothes from South East Asia, what do they tend to choose? Most of them choose "cheap" over "made in the USA" most of the time.

If you are interested in the way modern economists (Adam Smith is great, but a bit dated) see things, have a look at e. g. Krugman and Obstfeld's International Economics.

here's a short page on import tariffs. I was talking about import tariffs for IP, not export tariffs, which are rare but they do exist. For example there is a US ad valorem export tariff on raw lumber of 5%.

The more I think about your comment, though, perhaps an export tariff on IP is a very interesting topic, which I have not actually even thought about. Thanks for an interesting perspective!

Another thing is, about "radiogram analysis" and "accounting data" -- they are not really IP, yet this type of "labor" is imported more and more. I'd be interested in ways of basic protectionism there -- not crippling, evil kinds of protectionism, just some basic fairness kinds of measures.

Do you have the slightest idea about the basic theories of international trade?

There. You said it. I was waiting for the "G" word". Global what? No, the constant spin of saying protectionist is bad and globalisation is good is humorous because people such as yourself are completely incapable of finding how this is good for Joe Somebody working over in a steel plant in Ohio who has to go home tommorow and find a new job to feed his family.

Did you read anything that I wrote? Layoffs and jobs moving overseas hurts. IN THE SHORT RUN. But economies need to evolve and move forward. If they don't, they will be left behind. If we still had an economy focused completely on heavy industry, you would not be as well off as you are today. Our exports would be reduced to virtually zero. No one would buy from the U.S. because our goods would be too expensive compared to more competitive countries. This would trigger a bad long-term recession. Jobs would be lost. Wages cut. And, unlike in a free-trade situation, they won't come back.

For a more ancient example of comparative advantage: In the early 1800's, the New England economy was completely based on agriculture. But, eventaully, the soils depleted and the market was flooded with cheap agricultural goods from the South and West. These areas were more suited to agriculture than New England. Many New England farmers failed and became impoverished.

So, did the New Englanders just sit on their asses and keep farming? No. This freeing of resources away from the agricultural sector allowed for a worker surplus. Guess what happened? The industrial revolution. Since 90% of the population wasn't on farms, they could work in the factories.

The 70's and 80's downturn had little to do with industry but rather the country redirecting its focus into a service economy that we have today.

Uh. We now have such a larger service sector because we don't have much in the way of industry.

Your point earlier that we sucked at industry defies history. During WWII the U.S. was in a funk of a recession and it used its industrial might to snuff out two countries that were industrial power houses themselves: Germany ad Japan.

Read my post again. We haven't always sucked at industry. In WWII, we were great at it. The fact that we had such a large industrial base was one of the main reasons we won the war. But we sucked at industry by the 1970's. Thus, many companies packed up and left. That is obvious. The last decade we've had higher growth and lower unemployment than during the 1970's, despite having lost all of those industrial jobs.

Go read this for a basic overview of comparative advantage.

Risking the country on someones guess work has never really done us much good. Look at how well the tech industry went.

Free trade isn't risking the country on somebody's guess work. It is based on the will of the market, which is composed of the people. Do you know hat is based on guess work, though?

That's right. Trade protectionalism. The government interfering in certain industries in a worthless clumsy attempt at helping the economy.

Go speak to any economist. Do it. Any economist. They will invariably tell you that protectionism bites everyone in the ass in the long run.

Let me first begin with the theory of Comparative Advantage which implies that if countries concentrate on the industries they are most efficient at, all countries will benefit. There will, of course, occasionally be shifts in who has the comparative advantage of what, and we might be seeing a shift in call centers and perhaps a shift in lower-level programming.

Secondly, there is no massive movement of foreign direct investment to India or China, as one would expect if there was truly a threat to the US economy from there. American companies own only $10.5 billion in investments in China and $1.7 billion in India. Compare this with $132 billion in the Netherlands. Even in manufacturing, 94% of outward U.S. foreign direct manufacturing investment in 2001 flowed to other rich countries.

Investing in China and India is still tough because of because of their underdeveloped infrastructure and legal systems, undereducated workforces (with notable small groups of highly educated workers), remaining trade barriers, and limited consumer markets.

The US today account for 12% of global exports, the same amount it did 20 years ago, and three times as much as China.

US productivity has risen 4.8% over the last year, so even though Americans are well paid, they are producing enough to warrant it.

If you are concerned about NAFTA, in the first eight years of NAFTA manufacturing output in the United States rose at an annual average rate of 3.7%, 50 percent faster than during the eight years before the agreement took effect.

Americans continue to earn more, become more productive, manufacture more, and export more each year.

Here is the deal - the US benefits from people in developing countries making more money. They won't be "stealing" our jobs. The stronger the global economy, the better off we all will be.

Look at India. It's telephone penetration rate is 4 lines per 100 people. India's telecommunication systems market now has annual growth of 22%, and has tremendous growth potential. This means companies like Alcatel, Lucent, Siemens, Fujitsu, AT&T, Ericsson, and NEC will be brought in to finish up the wiring of hundreds of millions of Indian homes. Sure, a piece of the pie will go to many countries, but much of that will go to the US.

Meanwhile, US industry will be saving costs by outsourcing call centers and low-level IT operations to India. When you reduce costs, you can hire MORE productive Americans, not less!

Anyway, I'm not saying "don't worry about it," but we all need to be flexible as parts of the developing world develop. It means we need to concentrate on the things that Americans can do best. All of humanity will be better off in the end.

Exporting IT and programming jobs overseas.

Man, this burns me up. A guy grows up in a mud hut, studies his ass off, wins a scholarship, and becomes a crackerjack programmer. Why in the world should somebody here get $100k for a job he'd happily do for a tenth of that?

Now really, I think most of the outsourcing to India is just dumb; most really good software requires a deep understanding of the user and the context. But for the stuff that really can be shipped off to India, why shouldn't they have a crack a it?

The net effect of free trade is that everybody is better off. (The reason why is one of the few non-obvious things in Economics: the principle of Comparative Advantage.)

I am quite concerned about being able to work as an engineer for 20 more years (I've got 11 years already). I think that the corporations will find ways to reduce our salaries. What will you do when your $100K/yr job is gone and the only things around are $30K work at Frys?

That won't happen; Moore's Law and distance society has to go to make good use of even current technology guarantee you a long career. At worst, you'll be doing the same sort of work for $80K/yr.

That is ok by me; the supply and demand imbalance has meant that a lot of complete idiots have been able to make bank. It would do the field some good to have the deadwood shaken out a little. And our salaries won't drop below the salaries for other people with equivalent amounts of education; geek skills apply across enough industries that demand is very broad.

As I understand it, HP recognizes that the PC market is no longer growing, but they also recognize that they have way too much capital invested in that portion of their business to justify jumping ship. Consequently, they are in need of a way to compete with the likes of Dell to prevent that part of their business from being devoured. Realistically, the only way for them to compete is on price, and the only way to reduce prices is to cut costs because they can't increase volume in a market that is no longer growing. I think HP believes that acquiring Compaq will allow it to reach that scale at which it can start effectively cutting costs in its PC production operations. I hope that I'm not bastardizing the concept of Economies of Scale, but I think that is bascially the economic factor at play here.