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Comparative advantage and when to blow up your island

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Re: Comparative advantage and when to blow up your island

#11

Post by mabbo »

junipertea wrote: post #10
mabbo wrote: post #9

What bothers me in today's world is that we ignore how some countries achieve their comparative advantage. Why did Hershey's chocolate close the factory not too far from where I grew up, and move the manufacturing to Mexico? Well, labor is cheap there because there are no unions, few health and safety regulations, few workers' rights groups. That makes it much cheaper to operate. Why can China manufacture clothing ch…

in that case the government would just profit from the forced labor via additional tax income

If the tax were high enough, there would be no advantage and we wouldn't trade with them at all. We'd instead trade with ethical countries.

The money could also be explicitly put into human rights campaigns.

Re: Comparative advantage and when to blow up your island

#12

Post by zingplex »

mabbo wrote: post #11
junipertea wrote: post #10

Earlier quoted context omitted.

in that case the government would just profit from the forced labor via additional tax income

If the tax were high enough, there would be no advantage and we wouldn't trade with them at all. We'd instead trade with ethical countries. The money could also be explicitly put into human rights campaigns.

Alternatively, you could issue an annual dividend to all taxpayers at the end of the year. This would be akin to the carbon fee and dividend policy some have proposed.

Re: Comparative advantage and when to blow up your island

#13

Post by aklemm »

"Comparative advantage" has always embodied, to me, the difficulty with electoral politics. It's a fairly easy concept, taught fairly widely, yet almost no one really understands it and views the world through that lens. Most voters are operating without an understanding of comparative advantage.

Now apply that to dozens of other concepts in other fields. Same situation. It's depressing.

Re: Comparative advantage and when to blow up your island

#14

Post by lotsofpulp »

mabbo wrote: post #9

What bothers me in today's world is that we ignore how some countries achieve their comparative advantage. Why did Hershey's chocolate close the factory not too far from where I grew up, and move the manufacturing to Mexico? Well, labor is cheap there because there are no unions, few health and safety regulations, few workers' rights groups. That makes it much cheaper to operate. Why can China manufacture clothing ch…

> In my opinion, we need trade rules that explicitly tax and tariff those countries who are only finding comparative advantages through exploitation and unethical activity.

The US and Europe have this situation too, where some European countries have decent parental leave and overtime rules, non employer subsidized healthcare, and lack of employer dependent H1B workers.

Even within the US, you have states like CA offering paid parental leave, paid sick leave, environmental protections, non compete bans, and eliminating tipped minimum wages versus most of the other states trying to compete with cheap labor and not offering any job protections to people.

It’s 2020 and Ohio doesn’t even require employers to pay out accrued PTO.

Re: Comparative advantage and when to blow up your island

#15

Post by bluGill »

mabbo wrote: post #9

What bothers me in today's world is that we ignore how some countries achieve their comparative advantage. Why did Hershey's chocolate close the factory not too far from where I grew up, and move the manufacturing to Mexico? Well, labor is cheap there because there are no unions, few health and safety regulations, few workers' rights groups. That makes it much cheaper to operate. Why can China manufacture clothing ch…

Note that Hershey's moving only works out for them if the resulting change in labor situation means that their customers can still afford their candy. If the excess labor instead means wages at home go down and now people cannot afford candybars it doesn't work out for them.

In short, we are better off for not having Hershey's in the US. Mexico gets better wages (more competition) and out people are freed from making candybars and can move to more productive uses of our people.

Re: Comparative advantage and when to blow up your island

#16

Post by DiogenesKynikos »

mabbo wrote: post #9

What bothers me in today's world is that we ignore how some countries achieve their comparative advantage. Why did Hershey's chocolate close the factory not too far from where I grew up, and move the manufacturing to Mexico? Well, labor is cheap there because there are no unions, few health and safety regulations, few workers' rights groups. That makes it much cheaper to operate. Why can China manufacture clothing ch…

China's comparative advantage in clothing comes from long before there were any re-education camps in Xinjiang. The first phase of industrialization in China was based on clothing production. Compare China's exports in 1995 [1], which were heavily skewed towards clothing, to their exports in 2018 [2], which were much more heavily skewed towards electronics.

Xinjiang makes up only a tiny part of the Chinese economy, anyways. Xinjiang has 22 million people and exports barely $17 billion of goods per year. Guangdong has 113 million people and exports $440 billion of goods per year.

> In my opinion, we need trade rules that explicitly tax and tariff those countries who are only finding comparative advantages through exploitation and unethical activity.

That policy would lead to tariffs against most poor countries. I could imagine some unintended consequences there.

1. https://oec.world/en/visualize/tree_map/hs92/export/chn/all/...

2. https://oec.world/en/visualize/tree_map/hs92/export/chn/all/...

Re: Comparative advantage and when to blow up your island

#17

Post by tasogare »

mabbo wrote: post #9

What bothers me in today's world is that we ignore how some countries achieve their comparative advantage. Why did Hershey's chocolate close the factory not too far from where I grew up, and move the manufacturing to Mexico? Well, labor is cheap there because there are no unions, few health and safety regulations, few workers' rights groups. That makes it much cheaper to operate. Why can China manufacture clothing ch…

> Why can China manufacture clothing cheaply? Well, they have hundreds of thousands of Uighur prisoners being 're-educated' via forced labor.

This is complete nonsense. I hate CCP as much as anyone outside it but let's be real for a second: China became a manufacturing center way before the islamic terror attacks (like the Kunming attack of 2014) incitated them to take action against that ideology in East Turkestan.

Re: Comparative advantage and when to blow up your island

#18

Post by defen »

These simple models of free trade work fine when discussing commodities or raw materials, but one thing I never see addressed (I'm far from an expert, just an interested layman) is that modern manufacturing involves far more than the raw inputs - there's complicated logistics and an entire holistic knowledge base of the company or companies which produce a thing. A society can forget how to make things, especially if no one in the society makes those things any more. The classic example is that "no individual knows how to make a #2 pencil from scratch". Or, more recently, the USA can't even produce large numbers of N95 masks. So, there can be a short-term benefit to free-trade, but an unknown cost down the line if your trade partner goes away for some reason and you can no longer make things you were trading for.

Re: Comparative advantage and when to blow up your island

#19

Post by jungturk »

bluGill wrote: post #15
mabbo wrote: post #9

What bothers me in today's world is that we ignore how some countries achieve their comparative advantage. Why did Hershey's chocolate close the factory not too far from where I grew up, and move the manufacturing to Mexico? Well, labor is cheap there because there are no unions, few health and safety regulations, few workers' rights groups. That makes it much cheaper to operate. Why can China manufacture clothing ch…

Note that Hershey's moving only works out for them if the resulting change in labor situation means that their customers can still afford their candy. If the excess labor instead means wages at home go down and now people cannot afford candybars it doesn't work out for them. In short, we are better off for not having Hershey's in the US. Mexico gets better wages (more competition) and out people are freed from making…

An issue with this type of analysis is that "them" is ambiguous.

Even if the candy company folds in 5 years, part of "them" is probably still ahead - the management team "them" experiences gains through short-term incentives for performance while the ownership part of "them" suffers losses.

In some cases, those owners aren't fat-cat capitalists - they're workers' pensions and retirements funds.

In these cases, "we" didn't end up being better off by the company moving to Mexico.

Also, the claim that this type of relocation "frees" local labor from the toil of candybar-making to focus on real value creation is a stretch. More likely, they're now free to compete in a smaller labor market and superficially one would expect that to drive wages down (since the demand for jobs hasn't changed and the supply has of them has gone down).

Re: Comparative advantage and when to blow up your island

#20

Post by letitbeirie »

bluGill wrote: post #15
mabbo wrote: post #9

What bothers me in today's world is that we ignore how some countries achieve their comparative advantage. Why did Hershey's chocolate close the factory not too far from where I grew up, and move the manufacturing to Mexico? Well, labor is cheap there because there are no unions, few health and safety regulations, few workers' rights groups. That makes it much cheaper to operate. Why can China manufacture clothing ch…

Note that Hershey's moving only works out for them if the resulting change in labor situation means that their customers can still afford their candy. If the excess labor instead means wages at home go down and now people cannot afford candybars it doesn't work out for them. In short, we are better off for not having Hershey's in the US. Mexico gets better wages (more competition) and out people are freed from making…

In theory, but

> ...freed from making candybars and can move to more productive uses of our people

relies on the presumption that there is sufficient local demand for laborers (who may not necessarily have any experience that doesn't involve the manufacture or distribution of chocolate) in positions of increased productivity.

The decaying socioeconomic situation for wide swaths of the rural US suggests that this was not the case.

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