Cafe Hayek - Latest Comments in Competing with High-Wage Workers

Re: Competing with High-Wage Workers

John Konop — Fri, 02 Mar 2007 09:09:06 -0000

Opinion vs. FACTS!

Trading on terror to profit a few

EVEN AS Congress has finally begun a serious debate about whether U.S. troops should be withdrawn from Iraq, another part of President Bush's "war on terror" is advancing with far less public fanfare. Last month, the Senate Finance Committee approved the implementation of the U.S.-Oman Free Trade Agreement and cleared the way for its consideration by Congress.

The agreement is part of the president's dual strategy for fighting the war on terror: direct military engagement and free trade. Then-U.S. Trade Representative Robert Zoellick first announced the policy on Sept. 20, 2001, saying that the administration would be "countering terror with trade."

Bush reiterated the pledge four years later when he told the United Nations that "by expanding trade, we spread hope and opportunity to the corners of the world, and we strike a blow against the terrorists. Our agenda for freer trade is part of our agenda for a freer world."

In the years that followed, the war in Iraq — and the administration's stated reasons for launching it — have been widely challenged, but the president's free trade agenda has received far less scrutiny.

Just two months after invading Iraq, Bush announced his plan for a U.S.-Middle East Free Trade Area, which he said would include 20 countries from western Africa to the Persian Gulf. To make it happen, he established a unique negotiating platform involving a series of bilateral negotiations between the U.S. and each of the individual countries.

If all goes according to plan, the individual free trade agreements will be united under the U.S.-Middle East Free Trade Area by 2013. Negotiations have progressed rapidly as nations throughout the region seek to prove they're with the United States, not against it.

Oman's accord would be the fifth free trade agreement between the U.S. and a Middle Eastern country, and the fourth implemented by Bush.

Oman is a relatively small country (just slightly smaller than Kansas) at the southeast end of the Arabian Peninsula between the United Arab Emirates and Yemen. An absolute monarchy, Oman has been governed by Sultan Qaboos bin Said al-Said since 1970. Although its reserves are modest, oil accounts for 75% of the nation's export earnings and the vast majority of all U.S. imports from Oman (which, in total, were just $422 million in 2004). Apparel is the only other major import product. U.S. oil, energy and apparel companies, in turn, are likely to be the only major U.S. beneficiaries of the agreement.

It should not be surprising, therefore, that the U.S. corporate lobbying group pushing for the MEFTA (the aptly named U.S.-Middle East Free Trade Coalition) includes among its 120 members Chevron, Exxon Mobil, Bechtel and Halliburton — companies intimately connected to the Bush administration that have been big winners in the war on terror. Their "winnings," however, have not translated into greater oil security for the U.S., lower prices at the pump for U.S. consumers or lower rates of terrorism.

The Oman free trade agreement provides these companies with expansive new rights and greatly increased access to Oman's economy, a template they hope will spread from agreement to agreement across the Middle East.

For instance, Oman will give U.S. firms substantially greater access to its service sector, likely including energy, which is largely nationalized. The Omani government also is restricted under the agreement from giving preference to local over foreign companies in virtually all circumstances, including in its energy sector.

On Jan. 19, then-U.S. Trade Representative Robert Portman sent a letter to Oman's minister of commerce and industry. He affirmed that, when it signs contracts, the Omani government may not give preference to Omantel (the nation's second-largest employer after the government), Petroleum Development Oman or Oman Liquefied Natural Gas — that is, to the primary Omani exploration and production companies largely owned by the government of Oman.

Thus, U.S. firms will receive significantly greater access to Oman's oil profits without any clear benefits for Oman's economy.

As for Oman's apparel industry, the U.S. International Trade Commission estimates that the U.S.-Oman agreement will lead to a 66% increase in U.S. imports of apparel manufactured in Oman.

What are the likely effects? A report in May by the National Labor Committee, a not-for-profit research organization, exposed the costs of the first Middle East trade agreement signed by Bush in December 2001 — the U.S.-Jordan Free Trade Agreement. After that agreement was implemented, new factories arrived in Jordan to service American companies primarily from the apparel industry, including Wal-Mart, JC Penney, Target and Jones New York.

The factories have engaged in the worst kinds of human rights and worker abuses, including 48-hour shifts without sleep, violent physical and psychological abuse and workers brought from foreign countries with their passports held by employers, often receiving no pay for their work. Wal-Mart also is a member of the U.S.-Middle East Free Trade Coalition.

American companies seeking cheap, easy labor are not likely to meet much opposition from the Omani government. The State Department has reported Oman for human trafficking and forced labor abuses. Eighty-five percent of the private-sector workforce in Oman is made up of foreign "guest workers" who are granted limited rights. And the U.S.-Oman Free Trade Agreement does not even include the meager labor standards of the Jordan agreement.

At a moment when people across the Middle East reveal in poll after poll a deep distrust of the United States, and particularly of its actions in the region, it seems ill-advised to advance trade agreements that provide clear rewards to a handful of U.S. corporations but few discernible benefits to either the people of the Middle East or the people of the United States.

Re: Competing with High-Wage Workers

isaac Crawford — Fri, 02 Mar 2007 02:45:48 -0000

John Knoop wrote:

"Just like the Middle East!"

You picked the wrong example my friend as I am in Yemen. The middle east is exactly what you get if you resort to protectionism, a small group that has fantastic wealth and a whole lotta people with little prospects of their lives getting better. It is *very* difficult for a foreigner to start up a business or buy property here. The government won't allow foreign capital to come in, but they don't explain where the money should come from to help their citizens. The UAE is a great example of what can be done with an autocracy that allows free trade. Dubai has no natural resources to speak of, yet they are fantastically wealthy. They import everything, including their labor, only 18% of the people in Dubai are actually from the UAE. So you will need to do better than that John to convince anyone that you are right. What you need to do is come up with a wealthy country with an expanding economy that is very restrictive with imports. You won't find it, not in the middle east, or anywhere else.

Isaac

Re: Competing with High-Wage Workers

save_the_rustbelt — Thu, 01 Mar 2007 04:37:11 -0000

Don:

The godless anti-capitalist left wingers at the Wall Street Journal are at it again.

"Federal Aid Does Little For Free Trade's Losers"

By Deborah Solomon

You should send them a letter and straighten them out - quick.

Warmest regards,

Rusty

Re: Competing with High-Wage Workers

John Konop — Thu, 01 Mar 2007 03:56:46 -0000

Neocons And Socialist What is the Difference?

Do you think Wang Hui is right to compare the New Left alliance with the neoconservatives, supporting “fantasy projects” like democracy in Iraq as the same miss guided logic that U.S. support of abusive trade deals with China will some day create Democracy in China?

NYTIMES-Co-editor of China’s leading intellectual journal, Dushu (Reading), and the author of a four-volume history of Chinese thought, Wang Hui spoke about how market reforms have widened the gap between rich and poor in China.

Many of its local officials, he said, used their arbitrary power to become successful entrepreneurs at the expense of the rural populations they were meant to serve and joined up with real estate speculators to seize collectively owned land from peasants. (According to Chinese officials, 60 percent of land acquisitions are illegal.) The result has been an alliance of elite political and commercial interests, Wang said, that recalls similar alliances in the United States and many East Asian countries.

Despite his invocation of socialist principles, Wang was quick to tell me that he dislikes the New Left label, even though he has used it himself. “Intellectuals reacted against ‘leftism’ in the 80’s, blaming it for all of China’s problems,” he said, “and right-wing radicals use the words ‘New Left’ to discredit us, make us look like remnants from the Maoist days.” Wang also doesn’t care to be identified with the radical intellectuals of the 60’s in America and Europe, to whom the term New Left was originally applied. Many of them, he said, had passion and slogans but very little practical politics, and not surprisingly, more than a few ended up with the neoconservatives, supporting “fantasy projects” like democracy in Iraq.

Re: Competing with High-Wage Workers

triticale — Wed, 28 Feb 2007 09:33:56 -0000

Martin mentions the buggy whip makers. I wonder if he saw the article in the WSJ back in 1970 about the company which was then revolutionising that industry thru the use of nylon and fiberglass and putting most of the companies which sold to the Amish and to sulky racers out of business.

Re: Competing with High-Wage Workers

CalgaryGuy — Wed, 28 Feb 2007 07:03:22 -0000

Posted by: Martin | Feb 26, 2007 5:20:54 PM

"2. Comparative advantage was bunk from the start. Ricardo's 'wine and cloth' analogy compares luxury goods (wine) with necessities (cloth).

Discuss."

----------------------

Martin, I'm sure I'm not the only one here who's interested to hear why you think comparative advantage was bunk from the start?

Please enlighten me as to how his "wine and cloth" analogy does not carry over to say "wheat and cloth".

Re: Competing with High-Wage Workers

John Konop — Wed, 28 Feb 2007 04:07:42 -0000

Isaac

Just like the Middle East!

Re: Competing with High-Wage Workers

isaac Crawford — Wed, 28 Feb 2007 02:53:28 -0000

Even if the Chinese are evil, corrupt, and morally bankrupt, it does no one any good (with the possible exception of some union workers here at the expense of all of us) to further hurt those people by threatening their livelihood. Look at the difference between Cuba, who we have had an embargo against forever, with China. China IS getting better, Cuba has sucked for a long, long time. Trading helps both parties, ESPECIALLY if one of the parties is being mistreated by their government. If those jobs went away tomorrow, people that are being mistreated today would go on being mistreated, and they'd probably starve without jobs.

Also keep in mind that the "Chinese government" is not one monolithic entity, it is millions of people in various places of power. Knowing government like we all do, all of them will try to take the best advantage of their situation. For some, this means resorting to inhumane and cruel abuses of power. But I think you will find that the opportunity for this decreases the more affluent the population becomes...

Isaac

Re: Competing with High-Wage Workers

John Konop — Wed, 28 Feb 2007 01:53:19 -0000

Don

What you call “silly restrictions” is what many of us refer to as human rights! Do you think human trafficking, forced prostitution, no health & safety standards, no environmental standards……… are “silly restrictions”?

I guess you are to busy to think about the SLAVES!

READ FROM THE LA TIMES

http://www.latimes.com/news...

Trading on terror to profit a few

Re: Competing with High-Wage Workers

John Konop — Wed, 28 Feb 2007 01:42:57 -0000

Lisa

Tell your theory to the people in Oman, China…. where they work in sweatshops and human trafficking is norm!

Re: Competing with High-Wage Workers

LisaMarie — Tue, 27 Feb 2007 10:11:56 -0000

John,

You assert that free trade only works when people are free. I would counter that if trade is free, people will become free. Economic freedom IS freedom. Period.

Re: Competing with High-Wage Workers

David Peterson — Tue, 27 Feb 2007 08:35:24 -0000

I liked what Mises had to say about people wanting to deny the universality of laws of economics (saying it was true for some time, but not true anymore) and yet trying to promote a cause and effect relationship.

Re: Competing with High-Wage Workers

M. Hodak — Tue, 27 Feb 2007 08:26:58 -0000

Matt wins this thread. That was very funny.

Re: Competing with High-Wage Workers

Sam Grove — Tue, 27 Feb 2007 07:57:48 -0000

A price of collectivist thinking is the relegation of individual humans to the means of policy ends.

Thus humans in other countries are made into "enemies" and fellow citizens must be interfered with to prevent them from engaging in voluntary exchange with other humans.

Thus we see the whole purpose of political government is to manipulate and constrain the market so that some may be benefitted at the expense of others and peaceful behaviors must be restricted or prohibited.

There is no moral justification for such interference, as no one owns the market or any portion thereof outside of each individuals own participation.

Re: Competing with High-Wage Workers

liberty — Tue, 27 Feb 2007 05:54:41 -0000

Don,

I agree with you, of course. However one point that your opponents could make in order to refute your argument is that greater efficiency in this country due to improved technology benefits this country even as it puts people out of jobs and is different in the following way.

They would argue that the improved technology was created by Americans and it will mean both greater output in the short term and also turn into new kinds of products and efficiencies and growth in the long term - while simply hiring cheap foreign labor does none of those things. So, while the short term loss of low wage American jobs to new technologies is made up for by the innovation, improved efficiency and growth created by them, the same cannot be said of "exporting" jobs to cheap foreign countries. While in the former case the output is still all American created and greater efficiencies are taking place, in the latter case the work is done by foreigners so that money leaves the country, and there is no new technological advance or innovation being created, less being created by an American business which could then benefit American workers with sales of it in the future.

I think this argument can be easily refuted, but I think it must be addressed if you want to win over your opponents.

Re: Competing with High-Wage Workers

Don Boudreaux — Tue, 27 Feb 2007 05:51:39 -0000

Mr. Konop,

This is my last response to you; my time is valuable.

I have read Adam Smith. It is you who should read him carefully.

First, Smith advocated nearly pure free trade. He made some exceptions (for example, for national-defense purposes).

Second, and more to the point of this discussion, Smith understood that "there is much ruin" in every nation. No place must be textbook-free of government restraints in order to be legitimately described as having a free market. Just as a drop of arsenic -- or even a tanker-full of arsenic -- in the Pacific ocean doesn't turn the ocean into arsenic, markets can endure lots of silly restrictions and still be reasonably free.

Re: Competing with High-Wage Workers

John Konop — Tue, 27 Feb 2007 05:46:14 -0000

Russell

Can you argue with facts and not just say what you feel.

But that might be hard for you.

Re: Competing with High-Wage Workers

John Konop — Tue, 27 Feb 2007 05:44:12 -0000

Don

The article points out it is not FREE MARKET.

You should read Adam Smith sometime. If business is buying the government off that is not a free market system via ADAM SMITH.

In fact he warns about this issue in his book Wealth of Nations.

Re: Competing with High-Wage Workers

Don Boudreaux — Tue, 27 Feb 2007 05:23:28 -0000

Mr. Konop,

I can't be sure, but I somehow suspect that the Asia Times piece you quote from, and link to, is meant to dispel the notion that Hong Kong grew prosperous because of free trade. If so, the essay proves no such thing. The fact that Beijing (which has controlled Hong Kong since July 1997) is no democracy isn't news. Even if Beijing turns Hong Kong now into a heavily "protected" no-free-trade region, this fact says absolutely nothing about Hong Kong's avenue to success prior to 1997 -- an avenue paved with free trade.

By the way, the Asia Times' claim that "The property market is at the root of most modern Hong Kong fortunes" is utter rubbish. To be sure, property values rose significantly during the past century. But the reason they rose is because the wealth of the people of Hong Kong rose. By far the most plausible explanation of this growth of wealth is Hong Kong's free-trade policies (that were followed at least until the 1990s).

Re: Competing with High-Wage Workers

Russell Nelson — Tue, 27 Feb 2007 05:11:52 -0000

John, you've made it perfectly clear that you are a loon. Why should anybody start taking you seriously at this point?

Re: Competing with High-Wage Workers

John Konop — Tue, 27 Feb 2007 05:02:22 -0000

Matt

Can you argue with facts and not just say what you feel.

Re: Competing with High-Wage Workers

John Konop — Tue, 27 Feb 2007 05:00:25 -0000

It is called protect the rich from the FREE MARKET. I knew you would bite!

READ

Hong Kong politics: Business as usual

By Gary LaMoshi

HONG KONG - You never bring four flowers to a hostess here, because four represents death in Cantonese numerology. So it would have been more appropriate for hopes for democracy in Hong Kong if the ruling from the Standing Committee of the National People's Congress (NPC) had come down on 4-4-04 rather than two days later. Beijing's ruling - "sugar-coated poison" in the words of Democratic Party patriarch Martin Lee - in effect killed political reform in Hong Kong.

The big motherland offered the "sugar coating" of possible direct election of Hong Kong's chief executive in 2007, wrapped around the poison of the NPC asserting its right to interpret at will the Basic Law, the constitution that the British hammered out with Beijing as a fig leaf before they skipped town. Beijing alone remains interested in the document, while Britain, ironically, is occupying Iraq allegedly in the name of bringing it the democracy it never bothered to give Hong Kong in 150 years of rule. The Basic Law document promises Hong Kong a high degree of autonomy for 50 years, based on the Deng Xiaoping's "one country, two systems" principle.

Make that "one country, our system" now. By taking the right to interpret the Basic Law into its own hands, Beijing has made any local debate about Hong Kong's government purely academic. The concept of "Hong Kong people ruling Hong Kong" that China touted when it replaced the colonial regime always was really "Hong Kong people approved by Beijing ruling Hong Kong" until 2007; the NPC ruling extends that term indefinitely.

Re: Competing with High-Wage Workers

Don Boudreaux — Tue, 27 Feb 2007 04:21:57 -0000

Mr. Konop,

Perhaps you know something that Milton Friedman (and every other respected scholar who commented on Hong Kong) missed. Here's Friedman from 1996:

"...the salvation of Hong Kong has been its complete free trade and free market policy. No tariffs on imports, no subsidies or other privileges to exports."

The link containing Friedman's observation is here:

http://www.opinionjournal.c...

Re: Competing with High-Wage Workers

matt — Tue, 27 Feb 2007 04:18:39 -0000

It's been a while since readers have posted this much crap, but the most troubling thing I have read in all this nonsense is that John Konop has kids.

Re: Competing with High-Wage Workers

John Konop — Tue, 27 Feb 2007 03:43:03 -0000

Flnn

You are the one who supports Socialist!!

China: We Are Socialists!

Beijing (FORTUNE) – Senior U.S. officials, led by Treasury Secretary Hank Paulson, arrived inside the Stalinist-style Great Hall of the People Thursday morning, briefed and breakfasted and eager to offer guidance to Chinese leaders on how to become a “responsible stakeholder” in the global economy

According to the English translation of her remarks, she repeated six times that China was “sticking to” its “new path of industrialization,” and three times that China was “continuing to improve” on reforms already in place. Substantial free-market change wasn’t part of the equation. “By following a path of building socialism with Chinese characteristics in an independent and self-reliant manner,” she said, “we have scored glorious achievements that attracted worldwide attention.”

At debate is China not playing by the rules of the trade agreement.

CNN-But Paulson said earlier this week China could and should do more to reduce its massive trade surplus and revalue its currency. And a WTO report released Monday complained bitterly about continued rampant counterfeiting and piracy, policies limiting imports and regulatory barriers to U.S. service companies

“We see troubling indications that China’s momentum toward reform has begun to slow,” US Trade Representative Susan Schwab, a participant in this week’s meeting, wrote in the Financial Times.

This has been my point, we expect a Communist China to play by free market civilized principals. China has made it clear they will play under their rules and socialist system unless we stand up and play hard ball. Do you think the American economy can afford not to demand that China follow civilized rules of trade?