CLASS IS NOW IN SESSION
Mr. Coyote at nwrepublican.blogspot.com and I have been having an exchange of words about the economics of trade. Mr. Coyote doesn't like the word, but he is a protectionist in the vein of Lewd Obbs or Pat Buchanan. To wit, he maintains NAFTA has damaged the economy. He maintains that in 1992, economists projected trade surpluses in the range of $54 billion directly resulting from NAFTA - which didn't happen, and he maintains that economic competition was just fine before NAFTA under Reagan.
Let's look at the data, shall we?
If one chooses to make a chart with historical trade balance data, courtesy of the US Census Bureau as the blog MarkTAW.com has done, some very interesting conclusions can be drawn, none of which Mr. Coyote will be prepared to acknowledge.
First - Historical trade deficit in nominal dollars (with inflation)
Mr. Coyote, please note the following:
-The first lasting trade deficit of serious magnitude occurred between 1983 and 1990. That's right, under the watch of the 20th Century's greatest president and his ascendent vice president.
-Since 1991, two years before NAFTA was passed, the trade deficit has been worsening with each passing year, accelerating at the end of Clinton's tenure and snowballing during the years of the Bush 42 administration.
-It wasn't until 1998, four full years after NAFTA was the law of the land, that the US trade deficit surpassed its worst level in the Reagan years.
-Our recent recession (2000-2002) was the first since before Jimmy Carter that DID NOT cause the trade balance to narrow. Under Bush, with the help of his tax cuts and historically low cost of borrowing (due to the Fed/short term rates and China/long-term rates), the trade deficit actually continued to get larger with only a deceleration in the trade balance in 2000.
-As the figure below indicates, if you correct for inflation by using constant dollars, it wasn't until 1999 - five full years after NAFTA - that the trade deficit surpassed its worst level under Reagan.
-In the following remarkable figure, MarkTAW.com has graphed exports as a percentage of total trade over the years, with the 50% level line colored according to the party of the administration in power. Yes, red is Republican and blue is Democrat.
-So it was under Reagan that exports as a percentage of trade reached a nadir and returned during the Bush 42 administration nine (9) full years after NAFTA.
-And finally, with what countries is trade "imbalanced"? Let's look at the data below
-As anyone can see, it's not our NAFTA partners Mexico and Canada. Combined, our trade within NAFTA is only 30% of our imports and exports worldwide.
So what, Mr. Coyote, can we conclude?
1. Your theory that things were just fine pre-NAFTA under Reagan is pure hogwash.
2. NAFTA accounts for a mere 30% minority of our total trading activity.
3. The current trade deficit began and accelerated several years after NAFTA, incidentally with greater correlation to the 1997 Latin American financial crisis started in Argentina and resulting greater international currency float.
Q.E.D.
Our trade deficit is not necessarily a good thing, but it is a market phenomenon that results from the U.S.'s dynamic, innovative, high-paying economy. So long as the rest of the world makes cheaper stuff than we do because their labor supply and production methods are not as productive as the U.S., there will be a trade deficit.
And to regulate, subsidize, protect, tax, tariff or withdraw - no matter how strongly advocated by unions, Lou Dobbs or Pat Buchanan - is costly, ill-conceived, and flies in the face of economic progress.
Mr. Coyote, you have reading assignments here, here, here, and here.
Class is now dismissed.
Mr. Coyote at nwrepublican.blogspot.com and I have been having an exchange of words about the economics of trade. Mr. Coyote doesn't like the word, but he is a protectionist in the vein of Lewd Obbs or Pat Buchanan. To wit, he maintains NAFTA has damaged the economy. He maintains that in 1992, economists projected trade surpluses in the range of $54 billion directly resulting from NAFTA - which didn't happen, and he maintains that economic competition was just fine before NAFTA under Reagan.
Let's look at the data, shall we?
If one chooses to make a chart with historical trade balance data, courtesy of the US Census Bureau as the blog MarkTAW.com has done, some very interesting conclusions can be drawn, none of which Mr. Coyote will be prepared to acknowledge.
First - Historical trade deficit in nominal dollars (with inflation)
Mr. Coyote, please note the following:
-The first lasting trade deficit of serious magnitude occurred between 1983 and 1990. That's right, under the watch of the 20th Century's greatest president and his ascendent vice president.
-Since 1991, two years before NAFTA was passed, the trade deficit has been worsening with each passing year, accelerating at the end of Clinton's tenure and snowballing during the years of the Bush 42 administration.
-It wasn't until 1998, four full years after NAFTA was the law of the land, that the US trade deficit surpassed its worst level in the Reagan years.
-Our recent recession (2000-2002) was the first since before Jimmy Carter that DID NOT cause the trade balance to narrow. Under Bush, with the help of his tax cuts and historically low cost of borrowing (due to the Fed/short term rates and China/long-term rates), the trade deficit actually continued to get larger with only a deceleration in the trade balance in 2000.
-As the figure below indicates, if you correct for inflation by using constant dollars, it wasn't until 1999 - five full years after NAFTA - that the trade deficit surpassed its worst level under Reagan.
-In the following remarkable figure, MarkTAW.com has graphed exports as a percentage of total trade over the years, with the 50% level line colored according to the party of the administration in power. Yes, red is Republican and blue is Democrat.
-So it was under Reagan that exports as a percentage of trade reached a nadir and returned during the Bush 42 administration nine (9) full years after NAFTA.
-And finally, with what countries is trade "imbalanced"? Let's look at the data below
-As anyone can see, it's not our NAFTA partners Mexico and Canada. Combined, our trade within NAFTA is only 30% of our imports and exports worldwide.
So what, Mr. Coyote, can we conclude?
1. Your theory that things were just fine pre-NAFTA under Reagan is pure hogwash.
2. NAFTA accounts for a mere 30% minority of our total trading activity.
3. The current trade deficit began and accelerated several years after NAFTA, incidentally with greater correlation to the 1997 Latin American financial crisis started in Argentina and resulting greater international currency float.
Q.E.D.
Our trade deficit is not necessarily a good thing, but it is a market phenomenon that results from the U.S.'s dynamic, innovative, high-paying economy. So long as the rest of the world makes cheaper stuff than we do because their labor supply and production methods are not as productive as the U.S., there will be a trade deficit.
And to regulate, subsidize, protect, tax, tariff or withdraw - no matter how strongly advocated by unions, Lou Dobbs or Pat Buchanan - is costly, ill-conceived, and flies in the face of economic progress.
Mr. Coyote, you have reading assignments here, here, here, and here.
Class is now dismissed.
posted by Screwtape at 3:13 PM
4 Comments:
First of all... again....
How do you know what I will and what I won't be prepared to acknowledge?
If I acknowledge your charts and conclusions about the NAFTA trade deficits will you acknowledge that you were wrong about what I will and won't do?
Let's just see how intellectually honest you are before I give you any more of my time.
Coyote - The conclusion that you wouldn't acknowledge may have been unwarranted, but you really can't pick such a negligible straw man to avoid the substantive issues.
Actually I can pick such a "straw man." It is MY time that is being asked to be spent in this discussion.
So, unless he is willing to pay me for my time then I get to decide the parameters that will dictate the spending of my time.
Also... I might note that he still never did deal with the fact that China's currency is not pegged to the dollar. He has been faced with that question at least two times if not three and he has yet to deal with that.
So even though I may be willing to discuss the issue on his terms I do have a good reason to believe that he is not willing to acknowledge anything.
Actually, the "intellectually honest" position is to substantively address the arguments, concede the point or just admit that you don't have time for the effort required. No shame in that, we all have lives. You can also link to someone who has taken the time, assuming that they had a substantive effort.
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