China, China Vietnam, United States discussed on Uncommon Knowledge

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Two thousand eight when imports from China. Really go off the charts in China shock in studied quite extensively and have shown those imports during this. Preah did cause a lot of dislocation for certain communities where you've had a one factory town or the workers there did not have the opportunity to move to another sector of the economy. So if you're part of a big urban area it's diversified economically. Lose your job. In one. Secretary transitioned somewhere else fearing small-time in rural Virginia that's producing out your furniture right. You're not willing to move your sort of sunk. And what they found is there weren't other jobs. People dropped out labor force and had all the negative consequences. That you're let me try this line. One More Time trump adviser Peter Navarro this Navarro speaking in two thousand eighteen the US has lost tens of thousands factories and millions of manufacturing jobs precisely because China and other countries were maintaining tariffs higher than those of the United States. Close quote so I. This isn't exactly what Navarro says but could you just address the argument which is in the air people. Feel that you can see people watching Cable News and you can see that in all kinds of ways. It's taken for granted. It's a premise underlying a lot of conversations in the premises China. Got Richard by making us poor in particular that manufacturing in this country got hollowed out because the people in charge of investment decisions outsourced manufacturing to cheap labor and new manufacturing plants in China so Shanghai. Shanghai's a trade city but they're manufacturing cities in the interior of China that are glistening and Detroit is. Detroit has fallen apart that. That's that's and it happened. One rose wee hours fell. Because there's rose address that right so many points to be made on this particular issue so first of all consumers have benefited tremendously from cheap imports of various consumer goods. So whether we're talking about clothing which is now a much smaller share of people's budgets because price has gone down so much and that's not just China Vietnam in many other countries as well or very where the imports in the dislocation caused. And that study. That you mentioned Talks about that what we're much less aware of is the exports and they're not necessarily going to China but they may be going to other countries so we may be exporting heavy earth moving equipment to Australia now John Deere Caterpillar and others exponential Australia which is mining stuff that will then be shipped to China and then it becomes a good so you have to look at the totality if you just look at the bilateral sometimes it's very misleading. Here's one example where the bilateral is misleading. The Ifo which I presume you and many of your listeners hats You know when that comes in there it is and I always ask my students. What does it say in the back is it doesn't being China says Designed in California assembled in China so that comes in as an import at county about a two hundred dollar per unit import from China. But guess what only about five dollars of that is truly Chinese content. The Labor could together in a few small components. Most of the value is obviously apple in terms of intellectual property. But even the physical stuff. It's the semiconductors coming from Korea. It's the camera lens coming from Germany. It's the other chips that are coming from Japan Lee. That's a world product assembled in China brought into the US so sometimes the statistics can be misleading. But years were tricked your point once again. There's no doubt that there have been many towns in many places in in the Midwest. Say that have have suffered greatly. We've lost a lot of manufacturing jobs although that is sort of a flattened out at least as a sheriff labor force but some of those jobs have been relocated within the United States so auto manufacturers moved to the south so that's where unions and and Labor laws held a lot of play. So if you look at Alabama but of manufacturers they're both domestic and foreign investment so mid West is sort of not competing with other states of the Union for or those jobs also boasts jobs. There's so much more technology intensive than they used to be so in terms of the steel industry and the one thousand nine hundred eighty s We're cutting our teeth Washington It took ten worker hours. A ton of steel now takes one worker our producer Tom Steele. We're still producing lot of steel. That's just not a lot of jobs behind that it's a few engineers monitoring the doctors and that's not foreign competition while it is to the extent being forced to compete. It's also an increase in productivity. We're getting a lot more still than we used to. For many fewer workers than we obviously what creates a problem for those workers who aren't fortunate toured Stanford her Dartmouth were not part of the Knowledge Economy? Who are going to be doing something terms of manual labor? And if you're not creating a lot of jobs for the class of people it's going to cause a lot of difficulties you cannot just graduate from high school or even not do that and get a job at local factory. That's technological change China's apart that but a very small part of it and so what about other point here that China did this to us because they had tariffs that were higher than ours. Actually once again I'll grant the partial truth or the part of it. That there has been intuitively plug. Boards like No. But here's where he's sort of wrong. Because that China shock that dramatic escalation in China's exports that came about because they were reducing their tariffs on imported inputs and on final goods that made their producers so much more cost effective. You cannot export steel. You can export clothing unless you have access to the cheap inputs that are necessary crusoes final goods at world prices and for one reason why China was not competitive is because they'd seal their economy off. If you want to produce something had to source it domestically. Those priests were terribly inefficient. When they opened up and boost those tariffs also their producers could get access to those cheap inputs made the much more cost effective much more efficient and they've or taken world markets all right the case against free trade part to the new Cold War. You will already anticipated this argument. Here's Milton Milton. Friedman who has argued that one of the few arguments in favor of terrorists that might in principle have some validity is and I'm quoting him now. The national security argument the argument that a thriving domestic steel industry for example is needed. For defense it cannot be denied that on occasion this argument might justify the maintenance of otherwise uneconomical productive facilities close quote and you just quoted. Adam Smith defense is more important than opulence along. Okay so you grant that argument obviously do you just quoted Adam Smith noted freak out from Adam Smith? I think so. Yeah okay okay. So let's take one specific example and what I'm interested in is how far you can push this national security argument the corona virus crisis. We now discover since you're so up on trade you may have known this. All along was shocking to me. Ninety percent of our antibiotics. Come from China senator. Tom Cotton quote for two decades..

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