Thursday, March 7, 2013

Let China win!


President Obama announced the creation of a Trade Enforcement Unit to investigate “unfair trade practices in countries like China,” where many American goods are manufactured. “We will not go back to an economy weakened by outsourcing.” - President Obama during State of the Union Address.  

The President's 'feel-good' attempts at making our economy better are drastically lacking substance.  I cringe when I hear him 'urge' colleges to make tuition more affordable; clearly he doesn't come close to understanding the market.  The irony in the government trying to make anything more affordable (housing, Health Care, Education, ...) is the consistent inflation in those same markets caused by the government.  In terms of outsourcing and competing with China there are only so many things that can be done - and we should end it there.

Trade tariffs are really the only tool against this - but at some point I think economically it makes more sense to give up.

If a country is willing to subsidize a product and keep their people in complete poverty to a level that even after a big tax still beats our prices, then I say move on, buy the product and forget about it.

Think about it - if China wants to sell their Hankook tires at a price far below American tires with similar quality by taxing their own people then you can't win that battle. Buy their tires or make advancements far beyond Chinese tires. Yes it can/will hurt American jobs at first, but the entire country will be able to afford better tires at a cheaper price. We'll get more jobs elsewhere and our standard of living will improve off their poverty. The cotton gin destroyed thousands of American jobs as well - but everyone could afford a shirt. Advancements play out to be a positive economic move.

There are many economic situations that there are not easy solutions; in fact I'd argue that we chase better solutions indefinitely (i.e. financial regulations). We need to stop spending so much time and effort on problems with no solutions. Financial regulation will never catch up to the market. Name a time when the regulations were ahead of the market. Solution: put people in jail that steal/commit fraud/etc... Don't bail those out that fail. Keep the playing field fair. Done - move on.

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