Comparative advantage only works where there is full employment. More trade volume will not work between countries without full employment. The US does not have full employment, nor is it forced to run a balanced trade account. Nor is capital immobile.
The people pushing for trade wars are wrong, because all of the money gained will go to business owners, not workers. However, the agreements that are about to be signed will not improve living standards in the US, because the reduction in prices will be soaked up by intermediaries and other prices, and the reduction in wages will push even more people underwater.
But then, people need to realize that trade policy is on the margins of other policies. Fix the other policies first, and trade becomes easy to fix, though it requires a great deal of negotiation and talking. Fail to fix other policies first, and there is no way to fix trade policy, because other nations are not going to take a hit to fix America's poor policy regime.
I wonder if there has been and still is price-fixing on goods manufactured in China by US companies?
ReplyDeleteIt seems to me that goods made in China with US brand names are priced about the same as when they were made in the US even though costs are far less and profits have soared.
This seems to me to be a reason for Anti-Trust price-fixing investigations.
There is no law requiring that savings be passed on to the consumer.
ReplyDeleteThat's up to consumers to enforce by the market mechanism.