Twofish's Blog

June 7, 2008

Trade – China, Mexico, and Iraq

Filed under: china — twofish @ 9:01 am

I really don’t think that would change things. If China removed all auto tariffs, then they would end up being imported from Mexico rather than the United States. The interesting thing is that the WTO negotiations between China and the United States were nowhere near as tough as the ones with Mexico.

There are two things that make US-China trade very different from US-Japan trade with respect to labor. The first is that with the exception of textiles, change the US-China trade balance really does not help manufacturing in the US. If China disappeared, then you’d end up with manufacturing going off to Mexico, Vietnam, or Bangladesh.

The second thing that makes the politics very different is that there are labor unions that benefit greatly from China trade. The International Longshore and Warehouse Union for one and the Teamsters for another.

Finally, I really think that the root cause of all of this is Iraq (just like a lot of the economic turmoil in the 1970’s was the result of paying for Vietnam). Think about it. The US has spent hundreds of billions of dollars fighting a major regional war. Your taxes didn’t go up. Where is this wealth to fight the war coming from? I don’t think it is much of a coincidence that the world economic system changed right almost the second that US troops marched across the border.

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