FTA Between the US and Colombia, Panama and South Korea

[emindead]

What's up, my gringo brothers? This just got approved by the Senate. It only needs Obama's signature and we're good to go.

You like?

[El Barto]

Hell yeah.  Duty free yeyo.   

[Riceball]

FTA with South Korea is great for computer manufacturers.

You guys still make computers, don't you?

[pogoowner]

The less barriers to trade, the better.

[Riceball]

Pretty much.

Occupy Wall Street will be pissed though

[Super Dude]

I see no reason to oppose free international trade. In fact, what OWS is protesting is a lot more like protectionism, i.e. protection of those who can buy it.

[livehard]

why should what side of a border your were born on change whether its morally acceptable for someone to interject, through force and regulation, into a trade between two willing parties?

[jasc15]

I think trade agreements can be made unnecessary if imported goods are required to be manufactured per the same standards as domestic goods.

[Super Dude]

why should what side of a border your were born on change whether its morally acceptable for someone to interject, through force and regulation, into a trade between two willing parties?

I think that very difference is what makes it necessary. Think of it as a different of scale rather than of kind.

[rumborak]

Speaking of international trade, the almost unanimous view seems to be that the more trade between countries, the better. Is that true though? It strikes me that it's a double-edge word; you also enter a dependency with those countries you trade with. If the goods are vital goods, your economy and country's well-being is suddenly inextricably entwined with the other country's. Look for example at oil and gas, the call for energy independence by American politicians is essentially a veiled admission of failure of international trade in that aspect.

rumborak

[Super Dude]

What call for energy independence? From where I'm standing, the only person doing that is President Obama and he's a liberal anyway.

[rumborak]

The Republicans want to explore domestic oil resources, right? I'm not talking about green energy, but rather the call to produce local energy in whatever fashion. That seems an admission that international trade failed in that area.

rumborak

[Super Dude]

Ah, I understand. Yes, there I can see what you mean.

[Riceball]

From my perspective, if a country could produce everything itself at a welfare maximising level; it would. It depends on the intrinsic evaluation of trade risk (thats a made up term, btw) for the particular good or service that is to be traded/produced domestically - in so far as if a country considers the good or lack of it a risk to their economy then the risk premium on trade will go up and it will make domestic production seem more attractive.

So you see that in oil, or energy in general. A country would never, ever, ever be an energy importer by choice, due to the high risk premium associated with the lack of supply of energy at a particular time. Which is why, whenever its practical, its always the first choice to develop domestic energy supplies and rely on trade for supplements.

I'm just theorising here, but I think by adding in that risk premium associated with the good, you'll raise the effective price and make domestic development more attractive.

...if that makes sense?

[JasonScandopolous]

From my perspective, if a country could produce everything itself at a welfare maximising level; it would. It depends on the intrinsic evaluation of trade risk (thats a made up term, btw) for the particular good or service that is to be traded/produced domestically - in so far as if a country considers the good or lack of it a risk to their economy then the risk premium on trade will go up and it will make domestic production seem more attractive.

So you see that in oil, or energy in general. A country would never, ever, ever be an energy importer by choice, due to the high risk premium associated with the lack of supply of energy at a particular time. Which is why, whenever its practical, its always the first choice to develop domestic energy supplies and rely on trade for supplements.

I'm just theorising here, but I think by adding in that risk premium associated with the good, you'll raise the effective price and make domestic development more attractive.

...if that makes sense?

On your last sentence, this is the primary practical reason for farm subsidies in the US (other than the stronger reason, which is farm state politicking).  On the middle paragraph, this is why countries like Iraq and Libya get invaded.

[emindead]

This wasn't a smooth process, though. It took seven years for (at least) the Colombian one to be approved (I'm telling you, the US really hated Alvaro Uribe!).

I'm happy that we signed this treaty but I also feel a little bit weary. The whole point is competition and having more choice, right? The thousands of pages that declare the treaty include compensation to the immediate affected business, it also includes aid to some that want to compete here. What's the point of it, then? The US has MORE capital than Colombia, so that means that the US can subsidize for far more long the prices of the products that are being sent here. Subsidizing is a way of cheating if you come about it and it entitles an unfair advantage to the subsidize party. Instead of competing fair and square placing the two products against each other, both with the price the manufacturer decided to stamp on, it resolves that the product that its entering the product is competing in a much cheaper, lower than what the market says, because the aid was handled to them (so they aren't really taking chances, risks). I think one of the main reasons the rest of the world dislike Free Trade Agreements it's because they know that someone is taking unfair advantage, so they are not really competing but colonizing. (This critique applies both ways)

Cool, I can buy much nicer clothes, shoes and electronics than I could normally could, but at what cost?

[Riceball]

Excessively nerdy post.

On your last sentence, this is the primary practical reason for farm subsidies in the US (other than the stronger reason, which is farm state politicking).  On the middle paragraph, this is why countries like Iraq and Libya get invaded.

Yes. Very much. I suppose I put a technical slant on it.
Please don't start a flame war now people, we're talking economics dammit.

Btw, I always (like, always always) laugh when I read your posts on subjects like this re: your avatar - brilliant.

[livehard]

Speaking of international trade, the almost unanimous view seems to be that the more trade between countries, the better. Is that true though? It strikes me that it's a double-edge word; you also enter a dependency with those countries you trade with. If the goods are vital goods, your economy and country's well-being is suddenly inextricably entwined with the other country's. Look for example at oil and gas, the call for energy independence by American politicians is essentially a veiled admission of failure of international trade in that aspect.

rumborak

Of course having a diversified collection of production is desireable.  Nassim Taleb writes well about this; but what is the alternative? Free trade isn't making you more dependent on a certain good. It gives you just 1 more option, you can choose to make that good, or not to.  No body is forcing you to be dependent on anything.

[livehard]

From my perspective, if a country could produce everything itself at a welfare maximising level; it would. It depends on the intrinsic evaluation of trade risk (thats a made up term, btw) for the particular good or service that is to be traded/produced domestically - in so far as if a country considers the good or lack of it a risk to their economy then the risk premium on trade will go up and it will make domestic production seem more attractive.

So you see that in oil, or energy in general. A country would never, ever, ever be an energy importer by choice, due to the high risk premium associated with the lack of supply of energy at a particular time. Which is why, whenever its practical, its always the first choice to develop domestic energy supplies and rely on trade for supplements.

I'm just theorising here, but I think by adding in that risk premium associated with the good, you'll raise the effective price and make domestic development more attractive.

...if that makes sense?

It depends on what you are talking about. Well for commodities you lower the price actually if there is a lot of risk.  You're not going to be willing to pay more for a product if you think that there's only a 50% chance its going to get delivered  Think of what happens to corperate bond prices when risk of default increases.  The credit spreads widen and the price drops.  You are basically going to discount the product by a higher rate, so a higher number in the denominator is going to lower the value.

But what you were right about is that there are higher costs.  That what demands a lower price.  But the thing is with oil, there actually isn't tons of risk that can't be hedged.  The attractivness from getting oil here is the fact that you don't have to pay for it to come from all the way from the other side of the world, from a cartel that can control the price.