Only if Tarrifs are equal for all!

Bloomberg reported yesterday (http://www.bloomberg.com/apps/news?pid=20601080&si d=ajCJCMXomYcc&refer=asia) that shipping traffic out of China has dried up in the past month. Few people have really realized the direct implications of this. That China has reduced its exports to the US seems to indicate that consumer demand is drying up over here. This could be the leading edge of some real problems in the economy, scarcity of consumer products are not out of the question, as soon as next year. The worst thing that can happen to our economy would be that consumers begin reducing spending at extreme levels. Air freight into most Western ports is down significantly too. Shipping ports in the Pacific Northwest, according to anecdotal reports, indicate that ships from Asia have been arriving at 25-50% total capacity, a far cry from what it was just a year ago.

It doesn't take much work to figure out that if container traffic is down by, according to some figures, by as much as 18% since last year that sales of foreign goods will likely decline by a similar amount and profits will likely drop further. This problem is no longer simply isolated to the real estate sector. A problem which began with a couple of condo projects going bad in South Florida is beginning to cause a worldwide slowdown in the markets. The bottom line is that our economy moved away from manufacturing and production and towards a service/finance based economy that requires spending and debt to prop it up. When spending dries up, who will finance that debt? We've been lucky over the past 30 years that consumer spending never really slowed, but that's changing now and it could have very negative consequences for our economy.

The economy seems to be at a tipping point right now. Importers are having a hard time getting letters of credit from the banks because banks here in the US and abroad have for the most part frozen lending. Now usually during a recession, you get an economic slowdown, prices come down, interest rates drop and people start spending again. However, the economy in this instance might be at a tipping point: the "tip" occurs when things get so bad because the flow of goods dry up that people begin to hoard resources and save. That's what's happening in Iceland, which if you haven't heard had its economy completely collapse due to bad investments their banks made in sub-prime paper. Many commentators, including Thomas Friedman, believe that we're only one step behind Iceland, due to a combination of excessive debt, a rapidly slowing economy, and a teetering banking/financial services industry.

Right now, the economy seems to be trending towards a continued collapse in housing and real estate prices and possibly a spike in the price of consumer products as international trade dries up. A lot of economists, especially in recent years, believed that we had permanently defeated inflation, but the Federal Reserve continues to print money without abandon, flooding the system with liquidity. All of that has to impact the economy somehow. Five things are going on right now in the economy that will impact events in the next few months: 1. the value of the dollar is on the increase, but only because of the collapse of the stock market in recent days. 2. Our public debt is swelling up to uncontrollable levels, 3. Combine that with the collapse of the economy, and we will have the REAL possibility of the US defaulting on its debt, much like Iceland and other smaller countries are doing today. How are we going to finance our debt if we don't even have the money to pay back our creditors because trade has dried up? 4. I also believe that inflation or possibly hyperinflation, similar to what happened in Argentina earlier this decade, might become a real possibility, as trade slows, the country defaults on its debt, the currency collapses and the prices of goods rises. 5. Businesses will begin laying off workers, spending unemployment through the roof, as the government enacts austerity measures in an attempt to restabilize the countrys finances. Unemployment benefits may dry up, government services won't be as widely available to many in need of them.

This isn't a pretty picture, admittedly, but the trends are what they are unfortunately. All we can do is prepare ourselves. Whoever is elected President will need to deal with this set of circumstances.

Why are we even in these unfair trade deals?
We need out of NAFTA, GATT, and CAFTA.

Before NAFTA the USA had a 3 Billion dollar trade surplus with Mexico.  After NAFTA we have a 15 Billion Dollar trade deficit.  That's a 18 Billion dollar turn around.

It's not Rocket Science.

I think Virile Vagabond and Abichara have summed the situation up perfectly. It would be nice to think that any one country could be self-sufficient but goods and services are an intra-national reality now. Some goods and products the UK used to produce have been usurped by other countries with larger and more efficient industries. We need to keep abreast of developments internationally all the time if we are going to ensure that we trade actively on the world stage keeping our own workers' livelihoods in mind.

International trade is a two edged sword. The advantages are increased competition (which leads to more efficient wealth creation), lower prices for goods and services, and more interaction and understanding between the world's nations and cultures. The disadvantages are that it leads to overspecialization of labor and production (which can cause security and dependence problems) and short-term transition costs as labor is displaced and subjected to more competitive forces. In the big, long-term picture, it is clear that reducing and eliminating protective barriers is the trend (eg NAFTA and the European Community) and that this is necessary for healthy and efficient commerce. The advantages of lower trade barriers are evidenced by the commerce clause within the Federal Constitution, notwithstanding how this provision has been abused and misinterpreted for non-commercial matters. What we are certain to see in the relatively near future are international economic blocs that compete for trade and resources. We are already seeing this in the aforementioned NAFTA and the European Community. Nevertheless, the relatively short-term transition costs are painful as jobs are lost to the developing world and domestic wages fall to be more competitive on the global market. There are only a few options available to the U.S. to meet this challenge. One is to enact uniform and enforceable trade restrictions for the entire developed world, but this will only delay the inevitable. The more prudent option is to immediately begin, but control the reduction of domestic labor costs so as to keep jobs and a diverse manufacturing base. The bottom line is that international trade is here to stay, and the U.S. must either plan for and mitigate the effects of this change or merely allow it to happen without helping its citizens with the adjustment.

Again, this is a no-brainer...except for Democrats, who are stuck in the 1940s when it comes to trade policy innovation. It's a global economy out there, fellas. Take your heads out of the sand and join in.

Can be good as long as it acts in the best interests of humanity and does not promote sweatshops.

this is our survival as a country....definitely more important than gay rights, for example......

Americans need to start making our own things. We need to make electronics and toys in our country, not in Asia. We also need to have our clothes produced in American factories, not in illegal Latin American sweatshops. i wish that America would make its own things, not have them made in other countries.

Success= democracy, free trade, and free-market capitalism. Read Friedman's "The Lexus and the OLive Tree."

International trade is extremely important. Not only for the welfare in the home country, for most of the readers of this comment, the US, but also for the country one is trading with. It's especially importnt if the other country is a poor country, for instance in Africa. Trade is the most useful tool to produce a higher quality of life in these countries! But trade doesn't only produce welfare, but also peace, stability, mutual respect & tolerance & cooperation. This is the most valueble part of international trading, worth more than even the best political relationship! :-) But for the optimal results for the undeveloped countries, it's essential that these products aren't protected with high tax walls in the importer's nation!

I for one am not a proponent of “Big Government” and their involvement in a lot of issues that should be managed at the State level and most importantly within our own homes. I do believe that International Trade ranks a very high prioritization on the scale of political topics. So many things are linked to our international relationships that we seldom stop to think about until some level of crisis arises. Our participation, and even more critical, our leadership provides guidance for developing countries to learn from our success and our failures. Though some jobs do move from our domestic markets to other countries, in whole it promotes more domestic jobs than the number removed. As companies expand their global reach, jobs are increased domestically in the positions required to administer and manage international business affairs. International Trade also plays a very strong role in maintaining our National Defense system and the defense of our allies. We are a worldwide supplier of products and services for many countries who depend on us; we are also a huge supplier to many countries’ economic stability as a purchaser of their exports. What was one of the fist points of discussion during our recent tension with China? International Trade. We are the strongest military force in the world, but we are also the strongest economical force. If, if we are engaged in a conflict we have two fronts of attack, military and financial. When you shut Customs down and refuse all International Trade with a country who financially depends on your import system, how long do you think they can maintain their present military budgets? It is critical that our Government maintains and promotes International Trade and that we maintain excellent financial standings in this marketplace.

A couple months ago I heard Heritage's Jerry O'Driscoll make interesting comments at a conference in Chile, saying that international trade is one area where Bush could score an early victory, since there are some good moderates on trade in the opposition party. It looks like Bush might have the political capital to win more than just that, but it would still be very advantageous to further expand NAFTA (the single best thing that Clinton did during his presidency). Bringing Chile and other emerging capitalist countries from Latin America into the free trade zone would be a boon to all involved. I hope that no one still believes the economic fallacies that Ross Perot peddled in 1992 about the "giant sucking sound" that happens as jobs move abroad -- Ronald Reagan would have silenced him by reminding him that U.S. workers are the most productive in the world. Look at where unemployment has been after NAFTA -- never lower. More international trade, particular in the Americas, should be an important objective for the new administration.