Something I can't get

[OMGcookiecrisp]

[Hodur]

[Sebekiz]

There are a couple problems with trying to use Tariffs to force American Companies to "come back to America"...

1. You will be forcing prices up for the end consumers. If an American Company needs to charge $200 for a VCR, while a Foreign Compay can Charge $100, by putting a 100% tariff in place you've "evened" out the playing field, but only by forcing the citizens in the US to pay $200 for all VCRs. Admittedly, VCRs are a luxury item, but the point is that this would apply equally to all goods.

2. Tariffs invite (and almost always bring) retaliation. While you might prop up the US VCR makers, other US firms that were selling well to the foreign country (say Software or Computer manufacturers) will be hit when the other country inevitably raises their own tariffs in response.

3. By using Tariffs to regulate prices, the US would be effectively propping up US firms, but many of those firms may have fundamental flaws that caused them to need the propping up in the first place. If the US Company "needs" to charge $200 for their VCRs because they haven't invested any of their profits in plant upgrades that could allow them to reduce costs, propping up all VCR prices to $200 via Tariffs only encourages them to continue to not invest. Don't forget, most US firms are far more concerned about the profits they report in the next three months than what they will report next year. As long as the next quarter can somehow be made to look good, many will put off or not put enough effort into long term improvements because the costs will hurt the short term. Wall Street generally values stocks on the current profit numbers, and since many Executives' salaries are (relatively) small compared to the potential value of their stock options, they care more about propping up stock prices than long term profits.

To be honest, I'd rather see the US promoting fair labor laws and practices elsewhere. In the short term, it will push retail prices up a bit as paying a worker in a 3rd world country a relatively decent wage (for their area) will increase the cost of the cheaper foreign goods, but because those workers will have more available money we will likely see a rise in our exports as they look for more goods and services. Unfortunately, this is a long term solution and very few people appear to look at the long term (overall economic improvement for both the US and other countries) vs. what will help them for today (tariffs).

[Joril]

the fatal flaw in all this discussion is the human factor. in a perfect world where everyone always did what was best then, a free market would work. in reality it doesnt. foriegn governments are subsidizing companies to produce things in their country. now this isnt anything we dont do here. states continually provide tax shelters and other incentives for businesses to move there.

the major difference is labor cost. people work ALOT cheaper in other countries. labor costs include not only what the worker actually makes, but health plan costs, social security, FICA, insurance, and alot of other items. these are all costs companies have to factor into their budget when producing anything in the US. while in foriegn countries they dont. so to produce something overseas becomes more profitable, including shipping and any inport/export fees.

as a nation you run into some very real problems. the best example i can think of is from the lastest 'war' in iraq. as we all know there were quite a few countries that didnt agree with our plan of action. well one of those countries produced an item that was required for our guided missiles. they were in fact the only supplier of this item. when the war started, in protest of the war, this country stopped supplying the missile related item. which meant that once we exhausted our supply, that was it. there was no way to produce more in the time frame that would be needed for the war.

this example is where the buy america legislature came from. some smart people didnt want our ability to wage war limited by dependance on foriegn governments. which is where the all the out sourcing is really going to kill us.

look at the civil war for example. one of the major reasons the south lost, was that they had next to no manufacturing ability. all most all of the production of goods was done in the north. the south had to rely on outside sources and when the north cut that supply off, it choked the south.

that is what is slowly happening to the US. we are going from a production country to a consumer country. we won WWI and WWII because we had the production capability that the opponents couldnt match. once we fully reach a consumer based economy we wont win the next real war we are in.

all this is not counting the pure greed of corporate CEOs. whose sole purpose is to line the personal pockets at any cost. if that means fleecing their own employees, so be it (ala Enron). if that entails shutting down profitable production plants in the US for MORE profitable plants in another country, then thats ok to.

there is no easy answer, there never is. tariffs work sometimes, sometimes they dont. political pressure works sometimes, sometimes it doesnt. incentives to produce in america sometimes work, sometimes they dont. the best you can hope for is to die in your sleep.....


disclaimer.. i shamelessly stole the last time from Kenny Rogers, but its very true.

[Wulfbane]