Protectionism

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Re: Protectionism

Post by scomac » 18 Apr 2015 07:19

JaydoubleU wrote:Interesting issues. Not sure that I would want to consume dairy or poultry products that came from large American producers.
Don't be so sure that Canadian dairy and poultry industries would disappear without government protection. Other agricultural sectors don't seem to have any difficult in competing and exporting -- something that the above supply managed industries have foregone -- globally. The movie that you mention is typical of a the propaganda that the protected industries use to support their cause. They are called marketing boards after all.
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Re: Protectionism

Post by always_learning » 18 Apr 2015 07:29

The TPP is about much more than "free trade."

I'm in favour of free trade generally, and I'll probably think the TPP as a whole is an improvement over the status quo when all the details are released. However, it's got elements that, for me, give corporations too much power vs governments. Some of the government behaviour under attack is not your stereotypical protection of domestic industries.

For example, New Zealand's Pharmac is a state monopoly that uses its mass purchasing power to negotiate favourable drug prices. And it buys a lot of generics. Then it turns around and subsidizes the prices that all New Zealanders pay for medicines. This seems to me a case of a democratically-elected government making a legitimate value judgment about how to spend its revenue. All the people of New Zealand benefit, not just one industry.

Via the TPP, the US (with its fabulous health care system :shock: )is pushing for measures that will give big pharma more influence over Pharmac's decisions by increasing big pharma's ability to lobby Pharmac and (probably endlessly!) appeal its decisions.

Pharmac's doing a great job at making medicine affordable to all the people of New Zealand, and the TPP seems to be making that less of a priority in favour of the interests of big pharma.

If my opposition to that element of the TPP makes me a "protectionist," then I'll gladly wear that label.

a_l

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Re: Protectionism

Post by ghariton » 18 Apr 2015 14:40

always_learning wrote:The TPP is about much more than "free trade."

I'm in favour of free trade generally, and I'll probably think the TPP as a whole is an improvement over the status quo when all the details are released. However, it's got elements that, for me, give corporations too much power vs governments. Some of the government behaviour under attack is not your stereotypical protection of domestic industries.
It seems to me that this is a subset of a larger dispute.

In its various free trade negotiations, the U.S. has long pushed, quite aggressively, for stronger intellectual property rights. The leading edge seems to be patents for pharmaceuticals and copyright for Hollywood and affiliated producers. Of course, the U.S. is pushing these outside of free trade agreements too.

Canada has certainly been the recipient of many of these pressures over the decades. Yet our intellectual property regime seems to be working reasonably well. Many of the disasters predicted when NAFTA was being negotiated, including the end of public health care, have not come to pass.

And that is an important point. TPP is still being negotiated. It is normal that each country goes into the negotiations advocating positions favouring its own exporters (not desirable perhaps, but normal). But those are positions at the beginning of the negotiations. The whole point of negotiating an agreement is that each party wins some and loses some. And on some issues, the parties agree to leave out any provisions.

As I say, Canada's intellectual property regime seems to have survived the one-on-one negotiations of FTA and two-on-one of NAFTA. The U.S. will be even more isolated in the TPP negotiations, and is unlikely to be able to dictate to the others.

Finally, negotiating is not the same as agreeing. If negotiations result in a final product that is counter to a country's interests, it can always refuse to agree. But if the country refuses to participate in the negotiations, as many on the left seem to want, then that country has passed up an opportunity to improve its position.

Remember, the option of "no deal" is always on the table if a deal turns out to be overly onerous. The only reason to not negotiate is if one is adamant that there should be no changes whatsoever.

George
The plural of anecdote is NOT data.

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Re: Protectionism

Post by JaydoubleU » 18 Apr 2015 19:05

The movie that you mention is typical of a the propaganda that the protected industries use to support their cause. They are called marketing boards after all.
I don't think Food, Inc was financed by any marketing boards, or that it was intended as "propaganda." It was produced on a very low budget of only $1 million, and it was nominated for an Academy Award. It sought to open people's eyes to Big Agra as an industry more destructive than productive, and one that all consumers should be aware of. Since watching it I began to think more carefully about what I was buying, what was in it, where it came from. I've begun to do a lot more buying from small, local producers.

The issues go beyond protectionism into health and environment, and it is worth seeing to give some perspective on what food production really is.

http://en.wikipedia.org/wiki/Food,_Inc.

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Re: Protectionism

Post by scomac » 18 Apr 2015 19:20

First of all I said that movie was typical of, not financed by. I won't judge the movie as propaganda, but it is that sort of negative message that is used as propaganda in support of the existence of our dairy and poultry marketing systems. I can assure you that the marketing boards are fully supportive of big agriculture after all they don't want to be seen as standing in the way of efficiency or progress. It may surprise you to learn that the monopolistic control of the marketing boards is actually impeding your ability to make choices as they completely control who can enter the market thus barring some of those small local producers who would like to opt to sell to their customers direct particularly when they have a niche product to offer such as grass fed, breed specific or god forbid raw milk.
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Re: Protectionism

Post by JaydoubleU » 18 Apr 2015 19:37

I am just as wary of OUR dairy and poultry production / marketing systems. In Japan, I think propaganda and fear are used to portray foreign, imported products as inferior, and even potentially dangerous, while allowing Japanese products to sell for much higher prices. I sometimes suspect that the label "organic" is similarly abused and used as a means of jacking up prices. Japanese are convinced that "Wagyu" is so great that it should sell for 4 times the price of imported Australian beef. Is it great? It's full of fat, and I have no idea how it was raised.

When I said small local producers, though, I didn't just mean "Canadian" or "Japanese," I meant, literally, the old lady up the road whose eggs I buy and whose chickens I can see roaming around. I try to buy vegetables directly from local farmers who sell them at the sides of the roads. We had free-range chicken last night which, I can assure you, bears no resemblance at all to the fatty white meat sold in supermarkets.

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Re: Protectionism

Post by scomac » 18 Apr 2015 22:26

JaydoubleU wrote: When I said small local producers, though, I didn't just mean "Canadian" or "Japanese," I meant, literally, the old lady up the road whose eggs I buy and whose chickens I can see roaming around. I try to buy vegetables directly from local farmers who sell them at the sides of the roads. We had free-range chicken last night which, I can assure you, bears no resemblance at all to the fatty white meat sold in supermarkets.
Those are the very sort of producers that the marketing boards don't want to get a foothold. The poultry boards was forced to accept small backyard type operators. The dairy industry has done everything it could to fight small independent producers. We're actually fortunate that these sorts of initiatives weren't more widely accepted in the 1960's when it was all the rage otherwise we might find our choices were limited on a great many product categories.
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
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Re: Protectionism

Post by ghariton » 19 Apr 2015 15:12

JaydoubleU wrote:old lady up the road whose eggs I buy
You wouldn't be allowed to do that in Ontario.
scomac wrote:The dairy industry has done everything it could to fight small independent producers.
Yes.

I remember when the egg marketing board first started up in Ontario. Eggs tasted less fresh. A gentleman fried up eggs, one from the egg marketing board and one bought direct from a farmer, and the difference was dramatic -- the white and yellow would separate in the frying pan for the one but not the other. Apparently, the egg marketing board took at least two days to process eggs, so consumers simply could not get really fresh eggs. I have no idea whether that is still true.

A dozen years ago I did a study comparing regulation in various sectors of the Canadian economy. The setting of prices in the supply management system was quite a revelation. I got hold of some information that was not widely circulated, and it suggested that the price gouging was much worse than is usually believed. In particular, prices were being set to cover the costs of the least efficient small farmers, yet were also being charged by huge operations that enjoyed very significant economies of scale.

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Re: Protectionism

Post by Jo Anne » 19 Apr 2015 18:58

ghariton wrote:
JaydoubleU wrote:old lady up the road whose eggs I buy
You wouldn't be allowed to do that in Ontario.

Really? I buy farm eggs all the time from a woman in my health club.

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Re: Protectionism

Post by Thegipper » 19 Apr 2015 20:20

Supply management is not a good policy. There are about 205k farmers in Canada and only 12k are dairy farmers. The cost of quota makes it next to impossible for a farmer to get into this sector. Something like 75k per cow. The average cost to a average family is $440 per year. We export virtually no dairy products. It is next to impossible to import any dairy products. The dairy producers are a powerful lobby especially in Quebec and Ontario and politicians live in fear of their power. Supply management is an ongoing impediment in negotiating trade agreements. Hopefully the proposed Asia/ Pacific free trade deal will become a reality and this protectionist system will be a casualty .

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Re: Protectionism

Post by ghariton » 19 Apr 2015 21:18

Jo Anne wrote: I buy farm eggs all the time from a woman in my health club.
Yes. There's an exemption for farmers with fewer than 100 layers. I had forgotten that.

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Re: Protectionism

Post by ghariton » 20 Apr 2015 00:12

As A;ways Learning points out upthread, there is a lively debate in New Zealand about the merits (or not) of the proposed TPP.

Here's an article in favour of the deal. Here's a bit relevant to Always Learning's post:
No 8: This is the end of Pharmac. Balderdash. How many times does Groser have to back New Zealand's gutsy, Labour-led approach to ensuring the country has the cheapest versions of modern medicines it can get? That's a bottom line. We're not signing if Pharmac's compromised.
And here's a reply by perhaps the leading NZ critic of the TPP:
Secondly, I, for one, have never said the TPP would mean the end of Pharmac. To suggest that this is the main threat sets up a straw man to knock down and diverts attention from the real threat, which is a process of white-anting Pharmac.

Mr Groser said last December that New Zealanders would not pay more for medicines, but he did not deny that the Government would accept changes to patent laws that would put more of our health budget in the pharmaceutical companies' pockets.

If user charges are not increased, that must mean either that Pharmac needs a bigger budget or we get fewer subsidised medicines.

Likewise, Mr Groser admitted there would be some increased compliance costs for Pharmac. However, that involves much more than processes. I understand the latest text tabled by the US, Australia and Japan would significantly increase the leverage of the drug companies over Pharmac's decision-making processes.
Lots of speculation.

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Re: Protectionism

Post by ghariton » 24 Apr 2015 22:31

Greg Mankiw in the New York Times points out the widespread agreement among (orthodox) economists in favour of free trade
Economists are famous for disagreeing with one another, and indeed, seminars in economics departments are known for their vociferous debate. But economists reach near unanimity on some topics, including international trade.
So why so much opposition from the public? Three reasons:
The first is an anti-foreign bias. People tend to view their own country in competition with other nations and underestimate the benefits of dealing with foreigners. Yet economics teaches that international trade is not like war but can be win-win.

The second is an anti-market bias. People tend to underestimate the benefits of the market mechanism as a guide to allocating resources. Yet history has taught repeatedly that the alternative — a planned economy — works poorly.

The third is a make-work bias. People tend to underestimate the benefit from conserving on labor and thus worry that imports will destroy jobs in import-competing industries. Yet long-run economic progress comes from finding ways to reduce labor input and redeploying workers to new, growing industries.
A discouraging thought:
The Princeton economist Alan Blinder once proposed Murphy’s Law of economic policy: “Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least and disagree most vehemently.”

The debate about international trade is a case in point.
I'm sure non-economists will disagree.

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Re: Protectionism

Post by ghariton » 25 Apr 2015 15:31

Brookings Institution -- generally considered center-left -- argues in favour of more free trade -- from a U.S. point of view, but applies more generally:
First, increased trade helps create more jobs, including jobs that pay more than those that are not linked to exports or imports.

<snip>

Second, the United States has one of the most open economies in the world to goods, services and investment. .... Foreign exporters face far fewer barriers than U.S. companies and workers trying to access overseas markets. The only way to remedy this imbalance is through a trade agreement.

<snip>

Third, trade agreements benefit the 98 percent of U.S. exporters that are small- and medium-sized enterprises. Without agreements in place, these companies rarely have the bandwidth to penetrate regulatory red tape, or challenge a foreign government’s discriminatory treatment of its investments, or resist surrendering intellectual property.

<snip>

Fourth, while a trade agreement cannot improve the labor or environmental conditions in a partner country overnight, it would require signatories to abide by important protections or face serious consequences.
Free trade brings advantages and disadvantages. Sometimes a trade agreement may require concessions from one of the parties that are just too harmful. But most of the time, both parties are winners.

It is important to look beyond any one narrow issue and consider the entire free trade agreement. Narrow special interest groups will be quick to try to focus attention on their own self interest, while disguising it as for the greater public good. We need advocates for consumers and for the citizenry as a whole.

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Re: Protectionism

Post by ghariton » 26 Apr 2015 13:46

On the other hand, Timothy Lee opposes the TPP. He claims that it's not really about trade, but rather about intellectual property, labour laws, and other things. Trade is already pretty well free, according to Lee. (I guess he doesn't know about Canada's 300% tariffs on dairy products.)

A main complaint seems the following:
But the complex, secretive, and anti-democratic way the TPP is being crafted rubs a lot of people the wrong way. The agreement will have profound and long-lasting effects on countries that sign on, yet voters in those countries won't even be allowed to see the text until negotiations are over and it's too late to make changes.
I dunno. I had always believed that important agreements are negotiated behind closed doors, for a number of reasons. For one, you don't want other parties to know what trade-offs you are willing to make, because that would give them increased bargaining power in future negotiations. For another, you may be more willing to explore trial balloons if you know that you can easily back away from them, something which may not be so easy if special interests latch on.

The author's conclusion (written from a U.S. perspective, of course):
The Obama administration argues that it's important for TPP to succeed so that the United States — not China — gets to shape the rules that govern trade across the Pacific. But this argument only makes sense if you believe US negotiators are taking positions that are in the broad interests of the American public. If, as critics contend, USTR's agenda is heavily tilted toward the interests of a few well-connected interest groups, then the deal may not be good for America at all.
So it really seems to come down to a lack of trust in one's government.

Now I for one don't trust governments, as I have said here many times. But if one doesn't trust governments on trade negotiations, why would one trust them on anything else? For example, why would one trust them to build and operate infrastructure? To provide health care or education? To help out the less fortunate in our society?

More concretely, if you don't trust your government to negotiate a trade agreement when pharmaceutical companies are involved, why would you trust that same government to run a domestic pharmacare program when the same pharmaceutical companies are involved?

Privatize the lot.

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Re: Protectionism

Post by ghariton » 29 Apr 2015 23:56

According to the Peterson Institute the biggest winner from the proposed Trans Pacific Partnership (TPP) would be Vietnam (see pages 81 and 82).

Vietnam is the poorest of the countries negotiating the agreement. It would be a pity if the richer countries were to sacrifice it at the behest of narrow domestic interests.

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Re: Protectionism

Post by ghariton » 03 May 2015 20:11

Rachel Wellhausen discusses the Investor-State Dispute Settlement system (ISDS) proposed in the Trans Pacific Partnership (TPP):
Currently, about 3000 international treaties give MNCs the ability to sue governments. Some 2700 of these are Bilateral Investment Treaties. The rest are trade treaties, including NAFTA. These treaties have spread rapidly around the world since the 1990s.

From 1990 through the present, over 100 different countries have been sued over 550 times. Most of these are developing countries. The U.S. and Canada have been sued under NAFTA, but Western European countries have been sued only a handful of times (and Japan never). Sometimes these cases are brought at the World Bank’s International Center for the Settlement of Investment Disputes (ICSID). Sometimes they are brought under special U.N. rules (UNCITRAL). Because these cases can sometimes be private, we don’t know the full number of cases.

<snip>

The TPP draft chapter includes some notable elements. There are clear transparency rules, requiring that all cases brought under the TPP must be public. Governments cannot be sued simply for defaulting on debt, and governments retain some rights to control the flow of capital across their borders. MNCs can sue for “pre-establishment” violations — if they feel their property rights were violated even before investing in the country — but Chile, Canada, Mexico and New Zealand had already included exceptions to this in the draft. And, Australia has said no — in the draft, it is exempted from the whole system. (Australia also refused to agree to ISDS in the recent U.S.-Australia Free Trade Agreement.)

<snip>

While many oppose today’s ISDS, but most want it repaired, not abolished. They think that the need for the protection of property rights is too central to the integrated global economy.
As in all negotiations, ISDS is up for discussion, and amendment. It is not a reason to refuse to even negotiate.

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Re: Protectionism

Post by ghariton » 17 May 2015 14:01

Adam Posen, head of the Peterson Institute, on the Trans Pacific Partnership
"The impact on US workers, in terms of the number of jobs, will be small," Posen says. He argues that the big benefits to America will come in the form of lower prices for American consumers, a stronger foundation for American foreign policy in Asia, and increases in productivity for American businesses.

<snip>

"The importing of competitive pressure, of higher standards, of opening up new markets, can be transformative for a poor country," says Posen. "But this isn’t zero-sum."

This is something Posen feels people get completely wrong about trade — that for one country to grow, another country has to shrink.

"People sometimes talk as if China got rich at the US’s expense," he says. "China’s economy has grown by several trillion dollars. Even if you added up all the trade deficits, it would only be a fraction of China’s growth."

<snip>

Posen is a strong supporter of TPP. But he's clearly a bit uncomfortable with the ISDS provisions that have been a target of Warren and others. These provisions give foreign companies what amounts to a special court system where they can protest what they see as unfair treatment. And the basic idea, Posen says, is a good one — both for companies and for countries that need foreign investment but wouldn't get it unless something like ISDS existed. ... But companies, Posen continues, have taken ISDS much too far. "Some companies, including US companies, have gone to extremes to try to get these local regulations interpreted as forms of expropriation. I don’t think that’s right or necessary. I don’t think ISDS should be a back door for companies to get around local regulations they don’t like."

<snip>

Posen is broadly supportive of the IP provisions in the deal, but he thinks the critics have some fair points.

"I do think there is a lot of room for increasing enforcement of rich countries’ brand protections, diminishing pirated films and music (though less of an issue in today’s digital world), and especially protecting industrial technologies," he says. But he goes on to argue that "on pharma, there has to be some sort of constructive compromise so that the US isn’t overdoing the protection of profits and costs to poor people."
Makes sense to me.

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Re: Protectionism

Post by Shakespeare » 12 Jun 2015 17:06

Democrats deny Obama ‘fast-track’ authority for TPP trade talks - The Globe and Mail
Friday’s vote won’t be the last gasp for fast track but it is derailed for now.

The Senate passed it three weeks ago and changes will be needed before the House of Representatives can reconsider any amended legislation.

Whether the entire 12-nation Trans-Pacific Partnership trade-pact process collapses in the event Mr. Obama doesn’t get fast-track authority remains unclear.

But fast-track authority is regarded by many experts as crucial to unlocking the stalled Trans-Pacific Partnership trade talks
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Re: Protectionism

Post by ghariton » 12 Jun 2015 19:23

And then the left will complain that economic growth isn't what it ought to be...

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Re: Protectionism

Post by Shakespeare » 12 Jun 2015 19:57

Yabbut now you're the left. :wink:
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Re: Protectionism

Post by ghariton » 17 Jun 2015 18:07

According to Statistics Canada, there is a correlation between increased foreign trade and increased productivity of Canadian companies:
A common theme emerging from the firm-level research is that adapting to new larger markets, whether domestic or foreign, is beneficial to productivity growth. Larger markets raise productivity by allowing firms to exploit economies of scale and/or product specialization, forcing firms to become more efficient in the face of more competitive pressure, and offering firms more incentives and possibilities to innovate and invest. The empirical evidence also suggests learning-by-exporting—learning from foreign buyers that, together, allow exporters to benefit from adopting foreign technologies.

The benefits from access to larger markets are not automatic—plants that succeed are those that invest in advanced technologies, research and development, and training, all of which help to develop the absorptive capacity required for learning about international best practices.

The empirical results show that reallocation of resources from the less efficient to the more efficient firms is another important source of productivity benefits that have arisen from trade liberalization. This is consistent with the predictions of recent trade theories regarding heterogeneous firms: tariff reductions lead the least productive firms to exit and the more productive ones to expand; in this process, economic resources shift from less efficient to more efficient firms, thereby raising aggregate productivity.
I find that to be intuitively obvious, but it's nice to see empirical support.

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Re: Protectionism

Post by scomac » 19 Jun 2015 08:09

Milk surplus forcing Canada's dairy industry to dump supply.
“There have been days in the last couple of weeks when we have had to dispose of skim milk in lagoons,” DFO chairman Ralph Dietrich said in the letter. “Right now, we continue to be challenged on a daily basis and there is no obvious end in sight.”
“Supply management depends on perfect market conditions, and there are no such things,” said Sylvain Charlebois, a professor at the University of Guelph’s Food Institute. “You can never achieve a perfect equilibrium between supply and demand.”

Surpluses are a recurring and chronic problem for the industry, he added. “There is too much production out there,” Prof. Charlebois explained.
Here's one for George! :wink:

How they keep this dinosaur going is beyond me. It's nothing more than a political football that is being used to curry (voting) favour. Unfortunately I see no end in sight based on the track record of current and past governments.

In a globalized world that is based on the free movement of goods and services between regions this is absolutely indefensible in this day and age. It may have had merits fifty years ago, but those days are over. Proponents are not just living in the past, they are imprisoned by it!
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Re: Protectionism

Post by ghariton » 22 Jun 2015 21:15

Statistics Canada
Manufacturing firms that engaged in offshoring, where some of their intermediate inputs are sourced abroad, were found to have higher labour productivity than those that did not. On average, the labour productivity of a firm that offshored part of their intermediate inputs was 6.8% higher than that of a similar firm that did not offshore part of its inputs.

<snip>

Offshoring can increase productivity by allowing firms to specialize on core activities, by facilitating the adoption of more advanced technologies, through increasing exposure to international best practices, and by facilitating a better match between a firm's inputs and outputs.

In addition, firms with higher offshoring intensity (the percentage of intermediate inputs directly imported) had higher labour productivity, especially firms that offshored to locations other than the United States. Multivariate analysis confirmed that these results held even when firm characteristics, such as industry, nationality of ownership, exporter status, and being a multi-establishment firm, are taken into account. Statistical tests reveal that increases in offshoring intensity also led to higher levels of future productivity.
I've put this under protectionism because the same people who oppose free trade often also oppose offshoring of work. In both cases, they maintain, domestic jobs are lost and therefore society is worse off. The only winners, they say, are big corporations (and presumably the politicians that they control).

The other side of the coin is that, in a globalized world, countries will increasingly have to specialize in those activities that they are good at. Such specialization will create new jobs domestically, and those will be better jobs, both in terms of pay (no productivity gains = no increases in pay) and in terms of quality of work (no more repetitive mind0numbing tasks).

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Re: Protectionism

Post by Koogie » 23 Jun 2015 09:36

ghariton wrote:..."In addition, firms with higher offshoring intensity (the percentage of intermediate inputs directly imported) had higher labour productivity, especially firms that offshored to locations other than the United States."....
Anecdotally, I would say I have witnessed this phenomenon because we have a lot of small/mid sized manufacturers as clients. Frankly, offshoring (usually of casting, heavy assembly or other low labour input tasks) seems to put the fear of Dog into the local workforce. Those clients of ours that have done it seem to have fewer labour issues and even fewer union issues (which would be counter-intuitive).

Labour issues aside, is it a good business practice ? I would say the results are mixed for the usual variety of reasons. Quality control, supply chain issues, sudden cost increases, exchange hazard, etc.. I have heard lots of horror stories from procurement and production managers.
Buy very little, sell even less.

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