Free Trade?
According to an article I read today, Canada is compelled to sell Natural Gas to the U.S. under the North American Free Trade Agreement (NAFTA).
I try to imagine what this means. If I can produce 100 apples/year, and my local market can consume 80 apples/year, then I imagine I'd have 20 apples/year as surplus which could be sold to a wider market as whatever price that market will bear - partially independent of the price I sold to my local market.
That's perhaps "Protectionism" because it means local demand get first access to local products.
Apparently under "Free Trade", it's an open market based on supply and demand. If U.S. demand for apples raises their price to $5/lb, while Canadan market is selling apples at $2/lb, THEN, apparently, the U.S. can "bid" on Canadan apples, thus causing the "value" of Canadian apples to approach the $5/lb level. At suh a level, Canadians will likely reduce their apple consumption, and thus "freeing" more apples to be exported.
Is that a correct intepretation?
If I am a Canadan apple producer, apparently I may not be "allowed" to sell my apples at $2/lb to my local market UNLESS I make those same apples available for export at the same price. If I charge $5/lb for "exported consumption", and $2/lb for "domestic consumption", will the NAFTA treaty be used to oppose this free decision?
The question is strange - sellers want the best prices they can get, and so they'll be glad to allow prices to rise and allow domestic consumers to pay more, even if domestic consumption is decreased as a result.
Well, the "problem" of this free trade is that different countries will have different levels of wealth. Canadians may be poorer than U.S., so if the U.S. has more wealth, it can drive up prices so that the poor can't afford them.
The "market" solution is that high prices encourage expanded production, even if there's a delay of results. High prices mean production increases until costs come down again.
The article I was reading was on Natural Gas production. It complained that Canadians may eventually be upset that their natural resources are being depleted faster while they may need them in the future.
I would think gas-sellers could just keep raising the price until demand responds - I mean to slow production. Is it against the rules to try to sell a resource above market prices?
If I am selling mummified apples that don't decay ever, and I have no fear of losing their value, then I can just set my price $20/apple, and if no one buys, I'll just keep them until they do. Of course that won't help my local market gain access.
Considering another way, say I'm selling my car. If I sell it to "family", I might sell it "below market value". Free Trade would imply it is illegal for me to sell my car for below market value unless I gave others an opportunity to bid for it.
Very strange sounding, but a single item makes it less clear perhaps.
Say I'm a grocery - heck, call me "Sam's club". I sell to "members" at below market value. I can control my buyers by having requirements upon them. Perhaps where they live?
What if I had a "buyer's club" that had racial requirements? Can I say "Only Native Americans can buy my products?" or "Only Jews?".
I know for employment at least, you're not supposed to "discriminate" against people for reasons of gender, race, etc. Similarly for renting out housing.
Free trade has a noble ideal perhaps - everyone has equal opportunity. The "unfairness" mainly comes that some have more wealth than others, and they can perhaps "bid" up prices for anything beyond the ability of others to pay.
I guess the issues come out also in "Banana Republics" - countries which convert local production of food to export markets that can earn higher profits, but deny local markets enough food. SO the choice of crops is made by markets, not by local needs. The producer can "choose" what to grow, but if he is in debt, then he's restricted in his crops to what can get the best price.
The opposite side is that foreign sellers can buy into any market. If the U.S. has industrialized farming and cheap fuel to produce a crop for export, it can drive out local production of the same crop which might have been providing local jobs and keeping more money within the economy. So all the small farmers are forced to sell their land, go to the city for inferior employment, and rich industrialists can buy up the land for cheap export crops.
It does appear that most of the flaws of free trade come from cheap fossil energy, but also obviously in terms of environmental destruction and pollution as well. If apples=apples no matter how they are grown, then economics encourages apples to be grown in places with the lowest pollution standards.
I get the arguments at different levels, but I'm not convinced of clear action or opinion. I think individuals and governments ought to have the right to protect local markets from imports or exports. Some say protectionism hurts consumers, but I guess I accept the argument that there is virtue in local markets for stability and higher costs may be acceptable.
I try to imagine what this means. If I can produce 100 apples/year, and my local market can consume 80 apples/year, then I imagine I'd have 20 apples/year as surplus which could be sold to a wider market as whatever price that market will bear - partially independent of the price I sold to my local market.
That's perhaps "Protectionism" because it means local demand get first access to local products.
Apparently under "Free Trade", it's an open market based on supply and demand. If U.S. demand for apples raises their price to $5/lb, while Canadan market is selling apples at $2/lb, THEN, apparently, the U.S. can "bid" on Canadan apples, thus causing the "value" of Canadian apples to approach the $5/lb level. At suh a level, Canadians will likely reduce their apple consumption, and thus "freeing" more apples to be exported.
Is that a correct intepretation?
If I am a Canadan apple producer, apparently I may not be "allowed" to sell my apples at $2/lb to my local market UNLESS I make those same apples available for export at the same price. If I charge $5/lb for "exported consumption", and $2/lb for "domestic consumption", will the NAFTA treaty be used to oppose this free decision?
The question is strange - sellers want the best prices they can get, and so they'll be glad to allow prices to rise and allow domestic consumers to pay more, even if domestic consumption is decreased as a result.
Well, the "problem" of this free trade is that different countries will have different levels of wealth. Canadians may be poorer than U.S., so if the U.S. has more wealth, it can drive up prices so that the poor can't afford them.
The "market" solution is that high prices encourage expanded production, even if there's a delay of results. High prices mean production increases until costs come down again.
The article I was reading was on Natural Gas production. It complained that Canadians may eventually be upset that their natural resources are being depleted faster while they may need them in the future.
I would think gas-sellers could just keep raising the price until demand responds - I mean to slow production. Is it against the rules to try to sell a resource above market prices?
If I am selling mummified apples that don't decay ever, and I have no fear of losing their value, then I can just set my price $20/apple, and if no one buys, I'll just keep them until they do. Of course that won't help my local market gain access.
Considering another way, say I'm selling my car. If I sell it to "family", I might sell it "below market value". Free Trade would imply it is illegal for me to sell my car for below market value unless I gave others an opportunity to bid for it.
Very strange sounding, but a single item makes it less clear perhaps.
Say I'm a grocery - heck, call me "Sam's club". I sell to "members" at below market value. I can control my buyers by having requirements upon them. Perhaps where they live?
What if I had a "buyer's club" that had racial requirements? Can I say "Only Native Americans can buy my products?" or "Only Jews?".
I know for employment at least, you're not supposed to "discriminate" against people for reasons of gender, race, etc. Similarly for renting out housing.
Free trade has a noble ideal perhaps - everyone has equal opportunity. The "unfairness" mainly comes that some have more wealth than others, and they can perhaps "bid" up prices for anything beyond the ability of others to pay.
I guess the issues come out also in "Banana Republics" - countries which convert local production of food to export markets that can earn higher profits, but deny local markets enough food. SO the choice of crops is made by markets, not by local needs. The producer can "choose" what to grow, but if he is in debt, then he's restricted in his crops to what can get the best price.
The opposite side is that foreign sellers can buy into any market. If the U.S. has industrialized farming and cheap fuel to produce a crop for export, it can drive out local production of the same crop which might have been providing local jobs and keeping more money within the economy. So all the small farmers are forced to sell their land, go to the city for inferior employment, and rich industrialists can buy up the land for cheap export crops.
It does appear that most of the flaws of free trade come from cheap fossil energy, but also obviously in terms of environmental destruction and pollution as well. If apples=apples no matter how they are grown, then economics encourages apples to be grown in places with the lowest pollution standards.
I get the arguments at different levels, but I'm not convinced of clear action or opinion. I think individuals and governments ought to have the right to protect local markets from imports or exports. Some say protectionism hurts consumers, but I guess I accept the argument that there is virtue in local markets for stability and higher costs may be acceptable.
posted by Ares Olympus at 4:59 PM
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