· If you worry about trade causing us to lose jobs, then you need to worry about everything causing us to lose jobs (technology, robots, more efficient techniques
· Wages in China have actually more than doubled in the last 8 years
o Why? Because value of trade is increasing and the workers are desired more
· Comparative and Absolute advantage of jobs
o Wages/marginal product of labor =
§ China: $8 an hour/ 4 units per hour = $2 a unit
§ America: $30 an hour / 20 units per hour = $1.50 a unit
o Marginal product of labor:
§ How much you can produce in each additional hour
§ Can become negative
· China
o Only 2.7% of consumer spending is for “Made in China” goods
o If we put tariffs on Chinese goods (as Congress wants), it would not increase manufacturing but hurt it because our inputs disappear
· Regulations matter a great deal
o America did not join Kyoto Protocol in 1990’s because it would have taxed American businesses heavily
o Forcing people to hire workers decreases incentive
· Trade Surpluses do not necessarily increase employment
o Agricultural industry is an example
§ Trade surplus has been high since 1963, but the number of workers has decreased exponentially
§ Made possible because farming of land has become more efficient
· Because of specialization, we have become richer
o Able to produce more goods using less land
o Employment may decrease, but we become richer overall
o A Gift Economy
§ Would devastate the economy
§ Would lead to infinitely large trade deficits between countries/people and no technical employment
§ Instead of Gift Economy, we buy and sell stuff to one another to create economy
· Jobs
o EPI reported that after NAFTA, cost of everything to Americans fell but displaced 1,252,000 jobs
§ Also hurt Canada
o Technology has displaced jobs in outdated industries
o Jobs are a cost, so saying that jobs were lost is not a reason to hate NAFTA
o The total number of jobs is higher, but the percentage has fallen due to NAFTA and cheap labor outside of the United States
o Gifts from Korea (24,000$ car every 4 years)
§ Would lead to increase in living standards
o Farm jobs make up 1.7% of the economy today after at one point being 90%, but this has made America richer
§ Food exports to China actually are leading to Food Trade surplus with them
· Trade Deficit
o Based on US Capital Account Balance
§ People invested in American economy
§ Allows us to consume more than we produce
§ There was nothing unsustainable about the concept
§ Trade deficit with China
· Expert said that cheap Chinese labor will force investors to invest in them instead of US
· Foreign Direct Investment (FDI) received by China was 686 billion dollars, while ours was 1.8 trillion dollars, and per capita the US had a ten times larger FDI than China
§ Rizzo buys $10 of toys from Chinese and we pay $5 for classes
· Rizzo runs a total of a $5 deficit
· With the $5, the Chinese then invest in treasury bonds, brining money back into America
§ America’s total trade balance is zero
· Currency account balance is negative
· Capital account is positive
· They cancel each other out ^^
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