Free trade and protectionism

Theorectically yes. But practically to be able to produce goods at competitive prices, they need the infrastructure (i.e. technology, expertise, mobilised workforce) to get to that level where they can produce competitive prices. Taking argiculture as an example - parts of Africa have great potential for crop growing - crop-friendly weather, fertile soil etc. However the US farms have technology and the expertise to produce the crops cheaper right now, even if the African potential means it can outstrip the US in the future. African nations can't implement technology, expertise etc overnight and require protectionism to develop it so they can compete with the influx of US crops. (of course this is assuming free trade on the US's part)

The most important obstacle to economic development in Africa is primary product dependency - many African states are dependent on a single or small range of primary goods (for example, cocoa beans and related products account for 32% of total export revenues in Cote D'Ivoire) which poses problems because these products generally attain a low value on the global market (the prices of these goods relative to the cost of importing manufactured products, otherwise known as the terms of trade, have consistently fallen in accordance with the predictions of the Prebisch-Signer hypothesis) and are also highly vulnerable to sudden changes in price (which impedes planning and undermines income stability) mainly due to the effects of speculation, and, in the case of agricultural goods, the time interval between planting and the point at which these goods become available for sale. This dependency is maintained by the inability of African firms to compete with foreign manufacturers, who are able to benefit from superior access to technology and improved infrastructure (in addition to other advantages) and so sell the goods they produce at a low price, below the level at which African producers are able to compete (because they do not have access to the same advantages) which relegates African states to a status of permanant primary product dependency. The most effective way to overcome this system of dependency is the use of protective barriers so that manufacturing firms can develop, as they are able to sell their goods to the domestic market without the threat of foreign competition.

It should be emphasized that countries which are currently developed used the exact same strategy when they were in the initial stages of industrial development, despite the fact that the governments of these countries currently force developing states to abandon barriers to the movement of goods and accept the highly idealistic arguments which support free trade. This is discussed in the following article:

Ha-Joon Chang (Cambridge University) 'Kicking Away the Ladder'

Technological backwardness is not the main reason why Africa can't compete with First World nations. It's an issue with subsidies. First World nations' farmers are able to dump their products into international market. Yes, they can sell below their actual market cost because their governments pay them to be able to do so.

Here are a few documents about the subsidies' issue.
http://www.globalpolicy.org/socecon/trade/subsidies/index.htm

Africa actually can lower their cost better than First World nations in agricultural production. There's more avaliable land, due to being underdeveloped, available to Third World farmers than First World farmers. And labour is cheaper in Africa. Thus Africa have greater elasticity of labour and land than Europe or the US.

But the subsidies turn the issue upside down.

Protectionism won't help Africa much as African farmers will never able to compete, under the condition that those subsidies' exists, with most First World nations' farmers. The best that protectionism can do is to keep a local market for African farmers; thus the prospect of them with getting out of poverty through this method is quite bleak as the local market itself often can't afford certain necessary goods.

There's no way African governments can afford the level of subsidies that the First World nations offer. The best resolution to this issue is to destroy protectionism on both the First World nations and Third World nations at the same time.

I bet Ha-Joon Chang was at King's. Bloody Communist.

Actually he teaches at the Cambridge Economics faculty. From what I've heard (including even from some our more right wing economics compatriots) he knows his stuff and the school of hetradox economics might the next thing to unseat neoclassical economics.

Who mentioned imposed subsidies? There are other forms of protection e.g. tariffs, state intervention, quotas and exchange rate. Any of these can be implemented more cheapily than subsidies.

As for the local market, thats a moot point - I not suggesting that they will totally work their way out of poverty with just protectionism. But the level they can work to under protectionism can alleviate that somewhat, in addition to building an infrastructural base from which a globally competitive economy can emerge once markets are freed up.

Well yes and no. Africa does have massive potential - the land and labour exemplify this. But when they compete with high intensity farming built up over 200 years of development with ideas such as crop rotation (an idea woefully absent in many African countries) and technology such as GM crops, agricultural machinary, fertilisers, etc etc then it will still cost more expensive for a lesser yield. Most African countries (with a few exceptions) are still very much pre-agricultural revolution.

Theorectically yes. But practically to be able to produce goods at competitive prices, they need the infrastructure (i.e. technology, expertise, mobilised workforce) to get to that level where they can produce competitive prices. Taking argiculture as an example - parts of Africa have great potential for crop growing - crop-friendly weather, fertile soil etc. However the US farms have technology and the expertise to produce the crops cheaper right now, even if the African potential means it can outstrip the US in the future. African nations can't implement technology, expertise etc overnight and require protectionism to develop it so they can compete with the influx of US crops. (of course this is assuming free trade on the US's part)

I'm afraid this just doesn't make sense. Of course in order for farming to be competitive on the world market, it needs technology, expertise, a mobile workforce etc. But what you have absolutely not shown is that protectionism will help that happen. All the evidence points to protectionism ******ing, rather than helping, economic growth.

The thing is that your argument doesn't just apply to countries, but to regions, towns, villages, even individual households as well. If it makes economic sense for country A to stop trading with country B in order to encourage domestic producers to flourish, why is it irrational for village A to stop trading with village B? If protectionism between countries creates a 'thriving local economy' why wouldn't protectionism between villages do the same thing? The same point can be made in terms of infrastructure: if protectionism helps the infrastructure of country A, surely village A could also improve its own infrastructure by trading less with neighboring village B.

Of course, when you put it like this, your ideas are ridiculous; of course village A is better off trading with village B, because that way A can produce the things it does best, B can do the same, and the resulting trade makes everyone better off. But the situation is exactly the same for countries! There is no reason why each country should have all industries just like there is no reason why each village should have all industries either or why there is no reason why each person should be able to make every product he needs. The division of labour allows everyone to be better off than they would be otherwise.

With all due apologies, I don't think you know what you're talking about. What 'assumptions' does the theory of comparative advantage make that are not realized? I hope you're not talking about Paul Craig Roberts and the idea that if there is mobility of capital, comparative advantage fails (if you are, I'd be happy to explain why).

It was actually the Smoot-Hawley Tariffs that caused the Depression, according to most economists. And as people have pointed out again and again, there is no evidence that protectionism helps countries and plenty of evidence to show that it harms them. Your position, for instance, is contradicted by the simple fact that American manufacturing productivity was double the English by 1850 (see Manufacturing and the Convergence Hypothesis: What the Long-Run Data Show, Stephen N. Broadberry) - how could it be due to the protectionism that according to you, started then?

I agree. All I said was that the industries which tended to do better were the ones with the least interference, which supports precisely my point that protectionism does no good, even for the economy which does it.

If anyone wants a form of protectionism that will actually make an effective improvement to African agricultural business then it will be subsidies. The other forms just won't help make African farmers to be competitive at global market.

The best Africa can do, without the global market, is to be like China. Despite China can reduce production cost for various goods, it still can't compete with First World's agricultural price. And Chinese rural farmers are one of the poorest of its entire population - even with certain subsidies provided by the Chinese government.

To some extent, the Chinese farmers exemplifies that if there's neither huge subsidies from the government nor the destruction of First World's subsidy system then no Third World nations will ever be considered competitive. Thus any other forms of protectionism for agriculture are just waste of resources as they will not break the poverty cycle.

Agreed, African farming system is far from efficient compared to First World nation's. But even if Africa, for argument sake, effectively adopts all the advanced techniques over night, their agricultural produce will still be more expensive to First World nation's . Again it's the subsidies. In fact, lobbyists had often succeeded in raising subsidies when a certain foreign agricultural produces are sold cheaper in the US.

If free trade is not adopted around the world then there will hardly be any good prospect for Third World nation's agricultural business. African farmers does not truly need protectionism but fair competition to the global market. Without the later, no African government can afford the protectionism that will make African farmers to be competitive.

In regards to Heterodox School, I sincerely hope it will never replace Orthodox School. Why? Often in Heterodox, you can't tell the difference between positive and normative comments. It's too subjective and rarely scientific.

I won't cover up the fact neo-classical approach have certain serious flaws. But it's still by far has the most impartial methodology compared to others.
If one day Orthodox school is to be replaced, I hope it's a more scientific school or a reformed version of the Orthodox school that does it.

I agree subsidies are ideal, but other forms of protectionism can still build up the local economy before it takes on the global economy.

I don't get what you're trying to say here. Rural farmeres are the poorest, yes, but that is almost always the case in any country. Also the issue with agriculture in China is that the price in China for food is high enough to not have to start exporting - most of the food goes to feed the population which requires so much food, more has to be imported.

Incidently, China's recent economic progress is an example of how protectionism can build an industry. Manipulating the exchange rate artificially, China have made itself an exporting nation

Orthodox economics is hardly scientific either for a number of reasons including a priori analysis of worldly states and lack of falsifiablility. Not to mention it makes the fatal flaw of assuming humans make rational decisions.

I think you're missing what Heterodox economics means. Broadly it means not orthodox and whilst this includes marxist, feminist and socialist economics, it also includes up and coming new branches such as neuro and behavioural economics, which are certainly more scientific than anything neoclassical economics can profesh to be.

I was just wondering what people's views are on global free trade and protectionism?
I myself am a free trade advocate, I believe that the benefits for the masses far outweigh the costs to the few that lose out (and they mainly only lose out in the short term).
Can protectioism be defended, even in thse dark economic times? And, thinking of the USA presidential race here, will protectionism always be around in such an undesirably large amount, as those who lose out will lobby far more than the masses who have something to gain from free international trade?
you views would be appreciated.

Major Heterodox School, like Marxism and Austrian, tends to analysis economics in perspective to their political ideology more than from evidences in the actual world.

It seems that with a more fluid job's/commodities market than ever (i.e., goods and workers flow all over the world), economic nationalism cannot be justified. I agree with Drunkhampster: protectionism can only harm economic growth in other countries, and provides a political lever. Of course, certain nations would abuse a monopoly on resources: Russia and gas, for example. The protectionist barriers of Europe, coupled with free-markets in Africa, only serve to harm those free-trade economies.

I disagree with this as applied to the Austrian School. I don't think they were attempting to promote a political view; rather, the political philosophy of Rothbard et al. arose from their economic studies. It could hardly be the other way round.

I disagree with this as applied to the Austrian School. I don't think they were attempting to promote a political view; rather, the political philosophy of Rothbard et al. arose from their economic studies. It could hardly be the other way round.

http://www.huppi.com/kangaroo/L-ausintro.htm

From this list of differences, it's possible to identify that Austrian School tend to use unjustifiable axioms and avoid empirical results to deduce economic phenomena. It's clear that they adopted a libertarian perspective then applied it into understanding the economic phenomenon.

To put it frankly, those criticisms are ********, and the ones that are actually based in fact still manage to severely misrepresent the views of Austrians. I've debunked a lot of this rubbish on here before, and I'd be happy to do it again.