Prove it!
The only argument ever given is that the deficit results in job losses. But that's a silly argument. If job losses are bad for the economy, then automation and computerization are bad, because these also result in job losses. When human workers are replaced by machines, there can be a net loss of jobs in the economy. But it does not follow from this that it is wrong or bad for the economy to replace workers with machines.
It is time for those who constantly complain about the trade deficit to put up or shut up.
$500 says you cannot prove that the trade deficit per se does overall harm to the economy, or to the country, or to people generally.
Click here to take up the $500 challenge. Your argument and ensuing debate with freetrader@aol.com will be posted in DebateClub.net.
If, after your case is made, no one's mind is changed and you believe you proved that the trade deficit is bad and that you are entitled to the $500, we will negotiate an arrangement to have it judged by an impartial panel/jury which will decide whether you earned the $500.
To prove that the trade deficit is bad, you must show that the trade deficit per se has bad consequences, no matter what the cause of the trade deficit may be. In other words, it is not sufficient to show that the cause of the trade deficit is bad. The cause of the trade deficit could be bad, but that only means that the trade deficit is a symptom of a problem and not the problem itself.
An example of a bad cause would be uncompetitiveness of U.S. producers. If U.S. producers are uncompetitive, this is bad, and the U.S. should become more productive and more competitive. But that is not proof that the trade deficit per se is bad.
Another cause of the trade deficit could be the relative openness of the U.S. market plus protectionism and closed markets of other countries. In this case, the cause is two-fold, and one of these is good while the other is bad (i.e., the U.S. market being open is good, while the foreign market(s) being closed is bad). Of course the other countries should open their markets. And the trade imbalance is a consequence, partly, of the protectionism of those countries, and the corrective measure is for those countries to open their markets. For the U.S. to retaliate with its own protectionism might reduce the trade imbalance (or maybe not), but it would not correct what is wrong.
So, in the above example, it is only the protectionism of the other countries which is bad, not the trade imbalance per se.
Your task, if you are to prove that the trade deficit per se is bad, is to show that the trade deficit produces net harmful consequences for the economy, no matter what caused the trade deficit -- whether the cause of it is good or bad. You cannot use the cause of the trade deficit as an argument to prove that the deficit itself is bad.
Subj: The trade deficit
Date: 1/9/2004
From: cgouldie@austin.rr.com
To: freetrader@aol.com
I'll start off with a few contentions that show why the trade deficit is a bad thing
1. American business would make more money if trade were free, especially with the particularly egregious offenders, such as Japan and China.
Do I even need to argue this point, or do you agree?
2. Our laissez-faire treatment of foreign goods gives us tremendous leverage to change the trade policies of other nations, as we are a huge market they cannot ignore. Having already established ourselves in this position, we currently do not take full advantage of this leverage.
The trade deficit need not exist. Were we to close our borders as the Japanese have done, Japan would revert to barbarism. It is a situation they cannot allow or survive. Yet we allow them to impose great tariffs on our products under the misguided belief that our passivity will somehow persuade them to change, due to some sort of good will on their part. The evidence for this hypothesis is non-existent, and is really at odds with Japanese culture, one of arrogance and superiority (sound familiar?).
3. Greater prosperity for business, in combination with sensible foreign labor laws, leads to greater prosperity for all americans. Not using this leverage to our full advantage is a bad thing. In addition to being the most warlike nation, we are also one of the most generous when it comes to foreign aid. Less money means we do less for the world.
There's the opening salvo. Have at it.
I think you are committing the same fallacy here in both of your arguments (I see basically two arguments presented by you, as your points 2 and 3 are actually together as one argument, as I understand them).
Let me state first what the fallacy is generally, and then I'll relate that to each of the two arguments.
Your premise is this: Condition A causes condition B and condition C, and condition B is bad.
Therefore (your conclusion): Condition C is bad.
This is not logical. Just because A causes B and C, and B is bad, it does not follow that condition C is also bad.
Condition A in your argument is some economic policies of certain countries (Japan, China, U.S.A.). This condition (A) leads to the bad result B and to the trade deficit C.
But it doesn't follow that because the bad result B was caused by A that therefore all other results of A must be bad. At the very worst, the trade deficit (C) might be a side effect or symptom which serves as a signal that A took place and alerts us that the bad result B could also occur. But C, the trade deficit, in itself is not a bad thing.
A trade deficit could be caused by many different things. There could even be some causal factors that are good. The question is whether the trade deficit in itself is bad, i.e., whether it in turn causes something bad to happen. In order to prove that the trade deficit is bad, you must show that it causes something further to happen which is bad. You don't achieve this only by showing that it was caused by something which also caused another thing to happen which was bad.
Two likely causes of the U.S. trade deficit with Japan are that Japanese have a high savings rate, or low consumption rate, and that the U.S. has a relatively open market and low tariffs. Both of these conditions are good, or at least they are not bad. It's good for people to save for the future, and it's good for a country to have an open market and low tariffs.
So here are two good conditions taking place, and together they help to cause the U.S. trade deficit with Japan. If these were the ONLY causes of this trade deficit, then what would be the harm of that trade deficit?
To prove that trade deficits per se are bad, you must show that any trade deficit causes harm, no matter what may have caused the trade deficit.
Of course there are probably other causes of the trade deficit which are bad. But whether the various causes are good or bad, it doesn't tell us whether the trade deficit itself is good or bad. The mere fact that a trade deficit exists doesn't tell us that something bad is happening.
Your first argument:
"1. American business would make more money if trade were free, especially with the particularly egregious offenders, such as Japan and China."
Condition A is the offenses of Japan and China. Their behavior (A) causes U.S. trade to be unfree and for U.S. business to make less money (B).
What does this have to do with the trade deficit (C)? The connection is that C is also caused by A, as B was caused by A. Other than this there is no connection. C does not cause B. It's A that causes it. Therefore, A is bad, but why is C bad? What harm is C itself causing? None.
One could also take issue with your premise that China and Japan are guilty of bad behavior (A). As mentioned earlier, Japan has a high savings rate, and this is not bad. It is likely that Japan's high savings rate is part of the cause of the trade deficit. So that part of the trade deficit is caused by something good rather than something bad.
Nevertheless, even if your premise is totally accepted, i.e., that the behavior of Japan and China is totally bad, it still doesn't prove that the trade deficit (C) is bad.
Suppose the trade deficit could be eliminated somehow, but without changing the bad behavior of Japan and China. In that case, what good has been accomplished? None. Only if that bad behavior (A) is stopped is there any improvement. So, to condemn the trade deficit misses the point. It is condition A which must change, regardless of condition C.
Your Second Argument:
"2. Our laissez-faire treatment of foreign goods gives us tremendous leverage to change the trade policies of other nations, as we are a huge market they cannot ignore."
I.e., we could restrict our market, hoping it would force those countries to open up theirs. It's debatable whether we should do that. Possibly the trade deficit would be narrowed if we did. But why should the trade deficit be narrowed? The mere fact that we could narrow the trade deficit doesn't mean we should. Yes, getting Japan and China to open up their market would be a good result.
BUT -- and this is important -- the purpose of getting Japan and China to open their market is NOT to reduce the trade deficit. Getting them to open their market would be good WHETHER IT REDUCES THE TRADE DEFICIT OR NOT!!!!!
So you are missing the point to simply say that this good action -- opening those markets -- would result in a lower trade deficit. IT DOESN'T MATTER if would lead to this result. What matters is that it is good for any country to open its market and let people trade.
You do not know that opening markets necessarily leads to less trade deficit. In some cases IT DOES NOT!! And yet, even so, IT IS ALWAYS GOOD FOR ANY COUNTRY TO OPEN ITS MARKET. Regardless whether it leads to a lower trade deficit. Lower trade deficit is not the point. It's irrelevant. It is opening the market that is good, EVEN IF IT LEADS TO A HIGHER TRADE DEFICIT, which in some cases it would. Even if BOTH (or all) countries open their market, it can lead to a higher trade deficit rather than lower.
How could it lead to a higher trade deficit rather than lower? Simple. One of the countries has a high propensity to save, but also is highly productive and offers superior products. It will likely experience a trade surplus and its partners, who want its products, will accumulate a trade deficit. So don't assume that opening markets automatically means lower trade deficit. Perhaps in most cases it does. But whether it does or not is irrelevant, because opening the markets is ALWAYS good, no matter what effect it has on the trade deficit.
UNLESS YOU CAN PROVE THAT TRADE DEFICITS ARE INTRINSICALLY BAD. That's what you must show.
"Having already established ourselves in this position, we currently do not take full advantage of this leverage."
And maybe it's better that we don't. Or maybe we should use this leverage if it will force those countries to open their market. If such strategy would really work, then you have an argument for using the threat of tariff retaliation against those countries. Which is another debate.
But what would be the point of such a strategy? If it works, what have we accomplished? We've made consumers in both countries better off. It's not that the trade deficit was reduced. Reducing the trade deficit is neither good nor bad. It's irrelevant. At best it is a side effect of having done something that worked and produced a good result. But reducing the trade deficit per se, a different result, is neither good nor bad.
"The trade deficit need not exist."
But should it not exist? Why? What is the harm it causes? This is the question you need to answer to demonstrate that it is a bad thing. How is it a bad thing in the case where it is caused by more opening of markets rather than less?
". . . we allow [the Japanese] to impose great tariffs on our products under the misguided belief that our passivity will somehow persuade them to change, due to some sort of good will on their part."
I.e., you think they would give in and open their market if we threatened to retaliate with tariffs.
It is debatable whether Japan's tariffs are as "great" as you suggest. Remember that part of the cause of the trade deficit is not the trade barriers at all, but Japan's high rate of savings vs. America's high rate of consumption. So even if all Japan's protectionist policies were ended, there would still be a trade deficit because of this disparity in the savings rate between the two countries. And it might be significantly high.
It is tempting to get into the argument about whether retaliatory tariffs are a good idea. It would be foolish to say that retaliation could never work. Maybe in some cases, maybe not in others. It would be a gamble. Maybe the reason we don't threaten to retaliate is that such threats are more likely to lead, in the end, to less trade with Japan than to more. Yes, in some cases Japan might cave in. But in other cases it will retaliate back, and a trade war will ensue.
But that argument takes us away from the present question, which is whether the trade deficit is a bad thing. The retaliation question is a debate over how to prevent the presumed bad behavior of Japan and China. Assuming this behavior is bad, that they are very protectionist and should open their markets, and that this behavior leads to bad results, that still doesn't tell us whether the trade deficit is a bad thing. Yes, the trade deficit might be partly a result of this bad behavior on their part. But again, that doesn't tell us that the trade deficit is bad.
The bad behavior leads to markets being closed and consumers getting a raw deal. It hurts consumers that trade is restricted, which in turn restricts choices to them in the marketplace and also causes higher prices. But the trade deficit? That's just another result which in itself is neither good nor bad.
Suppose your idea succeeds, i.e., the U.S. retaliates with tariffs, or threatens to do so, and as a result Japan and China cave in and open their markets completely. But suppose as a result of this the trade deficits with those countries do not come down at all, but actually increase. IT IS POSSIBLE. Not likely, but possible. It could happen because those countries still might not buy much from the U.S., while the U.S. might actually increase its buying of imports from those countries. One reason could be that U.S. companies would increase their outsourcing to those countries and then import the products at a higher rate than they do now.
So then, you got what you wanted -- the markets opened because of threats to retaliate. Consumers are better served, U.S. wealth increases. But the trade deficit? It went UP, not down. Now is that good or bad? Everything else that happened was good. And yet the trade deficit went up even higher.
How would such a trade deficit be a bad thing? How is it bad that it went up rather than down?
Suppose you say, "Well, in this unique case a higher trade deficit is NOT a bad thing, but this case is an exception." Yes, maybe it's an exception. But then, what is the rule that this is an exception to? What is the causal connection between the trade deficit and the resulting good or bad? There is none. Since you know that making consumers better off is good -- always good -- why not forget about whether the trade deficit is going up or down and just concentrate on what is good for consumers?
What sense does it make to say: "A trade deficit is good whenever consumers are becoming better off, but bad whenever consumers are becoming worse off."? Wouldn't it be a lot simpler to just say, "It's good for consumers to become better off and bad for them to become worse off."? or "Let's do whatever will make consumers better off."? Why drag the trade deficit into the discussion when it is irrelevant? As long as you cannot show that the trade deficit per se is making them better or worse off, it is irrelevant.
If you could show that a trade deficit always has to be caused by something bad, then you could almost claim that a trade deficit per se is necessarily bad. At least something bad always precedes it. But it's not true that it has to be caused by something bad. E.g., Japan's high savings rate. You can't simply cite a trade deficit as proof that something bad has been happening. If protectionism caused it, closed market, then yes, that's bad.
Over the years the trade deficit with Japan has generally increased. And yet, Japan's protectionist practices have decreased. How can you be so sure that the trade deficit is caused by Japan's protectionism, when the latter has decreased while the former has increased?
Remember this -- Japan always claims that it HAS opened its market and is no longer protectionist. And whenever there is a debate between Japanese trade experts and their U.S. counterparts, the U.S. side is never able to demonstrate clearly that Japan's market is closed off or protectionist. Instead, the U.S. argument always ends up being that the trade deficit per se proves that Japan is doing something to prevent U.S. imports from getting into Japan. "They're not buying our stuff!" is always the ultimate complaint. In face-to-face debate with Japan, the U.S. does not make a good case against Japan. Most of what you hear is U.S. propaganda, from the government and business and labor.
So the threats of retaliation might not really have much effect, because there may not be all that much that Japan can do to appease us. Every country, including the U.S., has some protectionist practices. And they each say they've opened their market more than the other countries have. Maybe it's just that Japanese consumers don't want much that the U.S. produces. If they wanted more, they certainly could buy much more from us. The Japanese government does not prohibit them from buying U.S. products. It's not like the Japanese consumers are clamoring to get those U.S. products but their government is blocking them every way it can.
Obsessing on the trade deficit takes our attention away from what really matters -- making the market more competitive and making producers serve consumers better.
"The evidence for this hypothesis is non-existent, and is really at odds with Japanese culture, one of arrogance and superiority (sound familiar?)."
Just as it is not necessary to reduce the trade deficit per se, it is also unnecessary to waste our energies trying to change Japanese culture, such as their higher propensity to save. Our well-being is not dependent upon changing the Japanese. We can benefit from Japan by keeping our market open to them, whether they open their market more or not.
It is ludicrous to condemn a country because they don't consume enough, or to demand that they consume more.
"3. Not using this leverage to our full advantage is a bad thing."
If you mean the advantage of a lower trade deficit, you have not yet shown that it is disadvantageous.
"Less money means we do less for the world."
The only connection between less money and the trade deficit is that dollars go out of the U.S., and so there might be fewer dollars here and lower inflation rate. But there is not less wealth produced, and the wealth produced is what really matters. If you can show that the trade deficit causes less wealth to be produced, then you will have shown that the trade deficit is a bad thing.
Sure, if you put me in the position of having to prove that EVERY SINGLE trade deficit is a bad thing, I'll be hard pressed to do so. For instance, it may so happen that we buy a million shoe laces a year from Hungary, and they buy absolutely nothing from us. This nets a 100,000 dollar trade deficit. Is this bad? Well, 100k is a drop in the bucket, so probably it is neither bad nor good. It is insignificant.
However, one could use your same argument to prove that murder is okay. Is every killing a bad thing? No, of course not. War is justified sometimes. Many people justify Truman's dropping of the bomb, which was undoubtedly mass murder, with quite logical arguments. But overall, in the cases murder is usually practiced, is murder a bad thing? Most of us would agree that it is.
If you want to set up the argument so that you win no matter what, well, you are going to win. The fact remains that we have very large trade deficits with Japan and China, for instance, and these deficits are bad, and are a result of corruption in our government.
Probably you would not disagree with this statement. If this is the case, perhaps we could debate another topic, where the argument is not stacked in your favor (i.e., I am not in the position of proving a universal negative).
"Sure, if you put me in the position of having to prove that EVERY SINGLE trade deficit is a bad thing, I'll be hard pressed to do so."
That's not what you need to do. You have to show that the trade deficit per se is the thing that is bad, i.e., which causes the harmful consequences. Your examples show nothing harmful being caused by the trade deficit, but only that the trade deficit is caused by something which also caused something else to happen which was bad.
No, you don't have to "prove that EVERY SINGLE trade deficit is a bad thing"; all you have to do is prove that ONE, one single trade deficit only, was in itself a bad thing. Just prove that any trade deficit anywhere in history caused bad consequences. Or just make up a hypothetical example in which a trade deficit causes net bad consequences, as long as the example can be described as a normal case, or a typical case of a trade deficit.
To do this, it is not good enough to simply say that the cause of the trade deficit was a bad thing. You must show that this trade deficit, regardless of what caused it, was bad because it caused something bad to happen, and this bad would have to be greater than whatever good was caused by that trade deficit.
Further, you don't even need to prove that ONE trade deficit is bad, if instead you can prove that there is something intrinsic to a trade deficit that is necessarily bad. In other words, a trade deficit IN PRINCIPLE is a bad thing, or causes bad consequences, but does not in principle cause good consequences that offset the bad. Thus, you are not required to give a particular example. If you can just show that in principle a trade deficit must cause bad consequences, i.e., that net harm is the normal result, then you have proved that the trade deficit is a bad thing.
"For instance, it may so happen that we buy a million shoe laces a year from Hungary, and they buy absolutely nothing from us. This nets a 100,000 dollar trade deficit. Is this bad? Well, 100k is a drop in the bucket, so probably it is neither bad nor good. It is insignificant."
Since you're the one trying to prove that a trade deficit is bad, I'll leave it to you to judge whether the SIZE of that deficit matters. However, I suggest that this is a question of degree, and that even a small degree of deficit should also bring a small degree of harm, if your theory is that a large deficit brings a large amount of harm.
"However, one could use your same argument to prove that murder is okay. Is every killing a bad thing? No, of course not."
Whoops! You just jumped from murder to killing. They are not the same. All murders are bad, but not all killings are bad.
You could prove that murder per se is bad, and it is in this sense that you need to prove that a trade deficit is bad. And this does not mean proving that every single murder ever committed (or every trade deficit) was bad.
If someone had murdered Hitler when he was a five-year-old kid, that would have been good, because it would have led to good consequences. Even though no one would have known it, still it would have been a good that the world would never have been aware of. The murderer might even be tried and executed, and rightly, because it is in principle bad to commit murder. All else being equal, murder is bad. And in this sense you must show that a trade deficit is bad. You're not expected to rule out the possibility that some particular trade deficit somewhere deviated from the norm and led to a good result. No, just show that the norm is a net bad result because there is something intrinsic to trade deficits that makes bad results follow from them.
Those who justify the dropping of the bomb do not believe that it was murder. If they are right -- that it was justified -- then it was not murder. Killing that is justified is not murder. Part of the meaning of "murder" is that it is unjustified killing.
"But overall, in the cases [where] murder is usually practiced, is murder a bad thing? Most of us would agree that it is."
Not only do we agree that it's bad, but we can prove it. I.e., we can show that it causes harmful consequences. It is in this sense that you must prove that the trade deficit is a bad thing.
"If you want to set up the argument so that you win no matter what, well, you are going to win."
No, you win if you show that trade deficits do harm, in principle, that they inflict suffering, regardless of what causes them, and they do not in principle cause offsetting good. So the norm is a net harm.
"The fact remains that we have very large trade deficits with Japan and China, for instance, and these deficits are bad, and are a result of corruption in our government."
What you must show is that they are bad, regardless of the corruption in our government. Corruption in government is itself bad. But it does not follow that a trade deficit caused by this corruption is also bad. It might even be good. Not everything done as a result of corruption is necessarily bad.
Didn't Hitler (or was it Mussolini?) make the trains run on time? This might have been accomplished by corruption, or perhaps by cruelty inflicted onto some people in the train system. Perhaps engineers who arrived late were taken out and hanged. Even so, the fact of the trains running on time, in itself, is a good thing, not a bad thing.
The mere fact that a bad person or a bad gang does a particular act is not proof that the act per se is bad. That particular act might be good, even though other acts done by the evil-doers were bad. One could cite many examples to prove this point.
The Roman emperors were all corrupt, to one degree or another, and committed acts of cruelty. But they did both good and bad things. Not all that they did was bad. You have to look at each act and judge in each case whether it was a good or bad act, or something in between.
The Income Tax and the Federal Reserve system were both instituted under questionable circumstances. There might have been an element of corruption. So does that mean that they are bad and cause harm? No. They might in fact be bad and cause harmful consequences, but claiming that they came about because of corruption doesn't prove they are bad. A good thing can be brought about through evil processes.
"Pork barrel" programs come about through corrupt power politics. Does this mean that every pork barrel program has to be bad? No, some of them might turn out to be good for the country. Most of them are probably bad, but what makes them bad is that they waste tax dollars on a limited special interest group, and the taxpayers are not served. Merely showing that a pork program came about through a corrupt process doesn't prove that it is a bad program.
". . . perhaps we could debate another topic, where the argument is not stacked in your favor (i.e., I am not in the position of proving a universal negative)."
What you need to prove is that it is the trade deficit that causes the evil and not the evil that causes the trade deficit. You need to show that a trade deficit by its nature is harmful, i.e., does net harm. Give a hypothetical example of a trade deficit caused by something good rather than something bad, but which is still bad because it inflicts harm in the way that trade deficits typically inflict harm. What is that damage that trade deficits typically inflict on people, even in the case where the cause of the trade deficit was itself something good?
You could prove that murder is bad in this sense. Or stealing. There is net harm caused to people. Net suffering or pain or deprivation is inflicted onto people. You could prove that a federal budget deficit is bad in this sense. Pollution. High crime rate. Poverty. It is possible to prove that some things are bad and some things good. This does not mean proving a "universal negative".
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