Tuesday, May 01, 2018

Free Trade A Bridge Too Far

Everyone appears upset over the possible tariffs being proposed by Trump. The demand is for free trade. There is one problem with the concept. The minimum wage is not the same worldwide - - $68 dollars a month in Bangladesh or $321 dollars a month in China. How about Mexico at $3.48 a day and a 48-hour work week.

If you are a manufacturer in the US, and something is labor intensive; where will you eventually be forced to relocate? Three things happen when you move off shore; labor costs are lower, lawsuits for product liability drop dramatically and taxes drop to relatively low levels. The manufacture that moves to say, China is no longer a manufacturer paying taxes in this country, he is now an importer that pays taxes on his mark up from the foreign production location.

On an individual level, we examine our location and environment and make decisions as to what is the best monetary return for our family unit. An awful lot of what goes into the decision revolves around government regulations. If you have acquired wealth, you obey government regulations if you have none, government regulations be damned.

To tie this all together, government tariffs can be a leveling force, on an economic level, for trade between countries. Let’s hope this works

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