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Originally posted by venomX It simple, as Lebezniatnikov said, you can not have economic expansion into other countries with out political relationships. It doesn't happen. If you want to prove me wrong, give me an example of countries with a blossoming economic relationship that have no political connections. You can keep repeating the theoretical framework all you want. It just doesn't work. Never has, never will. Why would another country risk trading with someone that doesn't even bother to establish relationships with them? You also have to consider that the whole concept of 'trade without relationship' is extremely anglo/american.

In addition to that, International Trade Theory suggests that it is impossible - Nash's theory of Non-Cooperative Equilibrium.

http://en.wikipedia.org/wiki/Nash_equilibrium

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Originally posted by Lebezniatnikov In addition to that, International Trade Theory suggests that it is impossible - Nash's theory of Non-Cooperative Equilibrium. http://en.wikipedia.org/wiki/Nash_equilibrium

I think you guys are still rather confused about what he's proposing.

Here's an interview with him on Lou Dobbs Tonight that might help clarify:

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CNN’S Lou Dobbs Tonight April 23, 2007 Transcript REP. RON PAUL (R-TX), PRESIDENTIAL CANDIDATE: Thank you. It's good to be with you. DOBBS: Fire at will. The subject is so-called free trade. PAUL: Free trade. I'm for free trade. Although I'm not for the type of system that we have today because I don't believe it's my concept of free trade. I do not believe that the Congress should ever have the authority to pass this authority to the president. And on things like on fast track and then president devises agreements that serve the interests of the special interests. So, I positively opposed to this transfer of power just as I am opposed to the Congress transferring power to the president to declare war. So you can be for trade. I follow the admonition of the Founders. They think we're a lot better off if we trade with countries, rather than fight with them. We fought with Vietnam through the '60s. It did go well. We left. Now we trade with them. I think we do better trading. Where our problem gets into are these managed trade agreements under the WTO and under NAFTA and the plan for a North American Union. These are the kind of movements I think are very detrimental to national sovereignty. I don't think it helps our workers. And in combination with our monetary policy we are now exporting our jobs due to a flawed trade policy and actually a flawed foreign policy because we have allowed too much power to gravitate to the executive branch, and the Congress won't live up to their responsibilities. The Congress is supposed to be protecting us, protecting and guarding against our liberties. At the same time, here we are once again in an undeclared war overseas, that's going on endlessly trying to enforce U.N. resolutions, which is very disruptive to our economy. It causes huge deficits. That is more disruptive to our trade policies, as well. Do I not believe we can solve all our trade problems unless we eventually look at monetary policy. Because when we have the privilege of printing the reserve currency of the world, we abuse this, we print the money and no wonder the jobs go overseas because they take our dollars. That is coming to an end because this war and our financial obligations has nearly bankrupt this country. I think we're in for big trouble. DOBBS: Congressman, you did it. I mean that's two minutes uninterrupted. We appreciate it. Let me ask you a couple of follow-up questions if I may. PAUL: OK. DOBBS: First, let me ask you the question that is often asked of someone taking the position you have on free trade. I want to remind everybody who may be surprised as you speak about free trade you are a candidate for the Republican nomination. Are you a protectionist? PAUL: No, not really. Only when it becomes national security reasons. But no, I think the more trade that we have, the better. I just don't like privileged trades. I don't like international managed trade. I don't like this NAFTA and WTO managed trade because I don't think the people are served. I think the special interests are served because they have the influence in these organizations. DOBBS: Would you either rewrite or rescind NAFTA? PAUL: I'd get rid of NAFTA and WTO, for that matter. I certainly don't want a North American Union and I'm sick of these plans for this highway coming through here that's going to go from Mexico to Canada. That's not my idea of national sovereignty. DOBBS: The idea that the United States, as Bill Tucker reported tonight, H1B visas being used under the rubric of bringing in bright foreign workers into this country, in point of fact, as our research has demonstrated, more than half of those for low-skilled jobs. What would be your position there? PAUL: That I would not have as much concern about. But I think it needs monitoring. My big concern are the illegals, I'm concerned about all the enticements we give for the illegals, automatic citizenship by being born here. And then just be here for a while and you get in front of the line. Free medical care, free education. No wonder they bring their families. So I would get rid of all the benefits to the illegals and deal with that and the legal entry, then it needs more monitoring, and looking into these H1B and different categories that we have. DOBBS: Congressman Ron Paul, we will leave a discussion of illegal immigration to another time for greater examination. We thank for being here tonight. PAUL: Thank you. DOBBS: Congressman Ron Paul. Well, as the presidential campaign continues, we'll continue this special series on our broadcast. 2008, definitely it is time for answers. Giving all the presidential candidates who want to take us up on our offer two minutes of uninterrupted airtime to address each critical issue facing this country.

There's also a rather interesting chapter regarding trade agreements in a book entitled Omnipotent Government: The Rise of Total State and Total War, available at the Ludwig van Mises Institute's online bookstore. If you're interested in gaining another economic perspective (from the Austrian School of Economics) besides the one that you just acquired.

Part IV. The Future of Western Civilization

* XI. The Delusions of World Planning

• The Term "Planning"
  
• The Dictatorship Complex
  
• A World Government
  
• Planned Production
  
• Foreign Trade Agreements
  
• Monetary Planning
  
• Planning International Capital Transactions

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Originally posted by venomX It simple, as Lebezniatnikov said, you can not have economic expansion into other countries with out political relationships. It doesn't happen. If you want to prove me wrong, give me an example of countries with a blossoming economic relationship that have no political connections. You can keep repeating the theoretical framework all you want. It just doesn't work. Never has, never will. Why would another country risk trading with someone that doesn't even bother to establish relationships with them? You also have to consider that the whole concept of 'trade without relationship' is extremely anglo/american. Asian, Latin Americans, Southern Europeans and other collectivist leaning cultures would NEVER trade with someone without establishing a relationship. Saying that a concept that is completely culture in nature, and is endemic to only a handful of countries (the US, Canada, the UK and Australia mostly), can work all around the world is ludicrous. Seriously, start considering thing from a world perspective. Being a proud and individualistic country is worthless in this day an age.

There's a big difference between a "relationship" and a binding agreement or an alliance.

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Originally posted by Trancer-X There's a big difference between a "relationship" and a binding agreement or an alliance.

Correct. A relationship means that you don't have to put any effort into it and you never need to compromise to get what you want. A binding agreement or alliance entails more responsibility. Relationships are for those who wish to not be bothered by other peoples problems. An agreement or alliance entails being there for the good and/or bad times.

Agreements or alliances are not the boogie monsters you think them to be. You just need to assess them properly before going into them to make sure it won't turn into a love/hate thing. The US just tends to jump the gun too quickly. That's why I proposed that what needs to be done is to have a more robust evaluation process and/or help better the alliances by aiding in solving the problems that afflict it. Creeping back into your hole and pretending it's not happening won't solve anything, it'll just leave it for another day.

I will address your previous post later, and I will give this more thought. I doubt that pulling out of agreements that will create more benefit than harm in the long run is the best answer. It is definitely the easiest and simplest, but not the best. In any case, I'll get back to you later, gotta study for an exam.

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Poetry>Byron//Blog>TheMean

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Orbax At that point you kind of crossed the rubicon and you might as well lay siege to Rome

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Originally posted by Trancer-X

Right, you're missing my point. And there are some things I would argue that the good Representative misconstrued.

Free trade is not the norm in the international system - autarky is. Free trade necessitates the lowering of tariffs in order to reach parity on both sides, where goods and services can flow between countries unimpeded. Under Ron Paul, this would never happen for several reasons.

First, his unwillingness to negotiate bilateral trade agreements (which is really what the GATT is) is telling - he wants to eliminate all prior agreements for trade liberalization and start from scratch. Ok. But how do we reach freer trade from autarky if we don't craft bilateral agreements with other countries, thereby giving up some of our precious national sovereignty? We can't. Autarky will not only be the state of nature, but it will also be the norm under Ron Paul. He may not profess to be a protectionist, but the international system will force his hand.

Second, bilateral trade negotiation privileges have in the past been given to the President to allow the Executive branch the authority to arrange bilateral arrangements with other countries. It should be mentioned that the provision has been allowed to sunset, and is not one that the Administration currently enjoys. However, taking a look at the method of these negotiations is illuminating. Namely, the United States Trade Representative, not the President, is the official trade liason abroad, and it is her office that has wide-ranging authority over trade agreements. As it should be - she is an economist and understands optimal tariff levels, etc. But it is the USTR that evaluates tariff levels in the United States and reaches out to other countries under the provisions of the GATT to negotiate trade liberalization. Congress simply couldn't handle that today, especially not since they seem to struggle getting so much else done. That is the main reason the President is sometimes granted that fast-track authority - Congress entrusts him to delegate the authority to make decisions to someone both knowledgable and capable of actually getting them done.

Third, going away from free trade would be tremendously bad for the economy. Economists are almost unanimous on the point that free trade is indeed good for countries. Not necessarily individuals, as some certainly are hurt (particularly labor forces in import-competing industries), but on the aggregate, more people are positively affected in greater ways than those fewer who are affected negatively.

Let me illustrate the following point to make this a bit more clear. If you take two countries, the United States, and say, Lira's Brazil, you can see why free trade is a superior strategy to autarky. Under free trade, let's say that both countries have an overall national welfare equal to 100 GDP. Both countries are relatively well off. However, if one country decides to implement a tariff in order to increase government revenue and protect it's domestic industries (protecting domestic industries is the main function of a tariff, and is something that Ron Paul has pledged to do), it's general welfare goes up, as the exporting industries of the other country are hurt and welfare there goes down. Macroeconomic theory demands that the tariff drive a wedge between the national welfare of the two countries - the increase in welfare of the tariff-implementing state is equal to the decline in welfare of the exporting state plus the government revenue the other state gains at it's expense. So in other words, if the US implements a tariff, the US economy stands to gain, but Brazil stands to lose at an even greater rate. So let's place the US welfare at 110 GDP and Brazil at 85 GDP.

So what will Brazil do? They will levy a retaliatory tariff, driving up their own national welfare at the expense of the welfare of the United States. Assuming both countries to be equal in exports for the sake of easy math, Brazil's welfare gains will be equal to the gains made by the US when it implemented a tariff of its own. But since Brazil initially lost greater than the US gained, Brazil will not be able to recapture that pre-tariff level. It will have lost 15, and gained 10, for a net loss of 5. Brazil's welfare stands at 95 GDP, below what it did at free trade levels. The United States similarly will not be better off. From its point at 110, the US will also lose more than Brazil has gained, and will fall 15 to 95 GDP.

So you can see that with tariffs both countries stand to lose... so why do they end up there?

John Nash (the Nobel-winner portrayed by Russell Crowe in A Beautiful Mind) came up with the theorem of Non-Cooperative Equilibrium in order to argue this point. His theorem suggested that countries act in their best interest based on the actions of their counterparts. So given that the US is in a state of free trade, Brazil's best course of action is to enact a tariff, driving it's own national welfare up to 110. And history has shown that this is what countries do. So under this assumption, what will the United States do? Given that Brazil has implemented a tariff, the United States will retaliate in kind, driving its GDP up from 85 to 95. Now both countries are losing.

So why don't they revert back to free trade? Because it's a classic prisoner's dillemma. Both are constrained by the actions of the other country. For the United States to revert back to free trade and remove their tariff, their overall welfare will decline once again back to 85. Hardly seems the politically-expedient thing to do. The same is true for Brazil - there is no incentive for liberalizing trade unilaterally, which is what Ron Paul pledges to do. And if the US does unilaterally liberalize, then Brazil stands to maximize its gains, so it will certainly NOT follow suit with liberalization.

That is where the GATT was born - the GATT is a global governance institution designed to facilitate the arrangement of BILATERAL trade negotiations between countries. The argument that the GATT or WTO takes away national sovereignty is silly and naive - there are no negotiations with the WTO itself, it is simply a conduit for negotiations between governments, and a monitoring organization to ensure that agreements between countries are not infringed in order to cheat the system - in other words, the Dispute Settlement Process under the WTO is in place in order to make sure that once free trade is established, Brazil doesn't secretly implement a tariff to maximize it's profit at the expense of the US. If Brazil continues to cheat, the WTO authorizes the United States to enact retribution measures with no fear of retaliation.

The GATT is simply the framework under which countries liberalize trade - because history has shown that without it, tariffs are levied willy-nilly and trade is greatly curtailed.

Which is why Ron Paul and free trade seem completely mutually exclusive to me.

/rant.

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