Tag Archives: economics of trade

Understanding “Free Trade” is not Free

Article written by Bob Powel

Note: Visit page for better view,  we all need to learn more about the so labeled “Free Trade” for most of our problems are originating from these inimical trade policies and our current faulty banking system. T.N.

Source: Continuous Improvement Associates

Liberal Moments(SM)
#23. ‘Free Trade’ and the Environment
By Bob Powell, 2/28/08
Here is this Liberal Moment (SM) Handout in pdf and doc formats that include many links to the information presented.Understanding “trade” 1. It’s not “trade”; it’s “transfer of the factors of production”: labor & capital. 2. Corporations build products over there so they don’t build them over here at a labor cost that can support an American mortgage payment.3. It’s “reverse protectionism” because US policies subsidize offshoring. Stopping “reverse protectionism” is not protectionism!4. It’s not about “protectionism.” US “free trade” agreements have 100s of pages to protect intellectual property & private capital, not environment & labor.

How the U.S. Subsidizes Offshoring of Jobs

  • Corporations can defer paying taxes on income from foreign subsidiaries … indefinitely. Congress also gives them “tax holidays”.
  • Tax loopholes such as moving headquarters to a tax haven.
    Allowing R&D and other investment tax credits for companies that move manufacturing off shore … the U.S. doesn’t fully benefit.
  • Corporations engage in flawed transfer pricing schemes to avoid U.S. taxes, i.e.: sell components to foreign subsidiary at very low profit, and buy back product after manufacture with a very high foreign markup & profit.
  • Not including labor & environmental standards in trade pacts is a subsidy. The costs of environmental degradation and injuries to workers are externalized onto the public at large. Without standards, democracy is undermined: individuals don’t value & “purchase” clean environment & workplace safety, governments do; if a government isn’t a democracy, it doesn’t represent the interests of its citizens.
  • Corporations are allowed to write-off the costs of shutting down a U.S. factory when it transfers the work to a factory offshore.
  • Corporations are allowed to write-off the costs of bringing foreign employees to train in the U.S., requiring its U.S. employees, as their last duties before being fired, to train the foreign replacements to do their jobs.
Exploding US “trade” deficit
US “trade” deficit with China

Environmental and Other Effects of Offshoring to China:

CO2 Emissions per dollar of output significantly higher in China and India where corporations are sending jobs

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