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China and Canada, Freedom Foes or Trade Friends


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As far as a trade embargo goes, I think we have become too dependent on Chinese goods to go that route. We have shifted production of too many necessary items to China. We have sold our economic independence for cheap stuff.

But we are going to have to bring all that production back online anyways. Like I said before, this massive flow of real goods from east to west with nothing more than bits of paper going in the other direction is temporary. You cannot run a large trade deficit forever, and every year you do it you get deeper in debt. If China stopped its currency manipulation even TODAY you would see a 30% swing in the price of Chinese goods, and some of that domestic production would already start returning.

Venezuela is a good example of what happens to a country that tries to rely too heavily on imports and foreign investment.

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Allowing access of foreign companies to your markets does not only have a cost (less business for local competitors), it also has a benefit (low cost of goods for your citizens).

It FEELS like we get cheap goods but the reality is that we just get deferred payment. When you run a large trade deficit that deficit becomes public and private DEBT. Saying that we get cheap goods is like saying its cheap to buy a bunch of stuff on your credit card just because you dont need to pay any real money for stuff.

Try running your household this way... consume 3 times as much as you produce for a prolonged ammount of time... And see where things end up. You will end up with a whole lot of debt, and eventually you will have to start producing again. That is whats going to happen to all the western countries running large trade deficits with the developing world.

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Unfortunately people fall prey to the whole "cheap goods fallacy". This whole idea that because consumers can get cheap goods so trade with China must be a positive thing.

Heres the problem with that... In order to run a persistant trade deficit you need to maintain a net inflow of capital. In order to do this you either need to deplete your savings, borrow money, or sell assets. We are doing all three of those things, and theres a limit as to how much of each we can do. This represents "leakage" of canadian assets and incomes into foreign countries which is measured in the current account.

Canadas current account deficit is about 3% of GDP, and what that basically means is that our domestic economy has to grow an extra 3% just to stand still, because of these trade deficit.

So that Chinese DVD player is not as cheap as it seems, and only part of its cost is reflected on the price tag.

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Unfortunately people fall prey to the whole "cheap goods fallacy". This whole idea that because consumers can get cheap goods so trade with China must be a positive thing.

Heres the problem with that... In order to run a persistant trade deficit you need to maintain a net inflow of capital. In order to do this you either need to deplete your savings, borrow money, or sell assets. We are doing all three of those things, and theres a limit as to how much of each we can do.

So that Chinese DVD player is not as cheap as it seems, and only part of its cost is reflected on the price tag.

Nobody buys Chinese DVD players. I don't even know if they even exist.

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Then we adopt a disposition away from doing less business with China and more business with others. We have about a 30 billion dollar trade defecit with China, that in the long term we would be better off without anyways.

I assume you mean by direct intervention in Canadian business, followed indirectly by the Canadian consumer………So you want me to give up my cheap Chinese made crap because some students have had a protest? :huh:

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Unfortunately people fall prey to the whole "cheap goods fallacy". This whole idea that because consumers can get cheap goods so trade with China must be a positive thing.

Heres the problem with that... In order to run a persistant trade deficit you need to maintain a net inflow of capital. In order to do this you either need to deplete your savings, borrow money, or sell assets. We are doing all three of those things, and theres a limit as to how much of each we can do.

So that Chinese DVD player is not as cheap as it seems, and only part of its cost is reflected on the price tag.

How would that be diminished by “buying Canadian”? How many lower income Canadians purchase Chinese goods from a Walmart versus more expensive Canadian made goods, and of course, how would this factor into your meme?

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How would that be diminished by “buying Canadian”? How many lower income Canadians purchase Chinese goods from a Walmart versus more expensive Canadian made goods, and of course, how would this factor into your meme?

I explained that. The current account deficit is a reflection of the trade deficit. If we bought more Canadian stuff then we wouldnt have a current account deficit, which at todays level would result in a net effect of 3% positive economic growth per year.

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I think dre feels we should make our own consumer goods.......I could be wrong though.

No it doesnt matter what you make and dont make. What matters is avoiding policies that lead to long term trade imbalances for the reasons I stated.

Cheap goods is an illusion in a scenario where trade is perpetually lopsided. If you wanted to use the cost of goods as an argument for a particular trade policy you would need to factor in the current account deficit into the price of goods.

We arent necessarily getting cheap goods... we are just financing a portion of the cost with debt.

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Quite the opposite, we should encourage further trade and Westernization of Red China through even more trade agreements, cultural/student exchange etc………soft power such as this can work, as it did for Reagan over 25 years ago……Ultimately a regression of relations will only effect the populace and not the people of the ChiCom Politburo……..

Culturally, the Chinese psyche takes a far broader & longer term view, when compared to us in the West, with such things…….all that is needed from us is the continuance of our own cultural expansion into the remaining vacuums on this planet of personal/religious/economic/political freedom.

Ya and in China, they give a rats ass if we become more communist.

I guess it's just westerners that want to change everybody.

But after 50 or so years and the Chinese economy quadrouples the western's combined, we'll be adopting more communism!

WWWTT

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I've often thought the west should collectively stop trading with China until China starts to recognize human rights or democratizes.

And in China, they don't feel the need to stop trading with Canada until Canada starts recognizing human rights or communizing.

That's one thing I love about the Chinese, they're not trying to push their system on you like those Christians that come knocking on your door all the time asking you to convert.

WWWTT

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Better late than never I suppose.

We should have suspended trade after Tienanmen Square.

Really?

Maybe Canada should look in the mirror?

What if China broke trade deals with us after they found out about the G20? Or treatment of Native Canadians.

One standard for the west, another for the rest!

WWWTT

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No it doesnt matter what you make and dont make. What matters is avoiding policies that lead to long term trade imbalances for the reasons I stated.

Cheap goods is an illusion in a scenario where trade is perpetually lopsided. If you wanted to use the cost of goods as an argument for a particular trade policy you would need to factor in the current account deficit into the price of goods.

We arent necessarily getting cheap goods... we are just financing a portion of the cost with debt.

Following that meme to a microeconomics vantage point, all Canadians would be better off producing their own clothes, food, healthcare and transportation to avoid imbalances with Roots, Superstore, Shoppers and Ford.......

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No it doesnt matter what you make and dont make. What matters is avoiding policies that lead to long term trade imbalances for the reasons I stated.

Cheap goods is an illusion in a scenario where trade is perpetually lopsided. If you wanted to use the cost of goods as an argument for a particular trade policy you would need to factor in the current account deficit into the price of goods.

We arent necessarily getting cheap goods... we are just financing a portion of the cost with debt.

No

You're only looking at one trade relation. yes we run a trade deficit with China, but the difference isn't being funded by debt. Overall Canadian exports to import are pretty even (462 billion : 474 billion in 2012). Our GDP grew by about 3% last year. The rest of our growth was domestic consumption.

Cheap good are produced in China, because they are cheap. The cost of producing in Canada would exceed the cost of producing china. Not only because of the cheaper labor but also because of the economies of scale that exist in china and the start up costs. It would be of no benefit because we'd be still competing against chinese goods and we being paying more for domestic production.

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No

You're only looking at one trade relation. yes we run a trade deficit with China, but the difference isn't being funded by debt. Overall Canadian exports to import are pretty even (462 billion : 474 billion in 2012). Our GDP grew by about 3% last year. The rest of our growth was domestic consumption.

Cheap good are produced in China, because they are cheap. The cost of producing in Canada would exceed the cost of producing china. Not only because of the cheaper labor but also because of the economies of scale that exist in china and the start up costs. It would be of no benefit because we'd be still competing against chinese goods and we being paying more for domestic production.

Well then lets hope Beijing cracks down sooner than later. The last thing we need is a China where people start living in expectation of more freedom and the benefits of democracy. The next thing you'll know they'll want clean air to breath and how much will that cost our economy?

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Well then lets hope Beijing cracks down sooner than later. The last thing we need is a China where people start living in expectation of more freedom and the benefits of democracy. The next thing you'll know they'll want clean air to breath and how much will that cost our economy?

Probably nothing. But that wasn't the argument I was making.

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Following that meme to a microeconomics vantage point, all Canadians would be better off producing their own clothes, food, healthcare and transportation to avoid imbalances with Roots, Superstore, Shoppers and Ford.......

No its ok to have trade imbalances with specific entities as long as you have surpluses with others. Im not even vaguely suggesting that people should make all of their own stuff.

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