So you're saying American workers are less productive?
No, the opposite. They can cut all the taxes they want, give all the loans they can, but American workers will be more productive for a long time.

That's a product category whose inherent features lends itself to barriers to entry.
The only feature is that they must be made in a way that meets a set of process standards (i.e. a barrier to entry). I've been in the field for 25+ years. We know that when we enter China we have a 3-5 year run before their is an exact copy on the market in China for 25% less. That copy never comes to the US or EU. Why because in order to meet the quality process standards, they can't make it for 25% less. How I've always stayed ahead in China is to obsolete our own products with better products.


That doesn't exist with something like apparel, or furniture, or networking equipment, etc.
Exactly. I believe the point is to create a barrier to entry that consists of environmental requirements, life standards, and workplace standards. These requirements will raise the cost of making these things. The US and EU already have these costs built in. China may still have an advantage on cost. But it won't be as big, thus leveling the playing field.

There are many other benefits of trade that you're not bringing up. This list of factors is fairly crude, too.

Nonsense. Global trade is just beginning. Quite simply because the efficiencies are so enormous, particularly given the extreme efficiencies of giant container ships.

Were will North Americans get all their cheap consumer goods? Mexico?

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They constantly try to escape from the darkness outside and within
Dreaming of systems so perfect that no one will need to be good T.S. Eliot

Yes, and, to a lesser extent, Asian pacific rim nations.

From China, rerouted through some other country at a slight markup.

Nonsense. If it's so damn efficient why does both Europe and North America sell similar vehicles to each other? The answer is what made Krugman famous in economics (and what he won his "fake" Nobel prize for).

But what will the greatest industry the world has ever known, the great American Military-Industrial Complex do, if America turned inwards. Is not regime change one of the huge drivers of this industry and it's profitability.
But it does bear considering, if the USA turns inwards, what effects will that have on both the USA as well as the others. Well, I suppose, when / if some of the others focusing inwards, then that to will have an impact, both on themselves and also the USA.

As an aside, can I just say, that in all the years that I've been reading the posts here on Lavender Room, this is one of the most considered, articulate and informative threads.
Thank Avago

x2 on this sentiment, GreenPlease. Your economic posts are always insightful and well laid out - thank you.

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Do not taunt Happy Fun Ball

Thank you :)

Thanks for the kind words.

As for the military industrial complex, I'm not too worried. Just maintaining and replacing what the U.S. has now is quite a businesses in itself. IIRC the annual bill just to prevent and remediate rust for the U.S. Navy is ~$70billion. The ascension of China's military will likely force the U.S. to continue to develop and replace its weapon systems much in the way we did during the Cold War even though few of those weapons ever saw combat.

In a way, I can actually see American isolationism being great for the American military industrial complex. Political scholars in Europe have recently opined that America's presence is what has kept the "scorpions in the bottle" in Europe post WWII. Keep in mind that pre WWII Europe's history was one of constant and ever-escalating warfare. After all, World War I was almost universally hailed as the "war to end all wars" but we all know how that turned out.

I would argue that American military supremacy has prevented a lot of regional conventional wars. After all: why fight when the U.S. might show up? The result has been, post Gulf War 1, that warfare has shifted away from conventional industrialized warfare to hybrid and insurgency-led unconventional war.

IMO, once it's apparent that the U.S. is no longer interested in maintaining the global order, you could see conventional warfare return to regional rivals. There's a very distinct possibility of a conventional war between Saudi Arabia and Iran at some point in the next decade. Turkey under Erdogan has become territorially ambitious with Erdogan repeatedly publicly calling for a rebuilding of the Ottoman Empire (he practically made it a campaign issue) and recently Erdogan has threatened to invade Cyprus. At the moment, both Europe and the U.S. are kind of hoping that Erdogan will just "go away" but I suspect he won't and soon Turkey will be forced out of NATO.

In Southeast Asia, I suspect that Vietnam, Indonesia, the Philippines, Malaysia, etc. will grow at least a little bit wary of China's military ascension and will likely look to buy weapons from the U.S. if not to use them themselves then to have them as a token should they ever need U.S. military assistance.

In summary, I think the U.S. Military Industrial Complex will be just fine and I suspect they know that they will be fine. No need to start a war when wars, historically, have a habit of starting themselves.

The U.S. just threatened Vietnam with tariffs for trans-shipping Chinese goods fwiw and I don't think that's an idle threat. My suspicion is that after the Warren op-ed on trade (which was shockingly well digested by the DNC btw) more and more countries are going to take the threat of tariffs seriously.

A question I received via DM:

Cross-border trade between the U.S. and Mexico is already the largest bilateral trade arrangement in the world and IIRC cross border trade with the U.S. and Canada might be the third or fourth largest. So USMCA is a Goliath and it isn't going away or changing anytime in the foreseeable future. In fact, I see the U.S./Mexico trade growing rather significantly as both have what the other need (cheap natural gas and cheap grains and cheap labor... and yummy avocados :) U.S/Canadian trade might stagnate or decline a bit due a reduction in U.S. demand for oil from the oil sands.

But even with those trade arrangements, trade as a percentage of GDP is still very low for the U.S. In fact, when it comes to external trade as a % of GDP the U.S. is about as outward facing as Afghanistan (seriously). So that's our baseline: not much need for external trade and a political environment which seems to gravitate toward favoring domestic industry/trade hawkishness. If U.S/Mexico trade continues to grow, that will reduce the share of trade that escapes to the wider world.

As supply chains are reconfigured and moved outside of China, you could see trade between the U.S. and China go to near-zero (as an aside, many corporations have incentives to move their supply chains outside of China even when you put aside American interests). Trade between Japan and the U.S. is likely to decline but that's mostly because a quirk in Japan's demographics and their domestic policy for handling Japan's demographic decline: Japan is host to the world's oldest and most rapidly aging population. With a dearth of workers and an abundance of capital, Japanese companies have hit on the rather clever gambit of building factories in the U.S. and shipping some of the profits back home. So the U.S/Japan economic relationship will remain strong even if trade between the two countries technically declines.

Europe is likely to follow the U.S. down a protectionist rabbit hole as it will not want to become a "U.S. tech colony." That escalation is pretty straight forward: onerous taxation and regulation of U.S. technology companies by European countries, U.S. retaliation by tariffs on German autos and auto supplies, and round and round we go. So I'd imagine we will see trade between the U.S. and Europe decline both in absolute and relative terms.

Who Europe trades with is another matter. Europe is boxed in by energy: they have practically no domestic natural gas or oil supplies and, short of a war-time effort to build out nuclear power and electric vehicles, they are a very long ways from even a modicum of self-sufficiency. Europe lacks the force-projection capabilities to secure oil supplies from the middle-east so they kind of have to "hope" for stability there. Likewise their relationship with Russia is tenuous and lopsided. In the long-run, I'm not entirely sure who Europe's trade partners will be. Their needs are orthogonal to China's and India's so those two are out.

The big variable in all of this is regional warfare. The post-WWII era is the longest and most prosperous peace in human history. There's no guarantee that remains. So, for example, if war were to break out between Saudi Arabia and Iran or if Turkey were to try to take over the Kurdish territories of Iraq and Syria or make a push into the Balkans.... that region and its oil could simply become unavailable which would throw what remains of the global order into a tizzy.

So perhaps call it the End of Global Trade and the ascension of Regional Trade.


I think it would be a long reach for the U.S. to try to adopt an EU-style model of integration with Central or South America. A lot of the trade relationships wouldn't make any sense (e.g. Brazil and U.S, two agricultural powers... no upside unless you want to create an agricultural OPEC). Further, the EU experience with integrating various countries politically hardly inspires confidence. You would have serious problems with monetary integration (I'm going to go ahead and say it's impossible). Other than copper and lithium, SA doesn't really have anything that the U.S. needs (btw the U.S. has both, just slightly more expensive). I could go on and on but I don't see the benefits to the U.S. being remotely close to making it a worthwhile effort.

IMO, the most likely course is for the U.S. to leave the Monroe Doctrine in place and remain largely economically disinterested in South America. There is a possibility for the U.S. to strike some sort of a deal with either Argentina or Chile for a military base somewhere near the Straits of Magellan as part of a strategy to contain China.


Given how integrated much of the world has become and how reliant on the U.S. much of the world has become, U.S. domestic policy and foreign policy are inherently intertwined. Our domestic decisions will invariably reverberate throughout the world (think of the Butterfly Effect)

I don't understand your question, really. What's a "similar car?"

But cars are the poster child of global trade. They're made with parts from all over the globe. We just slap the label "American" on it if the brand has an American historical HQ.

Even from an historical perspective, global trade is fundamental to competitive markets. Toyota and the Japanese car companies nearly destroyed the U.S. manufacturers in the 70's because of innovations in industrial engineering. You really want to return to protectionist manufacturing? Tesla is now disrupting foreign luxury car markets. You really want to cut Tesla off from selling cars overseas? Oh yeah, and Tesla parts are of course sourced all over the globe.

Want to tell Apple/Google/Amazon shareholders that those companies are no longer allows to provide services outside the U.S.?

Trade isn't about merely "having" labor or resources. It's about competitive advantage. Who makes the best OLED screens right now? Samsung, that's who. So you want to accept a shitty screen on your phone by cutting off global trade? And there's no need for clothes-rending because someone else does something better. That's just how markets work. If someone else can manufacture something else better or more efficiently it make sense to just use that part while they do it better. It frees up your labor to do what *you* do well. Apple engineers focus on innovative software and just buy the screens from Samsung. Because it would be dumb to try and compete in OLED in the next couple of years.

This is just econ 101, the fundamental benefits of open trade. I'm dumbfounded at how both the GOP and Democrats are so willing to casually dismiss it.

I'm all for *regulating* trade...e.g. enforcing labor and environmental standards. But the idea of the U.S. isolating itself from global markets is just beyond insanity.

Anti-global-trade sentiment I put in the same bucket as anti-vaxxer sentiment. They both casually dismiss some of the greatest achievements of humanity purely by dogmatic belief.

To this issue, we do have a lot of jobs but the fact is, we don't have enough people who are capable to fill these jobs. Not everyone can be an engineer, a machinist, etc. Working in the aerospace industry I have heard the same refrain from all levels of the supply chain, "we can't get enough people who can do the work." A lot of these companies can only hire so many button pushers and unfortunately, that's about all that is out there right now.

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TEAM HD
Each day is what you make of it so make it the best day possible.

This has been my question through the whole thread (which is an awesome thread, really enjoying everyone’s input).

GreenPlease - you’ve said the US can essentially roll itself up in a no-trade burrito and take care of everything itself, but innovation happens everywhere. It’s really not in our (or the world’s) best interest to do that as, for example, like trail mentioned, OLEDs are being made so much better by samsung in SK. In addition how do we spin up the amount of manufacturing and skilled labor, even in 2 decades, to accomplish what is happening in the world right now?