Resolved: Tariffs harm domestic and foreign economies.
This is part of round one of the economics debate tournament.
Resolved: Tariffs harm domestic and foreign economies.
Debater must have typing experience.
Debater must have internet access.
Must structure the debate in a readable, coherent fashion.
Must insert one witty/interesting quote per round.
Please no lawyering, waging source wars, dictionary assaults (semantics), or fallacies.
(1) Acceptance + Internet High Five
(2) Main Argument
(3) Rebuttal to opponent's main argument
(4) Response to rebuttal + voting issues (one paragraph)
I accept this debate which I have thusly created and challenge those of rhetorical wizardry to a verbal duel. With my hand elevated and ready for forearm pronation, I slap yours in a ritualistic manner. Good luck to whomever accepts, and may the Gods smile upon you during this debate.
Let the game begin!
"Tariff laws, the vicious, inequitable, and illogical source of unnecessary taxation, ought to be at once revised and amended."
-President Grover Cleveland: State of the Union Message (1887)
I accept the debate. It looks like an interesting and informative one.
Interesting and/or witty quote: “It is better to debate a question without settling it than to settle a question without debating it.”
What is a tariff and what about it hurts economies?
The tariff is the chief means of protectionism, a policy that discriminates between domestic and foreign goods and services. Protectionism contrasts sharply with free trade, a policy that allows consumers to buy from abroad just as easily as they can buy goods domestically. A tariff is a tax levied upon goods as they crioss national boundaries, usually by the government of the importing country.  It is a special levy that consumers in the home economy are forced to pay to buy goods made abroad. In practice, the tariff is reflected in a higher price for domestic consumers; the consumers don't see the tariff, they just see the higher price, and choose their purchasing decisions based on that higher price: usually less consumption, which means less revenue for foreign companies. So the two main evils are higher prices for domestic consumers and loss of business for foreign producers. That is without taking into account retaliatory tariffs, which I'll go into later.
Tariffs hurt domestic economies
When a tariff is levied upon a foreign good imported into a domestic economy, the consumers see a higher price. The response to this fact is for supporters of tariffs to say that, "the domestic country will account for this, right?" "They will start producing more by themselves, and as a result be an isolationist utopia!" Sorry, that's not how it has worked in theory or in practice. In theory, the tariff causes a deadweight loss in the economy, which is a cost to society caused by government programs, externalities, monopolies, or other market inefficiencies, in this case namely tariffs.  A country suffers a net national loss with tariffs, and benefits without them. In theory, without these tariffs, countries benefit from trade through what's known as absolute and competitive advantage; these terms indicate when a country is by far more efficient at producing a good than another country, and by sticking with goods and services that country is better at doing, through trade, every party is made better off.  In practice, tariffs have hurt domestic consumers through higher prices, hurt domestic producers with higher materials costs, and exacerbated depressions. If protectionism in the form of tariffs really was a good idea, then why not raise the tariffs to 100% or 150% on all foreign goods? Surely the highest protectionist tariff would be the most beneficial, right? Wrong. The highest tariff in US history was the Hawley-Smoot Tariff, which was passed into law during the Great Depression, and as a result of its passing with Hoover's signature resulted in a severe US trade drop, an intensified depression, and retaliatory tariffs from abroad.  Everybody, moreover, is harmed by the general drop in the productivity of labor which the shifting of industries from more favorable to less favorable locations brings about, which leads me into the next contention. 
Tariffs hurt foreign economies
When a domestic economy levies a tariff on a good or service that domestic consumers want to buy, it hurts the foreign economy exporting the good or service. The reason is simply a loss in volume of sales: the higher a price increases, the less quantity of that good will be consumed.  So the higher a tariff increases, the less wealth being created between the two countries, and the worse everybody is overall. The foreign economy loses business and has to close factories and manufacturing facilities to account for the drop in sales. Levying a tariff on a foreign economy is essentially a slap in the face. As a result of this "economic warfare," the foreign country may impose a retaliatory tariff which harms their economy as described before. Free trade makes everyone better off. 
I thank my opponent for his opening argument, and I look forward to a good debate.
1. Tariffs save domestic jobs and industries.
Tariffs protects domestic goods and services from foreign goods and services. This also protects domestic jobs involved with the industries from cheaper overseas competition. Many developing industries rely on trade tariffs to be able to compete with foreign goods. Entire communities reliant on them will sink into poverty. An example of successful tariffs would be Japan. After WWII, they levied massive tariffs to keep their weak economy afloat. Today Japan is one of the biggest economies in the world and a major exporter. Tariffs saved their industry in an event from the 1960's to the 1980's referred to as the "Japanese post-war economic miracle." [1. http://www.country-data.com...]
2. Free trade creates trade deficits.
A trade deficit is a negative balance of trade. Calculating a trade deficit requires totaling imports and exports from both countries. The side where imports are greater than exports has a trade deficit. Net foreign ownership of American assets is currently $2.7 trillion. [2. http://economyincrisis.org...] William Bahr, an economist of the Economic Strategy Institute has estimated that our trade deficit since 1991 has made our economy 13% smaller than it otherwise would be. Before 1980 the GDP grew at an average of 3.8% per year. Afterwards, as our trade deficit grew, it dropped to 3.1%. [3. http://industryweek.com...]
3. Free trade hurts foreign economies.
"Free trade hurts foreign economies" is a controversial statement . It does not apply to all countries, however free trade can be devastating for some. For instance look at NAFTA. Only ten percent of Mexicans have seen an increase in standard of living during the last decade, and that does not make up for the jobs lost due to U.S. dominance in foods or other goods.[4. http://witness4peace.blogspot.com...] NAFTA was essentially a failure for the foreign economies. In fact, the evidence has shown that Latin America's per capita income has been reduced to half thanks to the free trade policies it adopted in the 80's. [5. http://www.eclac.org...]
Trade tariffs are necessary to help small industries grow and stop trade deficit. I am done with my argument and turn the debate over to Pro.
"Economy is the basis of society. When the economy is stable, society develops. The ideal economy combines the spiritual and the material, and the best commodities to trade in are sincerity and love." -Morihei Ueshiba
I thank my opponent.
Tariffs save domestic jobs and industries.
If this were truly the case, then why don't we enact 150% tariffs on all foreign goods, so that our industries can flourish? Because, tariffs are a, "vicious, inequitable, and illogical source of unnecessary taxation." They go against the one principle of economics that most economists agree on: free trade makes everyone better off. This claim is similar to the claim that no economy ever got rich without using tariffs to industrialize. This claim is false. "This claim, generally used by developing countries to avoid cutting tariffs, has a two-word refutation: Hong Kong. Some say Hong Kong's postwar success was as a port and financial centre for China. Not true. Being the entrepot for a country under US and United Nations embargoes and ruled by an autarkic Communist was not exactly a licence to print money. Hong Kong did the same as the other Asian tigers – starting off with clothing and other labour-intensive manufacturing and moving into more sophisticated products and services later."
Free trade creates trade deficits.
This claim goes back to the idea that when two parties make a transaction that one party will be left worse off and the other party will get the better deal. However, this ignores the concept of wealth creation and further capital production. If we import cheaper steel from China than we can produce in the United States, industries that use steal will benefit. If a tariff is placed on foreign steel, than we are just subsidizing the inefficiencies of our steel manufacturers when we could be specializing in some other industry we do better to achieve abosulte and comparative advantage. Also, the price for steel will increase in America, driving down demand and economic growth. The growth that we could achieve counterbalances the trade deficit, so we end up producing and exporting more without tariffs. [http://www.britannica.com...]
Free trade hurts foreign economies.
t's a controversial statement because it isn't true. Economies develop by exporting, and they get harmed by overconsumption and not producing as much. Simple as that. [http://www.lewrockwell.com...]
As per the rules, I will not respond to my opponent's rebuttal, although my arguments will naturally do so.
"If protectionism in the form of tariffs really was a good idea, then why not raise the tariffs to 100% or 150% on all foreign goods? Surely the highest protectionist tariff would be the most beneficial, right? Wrong. The highest tariff in US history was the Hawley-Smoot Tariff, which was passed into law during the Great Depression, and as a result of its passing with Hoover's signature resulted in a severe US trade drop, an intensified depression, and retaliatory tariffs from abroad."
Pro claims that since the Hawley-Smoot Tariff failed, tariffs harmful to the economy. This is an obvious logical fallacy. The success of tariffs obviously depends when and how they are enacted. After WWI farm prices declined. Tariffs were imposed to help farmers, and the isolationist movement grew out of control, with all sorts of industries demanding protection (the onset of the great depression helped spur this on). The result was a disaster that brought retaliatory tariffs and hurt foreign relations. [1.http://future.state.gov...] Saying that if tariffs helped the economy, they should be raised to the maximum is ridiculous. It is akin to saying if vegetables are good for you, you should stuff yourself with them all day. Furthermore, Pro ignores that the U.S. tariffs at the time were mostly successful, protecting its infant industries and allowing them to develop.[2.http://en.wikipedia.org...]
"When a domestic economy levies a tariff on a good or service that domestic consumers want to buy, it hurts the foreign economy exporting the good or service. The reason is simply a loss in volume of sales: the higher a price increases, the less quantity of that good will be consumed. So the higher a tariff increases, the less wealth being created between the two countries, and the worse everybody is overall. The foreign economy loses business and has to close factories and manufacturing facilities to account for the drop in sales."
My opponent simplifies things and ignores other effects of tariffs. Nearly all wealthy economies developed under protection of undeveloped industries. [3.http://www.ied.info...] What free trade does is gives major developed industries access to countries with weaker industries, allows them to take away their jobs and make the country dependent on them. This leads to stagnation and unemployment. Mexico, as I stated in my main argument, is a good example of this.
Pro, if I understand the rules correctly, can only respond to this argument and not my previous ones. He should also not introduce new arguments in his argument as I will be unable to respond. I look forward to the final round. ;)
"Economics is extremely useful as a form of employment for economists." -John Kenneth Galbraith
This round will be for responding to the opponent's argument, final statements on other arguments, and voting issues. You may not bring up new arguments, but may respond and expand upon past arguments.
Upholding my own case
What is a tariff and what about it hurts economies?
My opponent did not address this argument whatsoever. He forfeits this argument.
Tariffs hurt domestic economies
My opponent mentioned only two problems with this entire argument, and that is the Hawley-Smoot tariff and infant industry argument. He asserts, "Pro claims that since the Hawley-Smoot Tariff failed, tariffs harmful to the economy. This is an obvious logical fallacy. The success of tariffs obviously depends when and how they are enacted."
The Hawley-Smoot Tariff didn't fail, but that's not the problem; the problem is that it succeeded. It raised dutiable rates to sky-high levels for over 20,000 imported goods.  Can you imagine how much costs would rise for manufactureres, producers, small businesses, and government programs when over 20,000 imported items, many of which used in great demand over US goods and of greater economic efficiency than those made in the US. Since a basic understanding of economics leads us to an idea of wealth creation through trade, it follows to say that much wealth was regretfully not created while the Hawley-Smoot Tariff was in place.  For example, one-quarter of all wealth created today comes from international trade.  U.S. imports decreased 66% from US$4.4 billion (1929) to US$1.5 billion (1933), and exports decreased 61% from US$5.4 billion to US$2.1 billion, both decreases much more than the 50% decrease of the GDP.  Thus, the wealth creation that could have occurred was sadly not not occurring, because of an inane Washington policy. Tariffs are harmful to an economy, because they artificially sustain jobs that the market would otherwise not allow. Absent the tariffs, the economies of the world would restructure in a way in which the countries most specialized and best at doing a certain industry, manufacturing a certain product, or doing a certain service would help all other economies through absolute and comparative advantages, and leaving tariffs in place only increases opportunity costs of doing those things. 
"Furthermore, Pro ignores that the U.S. tariffs at the time were mostly successful, protecting its infant industries and allowing them to develop." This is his next objectionh in his rebuttal as well.
Robert P. Murphy absolutely demolishes this argument. He writes, "It is telling that such proposals never mention the duration of the "maturation" process. After all, if consumers are forced (by the tariff) to pay higher prices to relatively inefficient domestic producers for, say, two years, after which the domestic producers will outcompete the foreign rivals and offer lower prices forever after, then the deal doesn't sound so bad. But if consumers are forced to indirectly subsidize inefficient domestic producers for eighty years in the hope that they will one day become competitive, then the proposal sounds far less appealing. The fact that those espousing the infant industry argument never even mention the time frame just shows how little thought they've actually given to their proposal.
The infant industry proposals notwithstanding, the free market contains a mechanism by which firms can suffer short-run losses so long as they are compensated by eventual long-run profits. That mechanism is simply a loan. Plenty of new firms, especially sole proprietorships, don't make money in their first few years of operation. But so long as the present value of the firm's expected future cash flows is positive, the firm's owners should be able to borrow money to finance the first few years as they develop experience, name brand trust, etc.
If a firm or group of firms can't achieve funding from private investors to go ahead with their projects because the present values of their ventures are negative, then that is the market's way of saying that their schemes would squander valuable resources in the short run without sufficiently compensating gains in the long run. The advocate of a tariff to promote an infant industry is thus saying that he or she knows better how to determine intertemporal tradeoffs than the average person in his decisions to borrow or lend money at different rates of interest.
The absurdity of the infant industry tariff can be illustrated by considering an "infant worker" tax, which would be a tax levied on experienced workers in order to encourage businesses to hire younger workers with less experience. After all, without giving the young workers such help, how would they be able to survive during the years of training in schools? Clearly we need to tax older workers in order to encourage the development of human capital in our infant workers!" 
Free trade creates trade deficits.
This is not true, and this argument overlooks some basic fundamentals in how trade works. For example, a country may have a trade deficit with Japan, but do to the input efficiency of trade with Japan, thatand efficiency country may have trade surpluses with other countries, actually increasing wealth creation and economic specialization all around. 
Robert P. Murphy writes, "If trade deficits still seem dangerous, consider that everyone (who has a job) has a huge trade surplus with the city in which his or her employer is located, and a trade deficit with many other cities in the United States. In my case (and as I explain to my students), I have a huge trade surplus with Hillsdale County: if we added up all of the transactions I conduct with people who live in Hillsdale County, we would find that every month I end up paying out far less than I receive. In contrast, I have a large trade deficit with the nearby city of Jackson, since this is where my wife and I go on weekends when we want to do some decent shopping. Am I conducting my trade policy foolishly? Should I restrict my purchases from Jackson until I take a part-time job in that city, perhaps at the Denny's?"
Tariffs save domestic jobs and industries.
Actually tariffs do save domestic jobs and industries, but at an extreme economic expense and economic efficiency expense. This can be aptly demonstrated with steel tariffs:
These protectionist claims are unsound.
"A study of economics usually reveals that the best time to buy anything is last year." -Marty Allen
"Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway." -Warren Buffett
"After all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world." -Calvin Coolidge
"I made my money by selling too soon." -Bernard Baruch
 Taussig (1931)
 Peter Leeson (2010)
Before my rebuttal, I need to make some things a bit clearer.
"My opponent did not address this argument whatsoever. He forfeits this argument."
I did not address it directly, as it was a broad overview of Pro's main argument and contained no specific attacks on tariffs. Rather, I provided counterexamples showing how trade tariffs saved jobs and prevented trade deficits. This accusation is based off of Pro's flawed assumption that each and every one of his points would be attacked. I simply demonstrated that the pros of trade tariffs vastly outweighed the cons, proving that trade tariffs were beneficial to domestic and foreign economies. As I stated, anything can be harmful if used or implemented incorrectly (such as free-market anarchism).
If you look at his argument, you can see that Pro does the same thing, but to very specific arguments and examples. He did not respond at all to my example of Japan's economic recovery, the loss of jobs in Mexico, the statistics showing that Latin America's per captia income has dropped to half since the 80's, and the estimation that the U.S. economy is 13% smaller than it would without trade deficits. Instead, he provided counterexamples and did not directly address my arguments, which was completely insufficient in that situation.
Tariffs hurt domestic economies
1. "The Hawley-Smoot Tariff didn't fail, but that's not the problem; the problem is that it succeeded. It raised dutiable rates to sky-high levels for over 20,000 imported goods."
Pro claimed that it "succeeded" in raising the cost for imported goods. I agree wholeheartedly with him. My point was about helping the economy, which it utterly failed at. He confused the ends with the means.
2. "Can you imagine how much costs would rise for manufacturers, producers, small businesses, and government programs when over 20,000 imported items, many of which used in great demand over US goods and of greater economic efficiency than those made in the US."
Pro admits that the tariff raised prices on goods that were more efficiently imported than made domestically. In doing so he also admits that it was not the fault of any tariff, but rather a badly-implemented one, which was my point all along.
3. "Tariffs are harmful to an economy, because they artificially sustain jobs that the market would otherwise not allow."
Once again, Pro ignores the point. Tariffs do sustain jobs that a free market would not allow, but that is the goal of tariffs. It artificially keeps infant industries afloat, allowing them to mature. If economies were allowed to "restructure," as Pro put it, certain countries would be deprived of foreign trade or face rampant unemployment, while others would monopolize world trade. What Pro suggests is Anarcho-Capitalism on a grander scale.
4. "It is telling that such proposals never mention the duration of the "maturation" process."
The duration is estimated through how long the industry will take to develop, prices and demand, raw material production, and various other factors. For example in the engineering industry the average maturation length is about 20 years, which is not all that long if you are talking about an undeveloped country. [1.http://www.sciencedirect.com...]
5. "The infant industry proposals notwithstanding, the free market contains a mechanism by which firms can suffer short-run losses so long as they are compensated by eventual long-run profits:a loan. Plenty of new firms, especially sole proprietorships, don't make money in their first few years of operation. But so long as the present value of the firm's expected future cash flows is positive, the firm's owners should be able to borrow money to finance the first few years."
Or the industries could merely copy low-end foreign goods and sell them at inflated prices. Tariffs increase the demand for domestically made goods. Not using tariffs would take away jobs that the infant industries need to mature.
6. "The absurdity of the infant industry tariff can be illustrated by considering an "infant worker" tax, which would be a tax levied on experienced workers in order to encourage businesses to hire younger workers with less experience."
My opponent seems confused. These are two very different things.
Free trade creates trade deficits
7. "For example, a country may have a trade deficit with Japan, but do to the input efficiency of trade with Japan, thatand efficiency country may have trade surpluses with other countries, increasing wealth creation and economic specialization all around."
The job losses of trade deficits cannot always be cancelled out by surpluses. Take an example. Country A has a much stronger economy and has more workers than country B. Country A is a bigger producer of cars and computers, while Country B is a bigger producer of foods and luxury items. They trade each other their products, however, without tariffs Country A soon begins to take over their car and computer industries. Country B now relies on Country A, creating a trade deficit. It can sell its foods and luxury items to other countries, but what does that do for the lost jobs in the car and computer industries? Economic specialization is not always a good thing, and certainly not for weaker economies.
Tariffs save domestic jobs and industries
8. "Every state in the union will suffer net job losses as a result of the [steel] tariffs;"
"Ironically, the biggest job losses will occur in "steel belt" states such as Pennsylvania and Michigan."
"For every steel job "saved" as a result of the tariff, eight jobs will be lost in all sectors of the economy;"
"The steel producing industry would save between 4,400 and 8,900 jobs at a cost of between $439,485 to $451,509 per steel job saved;"
"Higher prices for steel products and related inefficiencies would decrease U.S. national income from between $500 million and $1.4 billion at a time when policy-makers are talking about ways to improve the U.S. economy."
Steel is not a good choice. It is not even close to a finished product, and thus many jobs rely on it. My opponent's use of steel as an example once again shows that he does not understand my argument. I am arguing that tariffs should be used only in the appropriate circumstances. Not anytime we want! As I stated, "the success of tariffs obviously depends when and how they are enacted."
Hong Kong example
9. "This claim, generally used by developing countries to avoid cutting tariffs, has a two-word refutation: Hong Kong. Some say Hong Kong's postwar success was as a port and financial centre for China, but being the entrepot for a country under US and United Nations embargoes and ruled by an autarkic Communist was not exactly a licence to print money. Hong Kong did the same as the other Asian tigers – starting off with clothing and other labour-intensive manufacturing and moving into more sophisticated products and services later."
Actually, after the communists took power in China, many immigrants fled there, and some Chinese corporations relocated to the city. The rapid industrialization and economic success is in large part due to population growth and low labor costs. [4.http://en.wikipedia.org...]
Here we see that:
1. Pro ignored the point of my argument entirely.
2. Pro completely ignored many examples that I gave (Japan, Mexico, Latin America).
3. Pro's Hong Kong argument was in fact copied word for word from his source.
4. Pro's Hawley-Smoot tariff argument backfired when he admitted that the items taxed were more efficiently imported.
5. Pro used an "infant worker tax" concept, which makes absolutely no sense to compare to corporations.
6. Pro's trade deficit arguments, again, ignored the point of my own argument.
"As my summary has shown, Pro has not met the BoP. The resolution is negated." -FourTrouble, upon completing a debate on the same subject.
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