Adam Bayliss : For example, NAFTA led to less shirt production and more corn production in the US and less corn production and more shirt production in Mexico. This was because the price of shirts relative to the price of corn was higher in the US than in Mexico, so reducing Mexican tariffs on corn and US tariffs on shirts reduced profits for corn farming in Mexico and for shirt making in the US while raising profits for shirt making in Mexico and corn farming in the US. But the price of making corn in the US did not include the environmental costs of pesticide run off or full price water for agricultural use, much less the positive probability that there will be future costs of GMO corn seeds. These are real costs of producing corn the way we grow it here in the US that are not included in the commercial cost of corn. On the other hand, the price of making more shirts in Mexico did not include the social costs of moving Mexicans out of villages into urban slums. In traditional villages Mexicans enjoy centuries old kinship safety nets and lower exposure to crime and disease. It is not at all clear that if we take these external costs of living in Mexican urban slums and shanty towns into account that Mexico's true comparative advantage is in shirt production, and if we take the environmental external costs of modern corn farming into account the US actually enjoys a comparative advantage in corn production. Therefore, it is not necessarily the case that by promoting more free trade between the US and Mexico NAFTA has yielded efficiency gains rather than losses. Hi, Wow, talk about postulating a lot of hypotheticals to justify a conclusion that was decided before the data was evaluated. So IF there were a "free market" in both corn and clothing, THEN trade restrictions would be BAD because they would reduce efficiency and raise costs and lower living standards. And so NAFTA would raise living standards in both Mexico and the USA. But since we "know" that this cannot be the case (because of the drop in US wages and jobs in the years since NAFTA?), it must be that government interference in the economy has distorted the relative costs of corn and clothes production in the US and Mexico. So corn must actually be cheaper to grow in Mexico than in Iowa and Illinois, and clothes must actually be more efficiently made in the USA? I mean if the distortion in the market were the other way (US clothing more subsidized than Mexican corn), the gains from NAFTA would be even greater than if the markets were free. And we can't permit that to be the case, can we? CORN So you introduce water subsidy and the "positive future costs of GMO corn". There IS a US water subsidy that distorts the market. But that is in the Southwest where water is scarce. Iowa and Illinois, where US corn is grown have a climate and soil just about ideal for corn. Does Mexico? My geography of Mexico is a bit weak: I picture lots of desert, some mountains, and jungle in the south. None of that very suitable for corn. Maybe better suited for that plant they make tequila from? Or for growing coffee? So just what parts of Mexico are better suited for corn farming than Iowa and Illinois? So it must be the GMO's? Genetically engineered Bt corn that resists insects without spraying insecticides must create a future cost that would not exist if that same corn were to be grown in Mexico? Or maybe it is a future nitrogen fixing corn that needs less artificial fertilizer? Application of less fertilizer will create unknown future costs if done in Iowa but not if in Mexico? CLOTHES Clothing as made today uses relatively low skill workers using machinery of relatively low capital investment. All relative to other manufactured items like cars or airplanes. So maybe the USA has more people with lower education, and it is Mexico with the greater number of college graduates and people with under-utilized job skills? Must be the case, or else NAFTA and the corn/clothes redistribution that you describe would make perfect sense. Silly me. I had thought this was just the other way around. So maybe more clothes should be made in the US, and more aircraft should be made in Mexico to take advantage of the "real" production costs? RURAL VS URBAN In the US, environmentalist are concerned over the costs of "urban sprawl" and people moving from the compact high density cities out to the suburbs and country side. They say the environmental impact is less when people live in cities because of lower transportation costs, effective mass transit etc. So when the US changed from 90% rural 10% urban to the reverse, it was GOOD, but if Mexico were to follow the same course it would be BAD. Because..... help me out here. I got lost. In conclusion, I would say that since government interference can indeed cause distortions that reduce efficiency and lower overall productivity and thus living standards, that the solution is not more tariffs and protectionism, but rather the opposite: elimination of government subsidies and market distortions. William K. Shireman & Clifford Cobb said that some years ago, as the best way to reduce pollution as well. See http://www.geocities.com/capitolhill/4834/55.txt Oops, that conclusion is not permitted, is it? ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) Bayliss again: > >Many of the indigenous people of Mexico have been living off corn for >thousands of years, so they must have had some success in growing corn >there. Is it a good idea to undersell Mexican corn farmers, forcing >them into the cities or to develop a crop that may not provide >subsistence? Are there enough jobs in Mexico to provide a living for >these displaced farmers, or are they better off growing corn? Hi, I didn't mean to say that they can't grow corn in Mexico, just that they can't grow it as efficiently as in Iowa or Illinois. Farmers there now average over 140 bushels per acre. I bet that is 10 time the yield of the Mexican farmer. Look at it this way: does the Mexican today want to live the same way that their ancestors did 1000 years ago? And how much larger is the population there today than it was 1000 years ago? So how much more corn would need to be grown just to maintain the same consumption per person? MY ancestors were subsistence farmers many generations ago. If I wanted to live that way today, I would join a rural commune. I don't. Do you? >...Is it a good idea to undersell Mexican corn farmers, forcing >them into the cities or to develop a crop that may not provide >subsistence? If you are talking about subsistence farmers (as I was), then the price of imported corn does not matter to them: they eat what they grow. They might stop if they found that they could buy it cheaper in stores. But that would be because they decided that it was a better deal for them. If you mean farmers who grow to sell on the market, are you saying that the problem in Mexico is that food is "too cheap"? That the problems of poor economies stem from underpriced food? (Hey, you should have been in FDR's "Brain Trust" ;-) >...Are there enough jobs in Mexico to provide a living for >these displaced farmers, or are they better off growing corn? > That is the other side of the trade coin: jobs are created in export industries. Shirts in the example you gave. The answer is yes there should be jobs for the displaced farmers. The basic question here is this: is increased productivity a GOOD thing? Was the Industrial Revolution a GOOD thing? Does in make sense to grow both corn and coffee in both Iowa and Mexico? Or to grow corn in Iowa and coffee in Mexico, and trade? ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) jjim blair (jeblair@facstaff.wisc.edu) Madison Wisconsin USA. This message was brought to you using biodegradable binary bits, and 100% recycled bandwidth. For a good time call: http://www.geocities.com/capitolhill/4834