International trade minimum wage

Discussion in 'Politics Discussion' started by Gomer, Mar 21, 2014.

  1. Gomer

    Gomer Well-Known Member

    Feb 2014
    Likes Received:
    The new oil and gas production in the United States was supposed to solve the trade deficit problem, and it did decrease the trade deficit by a small amount, but the trade deficit has begun to rise again. Since we are borrowing from foreign public and private sources to pay for the trade deficit, and to pay for the interest of various kinds on money previously borrowed, our debt to foreign lenders is increasing rapidly and is compounded. Borrowing to create new production capacity is one thing. However, when an individual, a business, or a nation borrows in a major way to pay for consumption, and then borrows to pay all the interest on old debt, that leads to bankruptcy, or a finessed equivalent to bankruptcy.

    The American economy will end up being wrecked if we don't eliminate the trade deficit, and that would be especially difficult for people because becoming poor after having had a good income is worse than being poor from birth. Yet, with this looming in the future, voters aren't pushing the government to solve the problem.

    One solution would be an international minimum wage equal to the American minimum wage, because that would make American labor competitive. It is doubtful that all nations would get on board a proposal to create an international minimum wage, but there is an alternative.

    I am calling the alternative option an "international trade minimum wage", and it could be established unilaterally by just the United States.

    The international trade minimum wage legislation would establish a requirement that any business would have to follow in order to do any business in the United States. A business which didn't meet the international trade minimum wage requirement could not sell products nor services in the United States, nor could it have its products nor services sold in the United States by a third party. The trade minimum wage would be equal to the American minimum wage.

    The requirement would be that any business, domestic or foreign, would be required to pay its lowest paid employee anywhere in the world the American minimum wage or more. This requirement could not be considered to be a violation of any trade agreements because the requirement would be exactly the same for both domestic and foreign businesses. There is precedent. Nations levy sales taxes on both domestic and imported products. No one would try to demand that a nation could only levy sales taxes on domestic products, while allowing imports to be sold without the sales tax.

    The obvious counterargument would be that that would make imported products more expensive. However, American wages would adjust so that it would do no harm to the standard of living of Americans. The historical data is that in the most recent years when the American economy was self-sufficient, Americans had a somewhat higher standard of living than we do now. So even if we didn't have cheap imports, we could still have a high standard of living.

    Note also that the cheap imports aren't really as inexpensive as we think they are. The reason is that the economy has borrowed money from foreign lenders to pay for the cheap imports. We are all part of the American economy, so what happens to the American economy in the long run happens to us. What is happening is that, after we pay for an imported product at a store, we still owe money on it as part of the American economy, because the economy has borrowed from foreign lenders. Furthermore, we have to pay interest on the loan as part of the American economy. That means that we will have a lower standard of living in the future. So the imports we buy aren't really as inexpensive as it looks from just the store price. If on the other hand, we were to buy somewhat more expensive American made products, that money would go directly to our businesses, which would then be able to hire more people, and pay them higher wages. The higher future wages would make it possible for people to buy just as many American made products as the imports they could buy when they had a lower income.

    To avoid disruptions, an international minimum wage would need to be phased in somewhat gradually. Probably it would be adequate if the trade minimum wage would be 20% of the American minimum wage the first year, 40% of the American minimum wage the second year, 60% of the American minimum wage the third year, 80% of the American minimum wage the fourth year, and 100% of the American minimum wage for all future years.

    This would not harm other nations, but would rather help other nations, so once they understand that, they would have no grounds to protest the international trade minimum wage. What would happen is that as their wages were increased due to the trade minimum wage, they would be able to buy more goods and services in their own nations, and that would cause new and additional economic growth of their own nations.

    It could work out for trade also. With a higher standard of living in foreign nations, they could buy more American made products,which would make it possible for us to buy more imports again. What is important is for America to not have a trade deficit so we don't make the debt to foreign lenders worse. But we could have higher trade all around if we had a balance of trade so that we didn't have a deficit.
  2. Katang Finance

    Katang Finance Guest

    Feb 2014
    Likes Received:
    In the long run, the cost of living will adjust itself to the level of wages. For example, housing prices will fall if most people cannot afford higher priced housing. Therefore, cost of living is not a relevant variable.

    One size fits all is necessary because it is the only way to stop a race to the bottom of wages as corporations move production from higher wage nations, and states, to lower wage nations and states. This applies to middle class jobs also. Notice that many engineering and computer programming jobs have been exported to low wage nations, precisely because their wages are lower. Further, the race to the bottom in wages doesn't help the corporations and the wealthy because as wages drop, people won't be able to buy as many goods and services as before, so corporations will shrink, drying up the wealth of the wealthy.

    You last point could only have been made if you didn't actually read the message all the way through. If you weren't interested, that is of course OK. However, I will note that the international trade minimum wage wouldn't require a consensus of all nations, although all nations would benefit from it. The trade minimum wage could be established by the United States alone. The reason is that the mechanism for enforcing the trade minimum wage is permission to do business in the United States, such as permission to have a business's products sold in the United States, either directly or indirectly, the right to borrow or lend money in America, and so forth. Corporations which didn't want to pay all their employees the America minimum wage or more could opt out of doing business in the United States. However, most probably wouldn't because a quarter of the Gross World Product is the American Gross National Product, so the American market is too large to opt out of if business owners are rational and intelligent.

    We wouldn't need any businesses which paid lower wages, because American wages would be competitive with the wages in any foreign business which would ve allowed to deo business in the United States. For our wage levels, it would be the same as if all other nations adopted the American minimum wage, because we simply wouldn't be dealing with any businesses which did not meet the requirement.
    In addition, the trade minimum wage would be beneficial to businesses because rising wages would increase sales, and therefore increase profits.

    At the moment, even if a business owner understands that raising wages will cause business expansion, while falling wages will cause businesses to shrink, that knowledgeable owner still doesn't dare increase wages on his or her own. Why? The reason is that if one or a few businesses raise wages voluntarily, then other businesses which do not raise wages will gain a competitive edge. So business owners in the know are unable to raise wages voluntarily, no matter how beneficial to businesses increasing everyone's wage would be. Business would gain a tremendous benefit from increasing wages, but the only way it can be done is for all businesses to be forced by law to raise wages together.
  3. crimsonghost747

    crimsonghost747 Senior Investor

    Mar 2014
    Likes Received:
    Interesting idea. So, since Asian manufacturers simply could NOT raise the wages to the US standards... basically every Asian company that exports to multiple countries (those exporting 100% of their products to the USA could handle raising the wages due to increasing the price of products sold) would simply be denied the right to export their products to the USA?

    So, overnight, goodbye to all products that are made in China, Taiwan, Vietnam etc. With time some of these products would come back since companies would split their "made for the USA" products into a different company (owned 100% by the bigger one) that would manufacture things just for sale to the USA.

    So on the short term: Basically the amount of products in US retail stores would drop by over 90%. Shelves would simply be empty. This would quickly be fixed by American corporations starting to create those same products. But yeah, those corporations would still pay the American minimum salary, and the end product would be maybe 50% more expensive than what it was before. So yup, great for purchasing power! On the longer term, people could just get Asian made devices (like 99% of electronics) so much cheaper by buying them from Canada, or any other country in the world when on vacation there. Hell, if you plan on upgrading the phones / tablets / laptops for the family, it would probably be cheaper to take a vacation abroad and buy it there. Same devices plus a free 2 week holiday!? Sounds good to me. Doesn't sound so good for American retailers. (this is already happening in Europe btw, people are traveling to other countries to buy certain items since it is cheaper and they get a small vacation at the same time if they want to stay overnight.)

    Also keep in mind that foreign countries usually don't like to be bossed around, especially when the ultimate idea in this whole thing is "what is good for 'Murica"

    Like I said, the idea really is interesting but it would never work.
    Last edited: Apr 23, 2015
  4. queenbellevue

    queenbellevue Well-Known Member

    Feb 2015
    Likes Received:
    You are 100% correct. No poor country would ever agree to this. Yes the exporters may love it, but then that would have massive effects on the economy because how the hell can local businesses keep up with those wage rates? Besides, they don't care that US manufacturers can't compete, in fact they LIKE IT. China would never be the powerhouse they are if not for manufacturing.

Share This Page