How can governments ensure all companies get equal access to China?

[SiliconWizard]

Most people have a fixed amount of disposable income each month.

That has to mean that if we raise prices by means of tariffs or other methods, people only have one option:  buy less stuff each month.

It is not immediately clear to me how this benefits anybody.

This is of course a very simplified economic "model" here. Things are just a tiny bit more complex.

There's a fine line between regulating economy and making it worse for everyone. But without any form of regulation, you're almost certain the system ends up going bonkers.
Tariffs are one way of regulating worldwide economy, and disposing of them altogether is probably not a good idea.

One thing (among many others) you're overlooking in this little "analysis" is that you're assuming that tariffs (and other means) make no difference to the economy, except higher prices for the consumer. This of course can't be true - if not excessive, it can actually improve things, and people would have more money to spend. Prices alone mean nothing if you don't link them to the standard of living of a given population.

The mere idea that lower prices for goods would lead to people getting richer somehow is completely silly. Doesn't work this way - or it's only very temporary. If you keep dragging prices down, everyone ends up poorer in the end. When you don't actively regulate economy, it just ends up regulating itself. And if everything gets cheaper, wages will mechanically drop too, eventually.

If you think we can just keep getting cheap goods from China (for instance) forever without it impacting our wealth negatively, IMHO you're largely deluded. At best, it would just end up making money have less value, without changing anything much to the overall standard of living. At worst, it would end up making us all poorer because it's just not sustainable as such.

You haven't really disagreed with the central thesis,  that tariffs reduce your spending power?

I think my point was made clear above. Sure it does reduce your spending power momentarily, but the long-term effects can be the opposite of this, due to retroaction on the whole economy.

But speaking of spending power, there is a secondary effect of cheap goods: people buying stuff that they may not have bought otherwise, and that are not really that necessary - so that secondary effect is that consumers possibly get poorer because they just spend more than they otherwise would. That's something we can all witness actually. That goes well with the motto of "spending all you can", but that also promotes overconsumption and tends to leave people with loads of crap and zero money to save (for hard times.)

But whatever the intention of a tariff is, it doesn't alter the fact that your disposable income doesn't go as far as it did without that tariff in place.  No?

I think I kind of explained my point above. You're assuming your income (and what it's worth) wouldn't change, and you seem to be kind of ignoring the bigger picture and the economic impact. I was making the point that it would.

[coppice]

When was the last time you saw a Chinese movie? 

I have no idea what point you were making there. Choosing movies to watch is mostly a language issue for most people. As it happens, I have watched a large number of Chinese movies. They don't make that many great ones, but I think their hit rate is still superior to Hollywood.

[rsjsouza]

In my experience there is a very fine line of tax rate that stimulates and impairs local manufacturing.

My home country kept every consumer product out of reach for the common man through law (70's~80's). This created an industry that, in certain segments such as automotive and computing, became complacent and aged for the most part (there were still a few brilliant entrepeneurs and technically skilled computer clone designers).

In the 90's it started opening the market (together with the PC market explosion), albeit with a hefty 60% tax on finished goods (this was designed to foster local manufacturing) but with much lower rates for primary goods (semiconductors included). This created two things: high prices and a grey market. The high prices maintained the complacency of the auto and consumer industries - everything that couldn't be moved easily then: white and brown goods and cars. On the other hand, what initially helped spike the tech companies given they were able to purchase more advanced equipment, in a few years the grey market expansion finished off these companies due to the excessive price erosion.

The issue does not extend to more niche segments due to regulation: a few areas have strong local design and manufacturing (e-scales, banking and commercial automation, instrumentation, etc.). Given the production volumes are lower, it is easier to enforce.

A similar attempt was made to block toys via compliance and regulation - unfortunately enforcement is weak and corrupt.

[Caliaxy]

Cheap labour is less of a factor now, than it used to be, since the manufacture of electronics can be heavily automated. Even if we do manage to bring back a lot of manufacturing to the UK, it won't create as many jobs, as many think.

Maybe not, but it would prevent IP to be transferred to foreign manufacturers who, in turn, will try to sell cheaper products based on your IP to your own customers. It might be too late to do anything about this though, Chinese companies are already offering high quality products and do their own R&D. Compete with that now.

[SilverSolder]

When was the last time you saw a Chinese movie? 

I have no idea what point you were making there. Choosing movies to watch is mostly a language issue for most people. As it happens, I have watched a large number of Chinese movies. They don't make that many great ones, but I think their hit rate is still superior to Hollywood.

Fair point, I have seen one or two Chinese movies and I thought they were superb -  but they are not mainstream, right?

[SilverSolder]

In my experience there is a very fine line of tax rate that stimulates and impairs local manufacturing.

My home country kept every consumer product out of reach for the common man through law (70's~80's). This created an industry that, in certain segments such as automotive and computing, became complacent and aged for the most part (there were still a few brilliant entrepeneurs and technically skilled computer clone designers).

In the 90's it started opening the market (together with the PC market explosion), albeit with a hefty 60% tax on finished goods (this was designed to foster local manufacturing) but with much lower rates for primary goods (semiconductors included). This created two things: high prices and a grey market. The high prices maintained the complacency of the auto and consumer industries - everything that couldn't be moved easily then: white and brown goods and cars. On the other hand, what initially helped spike the tech companies given they were able to purchase more advanced equipment, in a few years the grey market expansion finished off these companies due to the excessive price erosion.

The issue does not extend to more niche segments due to regulation: a few areas have strong local design and manufacturing (e-scales, banking and commercial automation, instrumentation, etc.). Given the production volumes are lower, it is easier to enforce.

A similar attempt was made to block toys via compliance and regulation - unfortunately enforcement is weak and corrupt.

I have also lived in countries that put up tariff barriers to protect local vested interests.  My experience is that it always ended exactly as you describe:  the protected industries act as if they have been given a royal charter excluding all competition (which is exactly what it amounts to), and stop trying.

Effectively, the tariffs or other regulatory hurdles end up creating the equivalent of monopolies locally.

I am not sure if there is a way to strike a good balance, or if it is always hopeless.

[SilverSolder]

Most people have a fixed amount of disposable income each month.

That has to mean that if we raise prices by means of tariffs or other methods, people only have one option:  buy less stuff each month.

It is not immediately clear to me how this benefits anybody.

This is of course a very simplified economic "model" here. Things are just a tiny bit more complex.

There's a fine line between regulating economy and making it worse for everyone. But without any form of regulation, you're almost certain the system ends up going bonkers.
Tariffs are one way of regulating worldwide economy, and disposing of them altogether is probably not a good idea.

One thing (among many others) you're overlooking in this little "analysis" is that you're assuming that tariffs (and other means) make no difference to the economy, except higher prices for the consumer. This of course can't be true - if not excessive, it can actually improve things, and people would have more money to spend. Prices alone mean nothing if you don't link them to the standard of living of a given population.

The mere idea that lower prices for goods would lead to people getting richer somehow is completely silly. Doesn't work this way - or it's only very temporary. If you keep dragging prices down, everyone ends up poorer in the end. When you don't actively regulate economy, it just ends up regulating itself. And if everything gets cheaper, wages will mechanically drop too, eventually.

If you think we can just keep getting cheap goods from China (for instance) forever without it impacting our wealth negatively, IMHO you're largely deluded. At best, it would just end up making money have less value, without changing anything much to the overall standard of living. At worst, it would end up making us all poorer because it's just not sustainable as such.

You haven't really disagreed with the central thesis,  that tariffs reduce your spending power?

I think my point was made clear above. Sure it does reduce your spending power momentarily, but the long-term effects can be the opposite of this, due to retroaction on the whole economy.

But speaking of spending power, there is a secondary effect of cheap goods: people buying stuff that they may not have bought otherwise, and that are not really that necessary - so that secondary effect is that consumers possibly get poorer because they just spend more than they otherwise would. That's something we can all witness actually. That goes well with the motto of "spending all you can", but that also promotes overconsumption and tends to leave people with loads of crap and zero money to save (for hard times.)

But whatever the intention of a tariff is, it doesn't alter the fact that your disposable income doesn't go as far as it did without that tariff in place.  No?

I think I kind of explained my point above. You're assuming your income (and what it's worth) wouldn't change, and you seem to be kind of ignoring the bigger picture and the economic impact. I was making the point that it would.

What I am struggling with, is understanding how my local income would increase and even exceed what I lost due to tariffs?

Good point about removing "junk spending", for lack of a better term.  We already have many principles in place to nudge people towards making better decisions.  Most people get paid monthly, and in many case bi-weekly or even weekly...    how many would be able to manage a yearly paycheck without running out of money by October?

For those of us who can manage, any "tariff babysitting" is an infringement.  Note, I don't mind shouldering a bit of burden of "excessive babysitting" if I thought it made the country or the world better off overall.  For example, you could consider speed limits a kind of babysitting (which they are).  But we generally accept them as being for the greater good and abide by them, by and large.

[coppice]

When was the last time you saw a Chinese movie? 

I have no idea what point you were making there. Choosing movies to watch is mostly a language issue for most people. As it happens, I have watched a large number of Chinese movies. They don't make that many great ones, but I think their hit rate is still superior to Hollywood.

Fair point, I have seen one or two Chinese movies and I thought they were superb -  but they are not mainstream, right?

How very parochial.