Re: trade liberalization

["MV" <maxv@vsnl.com>]

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IPI_Marker

> From: "Ashish Hanwadikar" <ashish_hanwadikar@yahoo.com>
> Hi Prakash,
> > How would that happen ? what changes would the unilateral droppping
> > of
> > indian (or develping country) tariff do to the US econmy to make
them
> > shake from its impact ? My guess is that they would prosper more.
> > (and
> > so would indian consumers - no denying that)
>
> Just imagine for a second we drop tariff on imported goods. Those
goods
> will be very cheaper. Not all goods are consumables. Some like
> Computers, and other electronic equipments, heavy equipment like Cars
> are both consumer as well as capital equipment. Depends on how you use

> it. If you use Car for transporting goods then it is a capital good
> (because it is used to produce other goods and services). Since cost
of
> such capital become less our productivity will increase. Since, those
> items that can be produced efficiently by other nations can be easily
> imported by Indians we will direct our resources to production of
those
> goods and services which are costlier to import (even after making
> tarrifs negligible). This will again increase productivity of our
> resources. I will give an concrete example. Let's take the example of
> wheat. Let's say that imported wheat after removing high tarriffs will

> cheaper compared to what can be domestically produced. Because wheat
> now will be imported by Indians the Agricultural land that was used to

> produce wheat before is now available for other purposes (building
> factories, houses etc.). Thus because of increase in the supply of
land
> the cheaper land can be used to produce other goods and services for
> which India has competitive advantages. Now because of increase in the

> supply of land (because of import of wheat) the goods that were
> exported by India earlier can be produced at a lower production cost.
> That will allow India to capture the market for export of those goods
> and services (for example Call Center, Software Development, maybe
> Textile).

The above scenario will work only under certain conditions.

1. There is a universal currency system so that the value of
   currency is same across countries, and the value of currency
   is directly linked to energy. The only way we can define
   currency with any meaning is "representation potential to
   mobilize energy" which was true from the beginning of trade
   until fossil fuels, coal and petroleum (pre stored energy)
   were discovered.

   Today under the floating currency system the value of currency
   is determined by very complex equilibrium dependent on umpteen
   variables which can easily be manipulated by vested interests,
   and it is happening every day.

   Under a energy based universal currency system the hourly
   unskilled labour cost will become uniform across countries,
   and the scenario you described above may be possible.

2. People should be adaptable. Which again requires minimum
   education, i would say equivalent of Indian ICSE syllabus 10th
   standard that will equip people to absorb new agricultural or
   industrial production techniques and enable them to market
   the resulting products nationally and internationally.

   A good illustration is our traditional craftsmen who make
   products that have good market in India and abroad, but the
   craftsmen do not get to enjoy the benefit of that market
   since they do not have the marketing capability which
   requires decent command of english the language of Indian
   and international trade. What is happening today is the
   profits are suctioned by the middle men or traders and
   in the process the craft becomes non profitable for the
   craftsmen and they look to other avenues, in process the
   product and the market disappears and the skilled artisan
   becomes unskilled labourer.


> Now imagine that countries like US, UK etc. erect tarrif barriers for
> goods coming from India. Say for Software Development. Say US adds
> special tax for Software imported from India. This will make Indian
> software costlier in US. That means US will have to produce software
> domestically (or will have to import it from other countries). That
> means some of the resources will have to be diverted from other
> activities to produce software. That will make other goods produced by

> US costlier removing their competitive advantages there.
> My point is very simple. By introducing tarrifs you cannot increase
> your wealth. You simply redistribute the use of resources in a less
> efficient way and consequently actually decrease your wealth. Any
> economist worth his salt will tell you this.

The cost efficiency of the US and the entire socalled developed
economy is fully dependent on use of petroleum without considering
the global cost on environment. Remove the petroleum factor
and there is no advantage.

Only few processes actually create wealth. Wealth is created
only when solar energy is stored for future use. In human
enterprise agriculture is the primary wealth creation process.


> Imagine other case where US subsidizes production of wheat (which they

> are doing in case of Soyabeans and other agricultural commodities).
> That means they are forcibly collecting money from American Taxpayers
> in order to produce wheat at lower production costs (to the Americal
> farmers). That means, by importing wheat from US we are actually
> causing wealth to flow from US taxpayers to Indian consumers. Isn't
> that great! We should take full advantage of such free goodies by
> reducing our tarriffs.
> Whatever way you look at it both tarriffs and subsidies represents
loss
> of wealth for the people of country imposing them.
>
> > A tariff is also a tax, what would your tax accrue on ?
> > My suggestion has been a tax n ground rent, which is transperent and

> > not
> > possible to transfer to anyone. Its the ideal way to finance a
> > government.
>
> Before we collect taxes we need to ask why Govt. needs to collect
> taxes. If you restrict Govt. spending to few key areas like Defense,
> Law and Order (courts, police etc.), foreign policy, etc. you will be
> surprised how less tax we need to collect. Once we know how much tax
we
> need we can decide what is most efficient way to collect tax. It
> doesn't matter who pays the tax (income tax, sales tax, octroi etc.).
> Because taxes always get passed down the value chain. If we collect
> income taxes only from individuals they will pass some of that tax to
> the employers in form of higher wages which will be passed to
consumers
> in form of higher prices.


What you say clearly illustrates wealth is created only at the
agricultural operation level rest of the process is just a
pyramidal value chain.

Once you understand where the wealth is created, you will be
surprised to see where the tax money(wealth generated from
agriculture) is going? Obviously it is not going back to the
poor, as long as govt does not spend big money on education.

Who really benefit from govt spending on running public sector
companies? The answer is, there is short term benefit for the
employees, rest of the benefit goes to the private sector
industry.

The process works like this - govt invests in an industry
in which it has no business advantage, industry grows for
certain period of time then the administrative inefficiencies
makes it non profitable, Enter the private sector - sets
up similar industry, there is already technology and
knowledgeable work force developed at the expense of the
tax payer(people in the village who create wealth) this is
siphoning of wealth by private sector that should have gone
to developing the nation by investing in education of the
people(which would have improved the productivity and
adaptability making our nation more competitive in the
international arena, and hence more prosperous)

What private sector and middle class who were riding the
public sector govt investments did not understand is
they need *consumers with buying power* to buy the products
and services they produce, slowly this reality is setting in,
hence the sudden enthusiasm in passing right of education
bill....Let's hope it doesn't turnout to be yet another
eye-wash!

> Only thing we need to bother about taxes is:
> 1) Efficiency of collection, compliances
> 2) Simplicity
> 3) Distortions introduced in the use of resources.
> By point 3) I mean taxes cause people to change their decision (both
> spending and investment). For example if we charge high taxes on sale
> of cotton its usage will be discouraged even though otherwise it is
> beneficial. This kind of selective taxes always distort the use of
> resources causing inefficiencies. Therefore a good tax mechanism is
the
> one which introduces least amount of such inefficiencies. I am not
> qualified enough to suggest any such system. I am sure there are lots
> of economists who can come up with tax system satisfying the three
> criterias.
>
> > Has there ever been a one-time program of the government. VDIS was
> > promised to be done only once ! It has happened atleast 6 times.
Your
> > welfare measure would go down the same path.
> I agree with you. Goverment is always tempted to redistribute wealth
> very often because they can gain more power. So, obviously success of
> my scheme depends on commitment of people to look at long term
> consequences of their decisions instead of just focusing on short term

> wealth transfer benefits. We need to educate people. Any free-market
> system (including WTO) depends on having long term commitments and
> rules to be followed by all ignoring short term inconviniences. Do you

> have a system which can work inspite of such commitments and
> understanding? Only thing I can say about my system vs WTO is that
once
> people understand why free-markets are needed my system produces more
> efficient outcome than WTO. The WTO is based on Govt. negotiations
many
> of which happen under close doors. In the long run politicians will
> blame WTO for all economic problems like recession, unemployment
(which
> will happen periodically in an capitalist free-market economies as
they
> correct some of mistakes of free agents like overcapacity etc.). Then
> WTO will become a political football. I doubt whether people will keep

> commitments made by their Govt. without taking them into confidence.

Free and fair international trade can take place only, if there
is universal currency system linked directly to energy mobilization
aspect of economy.

MV.

>
> Hope I have made myself sufficiently clear.
> Regards,
> Ashish
> --- prakash  chandrashekar <prakash7uc@rediffmail.com> wrote:
> >
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> > Please help make the Manifesto better, or accept it, and propagate
> > it!
> >
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> > IPI_Marker
> >
> > > Hi all,
> > >       I don't understand the need to be part of WTO at
> > > all! The whole
> > > concept of Free Trade being promoted by world's biggest
> > > Governments is
> > > a pardox. Simplest thing for developing countries like
> > > India will be to
> > > simply open up imports, remove duties and taxes, cut
> > > down on all Govt.
> > > expenditure other than defense and some key areas,
> > > remove  all stupid
> > > regulations and so on. If all the developing countries
> > > do these you
> > > will see those big countries like US really shaking
> > > from the impact.
> >
> > How would that happen ? what changes would the unilateral droppping
> > of
> > indian (or develping country) tariff do to the US econmy to make
them
> > shake from its impact ? My guess is that they would prosper more.
> > (and
> > so would indian consumers - no denying that)
> >
> > > As
> > > for loss of income of many poor people in developing
> > > countries that is
> > > going to happen anyway. When the technology is
> > > progressing so rapidly
> > > minimum subsistence based on manual labour will be very
> > > difficult. I
> > > would suggest a special tax and redistribute all of
> > > that tax collection
> > > among all the poor people so that they can take care of
> > > their short
> > > term needs and invest in Education and Training.
> >
> > A tariff is also a tax, what would your tax accrue on ?
> > My suggestion has been a tax n ground rent, which is transperent and

> > not
> > possible to transfer to anyone. Its the ideal way to finance a
> > government.
> >
> > >That's
> > > all! Once Govt.
> > > makes it clear that it is one time assistance everybody
> > > will be forced
> > > to be creative and productive. Otherwise, good luck!
> >
> > Has there ever been a one-time program of the government. VDIS was
> > promised to be done only once ! It has happened atleast 6 times.
Your
> > welfare measure would go down the same path.
> >
> > regards,
> > Prakash


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