Intel expected to cut thousands of jobs

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Free trade means, reliable jobs, high wages and a strong USA

This might sound untrue if you consider, for example, that workers at General Motors these days are pressured with job cuts and reductions in wages and all those sad, but necessarily actions to become healthy and strong again. Partly the cause for this is free trade. At the same time HP, IBM, Apple, Microsoft and so on are doing very well, this also, partly, because of the same phenomenon, free trade.

When free trade is propagated, certain businesses and companies are not considered but what matters is ?the whole picture? or the nation. Free trade makes the nation, for example, the USA more competitive and stronger. The stronger companies will dominate the economy and expand and make use of all that capital, labour and land that are otherwise used by the inefficient companies. Productivity increases and therefore also wages. Jobs are more reliable because employments are offered in competitive businesses.

Generally, though, unemployment will not increase or decrease. If for instance, the USA imposes tariffs on Chinese textiles, the Dollar will appreciate against the Chinese Yuan (the value of the Dollar will increase relatively to the Chinese Yuan). This depreciation (decrease in value) of the Chinese Yuan against the Dollar, in this example, is caused by a smaller demand for Chinese textiles and therefore a smaller demand for Americans to buy the Chinese Yuan. Because of this change in exchange rates, prices of goods from the USA to China will be generally higher and prices of goods from China will be generally lower (apart from textiles). As you can imagine, this will increase employment in the American textile sector, but decrease employment in other sectors. At the whole, unemployment will not change but trade between the regions will be lower. Specialization, competition and living standards in the USA will be hampered. The tariffs will only serve special interest that is the textile manufacturers and their employees.

Above explanation about exchange rates is an explanation of a so called ?floating exchange rate? (as the Dollar is),
if you want know more about floating exchange rates, go to;
http://www.hooverdigest.org/974/friedman.html

The outcome is that Americans can buy cheap goods with high wages and that the USA will be stronger than ever.

Bj?rn Lundahl
G?teborg, Sweden

Posted by: Björn Lundahl   Posted on: 10/08/06 You are currently: a Guest | Members login | Terms of Use

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