Blog

Isn't it Time to Take Another Look at Free Trade?

April 28th, 2010 - 8:58am
Filed under Economy

The economy is struggling through one of the worst periods in modern history.  Several experts have put forth their suggestions of what we must do to end the suffering and emerge at the beginning of a recovery.  Most of the proposals involve continued spending, raising taxes, or a combination of the two.   Missing from the dialogue is to look at the methods that made America's economy the envy of the world.   That was the implementation of Capitalism and its primary tool:  free trade.

United States Trade Representative Ron Kirk recently warned the Congress that it is time to pass free trade legislation.  Although President Obama has identified job creation as priority one in his recent speeches, it doesn't appear the Congress is getting the message as little is being done to facilitate free trade and to create jobs in the United States.  Even the stimulus money, although paid to American firms, ends up creating jobs in China and other cheap labor markets.

Although free trade will stimulate export-driven jobs and would help to meet Obama's goal to double the United States exports over the next five years, we still see Europe claiming many of our markets overseas.  The only supporters of free trade policies seem to be conservatives and business groups in Washington.  Labor, through their lobbyists such as the AFL-CIO and other labor groups say they NEVER will support any program that promotes free trade.  Alan Blinder writing in the Library of Economic Liberty periodical said that the divergence between economists' beliefs and those of well-educated men and women on the street seems to arise in making the leap from individuals to nations.  In running our personal affairs, virtually all of us exploit the advantages of free trade...without thinking twice.  The fact that another country becomes wealthier does not mean that America becomes poorer.  One reason that the United States did so much better than Europe for two centuries is that Americans had free movement of goods and services across our state lines while European countries "protected" themselves from their neighbors.

Many estimates have been made regarding the "saving of jobs" through trade restrictions.  Invariably, these trade restrictions end up costing Americans more.  Consider the $1,285,000 we lose annually for every job in the luggage business, $199,000 lost annually for each job in the textile industry, $1,044,000 lost annually for each job in the softwood lumber industry, and $1,376,000 a year for each job in the benzenoid chemical industry!  On the other side of the issue, free trade provided 1.2 trillion dollars in revenue and supported one in five manufacturing jobs here in the United States.  With more than 95% of the world's consumers living outside the borders of the United States the global marketplace is important to domestic companies.

Daniel Griswold of the Cato Institute reports that a recent study by the Institute found that 90% of Senators and Congresspersons favor trade restrictions over free trade.  This study shows a drifting towards isolationism.   Americans pay dearly for the government intervention in free trade matters.  The trade barriers erected by Congress cost Americans an estimated 70 billion dollars a year by raising prices and reducing competition.   Daniella Markheim, of the Heritage Foundation, said that hiding from or ignoring the debate on globalization will not promote a free trade agenda.  Rather, this approach leaves the voice of protectionism as the only voice being heard on trade issues.

The Institute for International Economics has calculated that moving from today's trade environment to one characterized by perfectly free trade would generate an additional 500 billion dollars in annual income.   Also, the University of Michigan concludes that if we would reduce the trade barriers on agriculture, manufacturing, and service activities by just one third we would increase our annual income by another 500 billion dollars.  So, the message is clear.  Congress needs to support trade agreements, ratify the agreements already in place with a number of countries, stop protectionism legislation, and eliminate all international trade barriers. - By: GN Member John Ridings Lee