The Case for Free Trade
It is inherent in human nature to look back at the past and long for the ‘good old days’. While we progress as a world community, many claim that our quality of life is declining. Others claim that the world is becoming increasingly unfair- that the rich keep getting richer while the ones at the bottom are not gaining any ground on the economic ladder. However, both of these assertions could not be further from the truth; the citizenry of the world has never been better off than it is now. America is the richest country the world has ever known and the reason for that is, simply, free trade.
Free trade is a symptom of free market capitalism and with the introduction of free market capitalism to the world, certain principles were introduced which were never seen before. Among these principles are: private property, competitive markets, limited government intervention and most importantly, freedom of economic exchange. However, recently there has been much debate regarding the beneficial value of free trade, resulting in unparalleled hostility towards the concept.
To address global inequality, one must examine modern events in terms of socio-economics and geopolitics. By nearly every measure, 21st-century humanity is not only improving but also succeeding. Children are far better off than their parents and poverty is declining. By many measures, global inequality has actually decreased in modern times. Measures in citizens’ purchasing power, for example, reveals that global inequality has declined remarkably all across the board.
We also have to acknowledge that poverty is a relative term. For example, people living in poverty in Rwanda are living very differently from the poor in America. Seventy-two percent of ‘poor’ Americans have one or more cars, while 50% have air conditioning and a wealth of other amenities that people considered poor in other countries do not own.
Disregarding the above perspective causes many individuals to claim that wealth is a greater problem in our society than poverty. Becoming a millionaire shouldn’t be a problem if, in the process, hundreds of millions become better off.
The argument against free trade resulted from the myth that free trade creates global inequality, and that claim can’t hold up to the most basic criticism.
Perhaps, more importantly, free trade has led to a great amount of good in the world. It has brought hundreds of millions of people out of poverty, decreased world hunger and increased awareness about environmental issues. It is no coincidence that countries that deal in free trade have a higher GDP per capita and that the people of these countries have longer lifespans.
Free trade, however, is not limited to the movement of goods; it values the open exchange of ideas and opportunities. Regardless of religion, race, or creed, we all have freedom to thank. Society has become smarter, with literacy rates increasing decade after decade since the advent of free trade, and we are approaching a time where there could be universal literacy. Another effect the free trade movement of ideas has created is the rapid increase of democratic systems of government being established across the globe. The oppression of women, as countries become more democratic and open to free trade, has declined throughout the world. Women are increasingly gaining an education, as more families are able to afford sending all their children to school. The fact of the matter is that free trade helps increase prosperity for Americans and countries with the same shared values. The idea that protectionism, which is advocated by President-Elect Trump, will automatically create more jobs in America is false, and a more likely result is a loss of American jobs.
Of course, there are some negatives that occur with the advent of free trade but the positives outweigh the drawbacks. The negatives are that jobs in industries that aren’t efficient will be lost. Conversely, jobs will be created in good effective industries, which history has shown us.
The notion that free trade is the cause of all manufacturing jobs loss is not factual, since it appears blue-collar job loss are more directly correlated with technological innovation. For example, mobile apps and devices have displaced a tremendous amount of products, leading to less manufacturing and less jobs. According to Donald J. Boudreaux, in his book Globalization, with manufacturing output actually increasing since the 1960’s, the reason there are less jobs is because of the American workers and industries becoming more efficient.
The arguments made by protectionists fail when challenged with scrutiny. To those that say trade deficits are an indicator of economic ailing are blind to the fact that it’s the totality of trade that shows American prosperity. Restricting imports by protectionist methods will only lead to American’s being worse off. It will incline foreign countries not to invest in America and there will be less choice for Americans to buy cheaper goods, leading them to have less disposable income. Protectionists policies will help special interests who gain by them acquiring a defense against competition. Protectionists also avoid the fact that American exporters use half of American imports according to the Mercatus Center for their own businesses. Finally, these individuals refuse to acknowledge the fact that countries with lower economic barriers to trade tend to see an increase in economic growth.
However, the key philosophical component that hasn’t been mentioned in the current debate over free trade is the fact that free trade promotes freedom. Without economic freedom, we will lose the ability to choose what we think is right for ourselves. We will begin to be controlled by these special interests that are being protected by these backward trade policies. Prices will rise and the American consumer and American economic growth will be directly affected by protectionist policies. It is a fact that as the government asserts more control over increasing aspects of our lives, our collective freedom will diminish.
America can still improve on its free trade track record and increase trade deals with countries it doesn’t already have a deal with. The more America opens itself up to free trade the better off all Americans will be. The effect free trade has on America creates an environment where workers in this country will move onto higher-level jobs. Manufacturing workers will be able to take advantage of the opportunities that open up, only if they were aware of them.
Director of the Center for Trade Policy Studies at the Cato Institute, Daniel Griswold, explains this is why America has this constant debate over free trade; the benefits are much harder to see than the ills. When a factory shuts down all of us hear about it, but when we reap the benefits of free trade we are silent. At the moment, America currently has tariffs on sugar and steel, if these tariffs were lifted, many manufacturing jobs would be created. Protectionism actually hurts American manufacturing! Regarding imports, the U.S dollar is uniquely used to our advantage. When American companies buy goods from foreign exporters, the exporters receive their pay in American dollars. These firms then have to exchange dollars for many reasons, then keep the remaining dollars and invest them in American assets and America. So, as we import, we actually create more opportunities for foreign countries to invest in America. On the other hand, if we suddenly put up trade barriers, foreign investment will fall, exports will fall and other countries will put up trade barriers, which will hurt American exporting companies (acceding to the Cato Institute).
When President-Elect Trump becomes our leader, he will have a tremendous opportunity to fix America’s path and to break out of recent economic stagnation. President Trump can craft policies that won’t just benefit the top of the economic ladder but everyone if, and only if, he enacts free trade policies that propel American interests forward and puts the American worker first. The only way forward in “Making America Great Again” is by continuing the policies of his Republican Predecessors, in which free trade, and economic freedom were the stalwarts of American prosperity.