Free Trade
An issue that has traditionally flown "under the radar" of most Americans is the trade policy of the United States. Our trade policy in America and the trade policies of foreign governments have an enormous effect on the worldwide economy. In addition, this issue is one of the few that divides both political parties in America. There are both free and anti-trade Republicans and Democrats, but the political constituency group that most adamantly opposes free trade, unions, is clearly allied with the Democratic party in America.
This issue, on the surface, is actually very simple. Should the American government interfere with the free flow of goods and services in and out of the United States through tariffs and domestic subsidies of certain industries? The anti-trade forces contend that American companies are "outsourcing" jobs overseas where labor is cheaper and so the federal government should punish these companies, impose tariffs on imported goods shipped from overseas, and subsidize industries that are losing jobs. But if this is such a problem, then why is the unemployment rate in America at a historical low of 5.4%? And why, as America continues to lower trade barriers, does the economy continue to grow and create more jobs for Americans? These questions remain unanswered by the anti-trade forces, but there is a bigger issue here.
Free trade is good for America, and for a very simple reason: It allows American workers to specialize in goods and services that they produce more efficiently than the rest of the world and then to exchange them for goods and services that other countries produce at higher quality and lower cost. Take the car manufacturing industry. Before the 1980s General Motors, Ford, and other American manufacturers had an 80 to 90 percent market share of the American car market as the vast majority of Americans bought their cars from American manufacturers. But in the 1980s Japanese car manufacturers started to offer higher quality cars at lower prices. When Americans started to buy the foreign imports, GM and Ford called on Congress to intervene. In some ways they did, but in general the importation of Japanese cars continued. As a result, the American car manufacturers realized that they would have to compete in the free market and had to improve their own cars and offer them for a lower price. The beneficiaries of all of this were of course the American people since better cars started to become available at lower prices. In addition, the foreign car manufacturers, buoyed by their success in America, have over the past 20 years built dozens of factories in America, employing tens of thousands of Americans. So not only did foreign manufacturers lower the price of buying a car, but they created more jobs for America.
A few months back, the Wall Street Journal reported on a situation that highlights the pitfalls of protectionism instead of free trade. The sugar industry is a highly protected industry in America. The federal government imposes extremely high tariffs on imported sugar and this has the obvious consequence of making sugar cost much more in America than it should in a true free market. But it also has another consequence that protectionist anti-traders rarely talk about. It forces many companies that buy sugar to use in the production of their own products to move overseas. In Ohio a candy manufacturing factory employing hundreds of workers shut down and moved overseas. Why? Because in America it was costing them sometimes 50% more to buy their number one ingredient, sugar, than if they were able buy it on the open market. So they just packed up and left. This is just a small example of the counterproductive nature of tariffs and subsidies. They simply shift the burden from industries that are politically connected to those that are not and in the process stymie economic growth. If the government would have eliminated the special protection it affords to the sugar industry, the candy manufacturer would not only have stayed in America, but it would have been profitable and able to expand its business.
The outcries over "outsourcing" are disingenuous because they are initiated by the few politically connected industries and organized labor groups that stand to lose the most from free trade, while the vast majority of Americans stand to gain higher quality and cheaper goods and services. The lower price of foreign goods or services allows Americans to, say, buy more TVs at Best Buy or save for their kids college education, or improve their house. In essence, free trade improves our own standard of living. It encourages labor force specialization and the exchange of goods and services that other countries do better and at lower cost. Specialization leads to competition and innovation, providing new technologies that allow Americans to produce more goods and services, cure more diseases, pollute less, get better education, and choose from a wider range of investment options. As the economy grows, people enjoy higher standards of living and gain a greater appreciation of the benefits of living in a peaceful society.
In the free trade debate, it is important to keep in mind that while some jobs may get outsourced to other countries, the lower costs realized by the outsourcing companies are used to re-invest in America, and in the long-run, create more and higher paying jobs for Americans while providing consumers with better, cheaper products. Free trade capitalism has produced trillions of dollars of wealth for American citizens over the history of our country and is one of the main reasons that we are the most powerful nation on earth. Don't let the protectionists tell you otherwise.
Any comments or questions can be received at whyyouareaconservative@gmail.com
~ The Conservative Guy
This issue, on the surface, is actually very simple. Should the American government interfere with the free flow of goods and services in and out of the United States through tariffs and domestic subsidies of certain industries? The anti-trade forces contend that American companies are "outsourcing" jobs overseas where labor is cheaper and so the federal government should punish these companies, impose tariffs on imported goods shipped from overseas, and subsidize industries that are losing jobs. But if this is such a problem, then why is the unemployment rate in America at a historical low of 5.4%? And why, as America continues to lower trade barriers, does the economy continue to grow and create more jobs for Americans? These questions remain unanswered by the anti-trade forces, but there is a bigger issue here.
Free trade is good for America, and for a very simple reason: It allows American workers to specialize in goods and services that they produce more efficiently than the rest of the world and then to exchange them for goods and services that other countries produce at higher quality and lower cost. Take the car manufacturing industry. Before the 1980s General Motors, Ford, and other American manufacturers had an 80 to 90 percent market share of the American car market as the vast majority of Americans bought their cars from American manufacturers. But in the 1980s Japanese car manufacturers started to offer higher quality cars at lower prices. When Americans started to buy the foreign imports, GM and Ford called on Congress to intervene. In some ways they did, but in general the importation of Japanese cars continued. As a result, the American car manufacturers realized that they would have to compete in the free market and had to improve their own cars and offer them for a lower price. The beneficiaries of all of this were of course the American people since better cars started to become available at lower prices. In addition, the foreign car manufacturers, buoyed by their success in America, have over the past 20 years built dozens of factories in America, employing tens of thousands of Americans. So not only did foreign manufacturers lower the price of buying a car, but they created more jobs for America.
A few months back, the Wall Street Journal reported on a situation that highlights the pitfalls of protectionism instead of free trade. The sugar industry is a highly protected industry in America. The federal government imposes extremely high tariffs on imported sugar and this has the obvious consequence of making sugar cost much more in America than it should in a true free market. But it also has another consequence that protectionist anti-traders rarely talk about. It forces many companies that buy sugar to use in the production of their own products to move overseas. In Ohio a candy manufacturing factory employing hundreds of workers shut down and moved overseas. Why? Because in America it was costing them sometimes 50% more to buy their number one ingredient, sugar, than if they were able buy it on the open market. So they just packed up and left. This is just a small example of the counterproductive nature of tariffs and subsidies. They simply shift the burden from industries that are politically connected to those that are not and in the process stymie economic growth. If the government would have eliminated the special protection it affords to the sugar industry, the candy manufacturer would not only have stayed in America, but it would have been profitable and able to expand its business.
The outcries over "outsourcing" are disingenuous because they are initiated by the few politically connected industries and organized labor groups that stand to lose the most from free trade, while the vast majority of Americans stand to gain higher quality and cheaper goods and services. The lower price of foreign goods or services allows Americans to, say, buy more TVs at Best Buy or save for their kids college education, or improve their house. In essence, free trade improves our own standard of living. It encourages labor force specialization and the exchange of goods and services that other countries do better and at lower cost. Specialization leads to competition and innovation, providing new technologies that allow Americans to produce more goods and services, cure more diseases, pollute less, get better education, and choose from a wider range of investment options. As the economy grows, people enjoy higher standards of living and gain a greater appreciation of the benefits of living in a peaceful society.
In the free trade debate, it is important to keep in mind that while some jobs may get outsourced to other countries, the lower costs realized by the outsourcing companies are used to re-invest in America, and in the long-run, create more and higher paying jobs for Americans while providing consumers with better, cheaper products. Free trade capitalism has produced trillions of dollars of wealth for American citizens over the history of our country and is one of the main reasons that we are the most powerful nation on earth. Don't let the protectionists tell you otherwise.
Any comments or questions can be received at whyyouareaconservative@gmail.com
~ The Conservative Guy
posted by The Conservative Guy at
10:41 PM
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