Thursday, August 12, 2010

Ending Free Trade Is Not the Answer

Paul Soglin proves that the right doesn't have a monopoly on overblown rhetoric:

Paul Soglin: Waxing America: Saving The American Economy - End Poisonous "Free Trade"
There is no free trade when the workers of one nation are forced to compete with the exploited workers of another nation. There is no free trade when the manufacturer in one nation is forced to compete with the manufacturer in another nation that substitutes poisonous materials that are cheaper.

It is time to reinstate tariffs and end the exportation of our jobs and our wealth.
This isn't just simply overblown, I'm not convinced it's even based in reality. I thought this was the type of rhetoric that the left is always telling us is reserved for Fox News.

Here's economist Greg Mankiw quoting former Clinton official and current Obama adviser Larry Summers on trade:
Most economists agree with Lawrence H. Summers, a Treasury secretary in the Clinton administration, who has said that Nafta “was really a watershed as to whether America was going to stand for larger markets, was going to stand for forward defense of our interests by trying to have a more integrated global economy.”

“It contributed to the strength of our economy,” he added, “both because of more exports and because imports helped to reduce inflation.”

This too is an over-simplification, but one of the things trade does for importing countries is lower prices on many goods. These lower prices mean that consumers are better off not only when wages are rising, but even if wages are flat (if you can buy more stuff with the same amount of money, your real income is said to have risen). Of course, you can't buy anything if you don't have a job. but I have yet to see a convincing case that free trade is a major contributor to our current terrible unemployment situation.

Soglin seemingly would have us turn back the clock to the post WWII era of relatively restricted trade (there's that era again, looming large in our policy debates). He may find it appealing to turn back the clock and make it 1974 in America again, but I certainly don't. Anyone who cares about maintaining the relatively high living standard that we enjoy today shouldn't either.


Dad29 said...

It is undeniable that manufacturing employment took a horrible hit following NAFTA.

See BLS stats on that.

No, it's not black/white. However, the costs of regulation and taxation in the US put manufacturing employers at a serious disadvantage. Forget the wage differential; concentrate on OSHA, Fair Labor Standards, EPA, health/dental insurances, child-labor (just for starters).

That adds up, quickly.

D said...


That is precisely because NAFTA is not free trade. 2,000 page documents filled with restrictions, tariffs, and quotas are by definition not free trade.

Free trade requires no legislation and no agreements. All it requires is an absence of restrictions.

Just like the market, free trade is FREE.

Kristine said...

What I like about the free trade is the competition among traders. For me, the higher the competition the lower the prices and most likely the better the quality of the product or the service. That is the impact of free trade and I think the consumers benefit a lot from that.