Support Free Trade
The President-elect, the new Secretary of Commerce, and the new Secretary of State all threw mud at one another throughout the election season when each, in their own turn, campaigned for the Presidency. Mr. Obama has said that he is creating a cabinet of rivals, but one thing that they all agree on is opposition to free trade. This, I fear, will set our nation back in more ways than one.
The major consern surrounding free trade is the notion that American jobs will evaporate when faced with competition from cheaper labor from outside the country. Obviously if a widget manufacturer has a factory in Detroit and he employs a few hundred workers at a reasonable wage, it would be a bad thing if that widget manufacturer were to shut down that plant, hire a bunch of third world labor, and start building his widgets in China for next to nothing. And indeed, if it were that simple and that was all that there was to it, free trade would be a horrible thing.
But it’s not that simple and free trade is good for America. Cheap labor in a foreign country has not, does not, and will not result in a horde of jobs shutting down and moving over seas.
First of all, just because we have tariffs doesn’t mean those countries cease to exist. Tariffs or no tariffs, those third world peasants will still work for nothing. Tariffs won’t stop them from lining up to get a job that pays two dollars a day. If a company really wants to cut costs by slashing their labor budget and moving over seas, the option will never go away. This is even more true if a company in America is making something which is exported other countries. Not only could they save money on labor, but in a high-tariff environment, they could save even more money by relocating to a country with a more favored trade status with the market they plan on importing too.
Secondly, manufacturing industry that is already in America has to spend a lot of money to move their operations. They have to build a new plant, hire a new work force, train that work force, and then pay to have the product sailed to America where once they did not. They also have to worry about supply problems. China is nowhere near self sufficient for basic raw materials such as iron ore and plastics. America is one of the biggest producers of a wide array of the raw materials used in manufacturing. Not only would a manufacturer have to ship his product in, there’s a fair chance that the company would have to import their raw materials as well.
Exactly how much shipping a product costs varies wildly depending on what it is and where it’s coming from, but current transportation costs mean that freight costs make up something like 9% of the price of an imported automobile. For the record, the cost of labor on an American made car is about 10% – a fact that helps to explain why “Japanese cars” like Hondas, Toyotas, and Nissans are all built in American plants.
Thirdly, even if a hand full of manufacturing jobs get shipped over seas, it’s not like every job in America goes with it. Manufacturing is just one aspect of the market. A widget not built in America still has to be shipped to an American port, stored in an American warehouse, driven to market by American trucks and trains, shelved by American sales people, and advertised by American firms.
Lastly, the tariffs in place now are, in places, lopsidedly against us. The Colombian Free Trade Agreement debate is a perfect example of this. As a result of legislation passed as part of the War on Drugs, American goods imported to Colombia are heavily taxed, while Colombian goods are imported to America duty-free. That means that any free trade agreement with Colombia has no effect on American jobs. It would not change the cost of Colombian goods here at home and there would be no new incentive for employers to ship American jobs to Colombia. It would, however, greatly increase the ability for American products to be sold in Colombia, thus increasing Colombian access to luxury goods (and increasing their quality of living) while simultaneously increasing demand for American products which in turn would actually help to create and sustain American jobs.
Free Trade is Good for America
Lower taxes on imports increases the buying power of Americans. That means that a product that previously cost ten dollars now costs eight. That means that every American buying imported goods effectively gets a pay increase. Opponents of free trade will tell you that cheap foreign labor drives down wages. As I wrote earlier, I disagree with that notion, but, supposing for the sake of argument that such a statement were true, the increase in buying power easily offsets a decrease in wages. I would also point out that such a situation would lead to deflation, thereby increasing the prosperity of all Americans.
Lower taxes on exports increases the demand for American goods overseas. Increased demand for American goods means more jobs here in America and more job security for the jobs which already exist. Lower tariffs make American luxury goods such as cars, Ipods, and computers more easily accessible to people overseas. More access to luxuries means more people can afford to live better, more affluent lives. Lower tariffs do not weaken the American economy, they strengthen it.
Free Trade is Good for Peace
The other effect of free trade is the degree to which it encourages political stability. I don’t know a single sane political mind that believes China will invade Taiwan. In the eyes of the Chinese government, Taiwan is a rebel state. Taiwan is a Chinese island. Chinese military forces out number Taiwanese forces on an almost unimaginable scale. But Taiwan has a democratically elected government supported by the United States.
Even if America decided not to go to war with China over Taiwan, a western embargo against China would be devastating to their economic progress. China’s economy is powered by trade. Its economic engine is fueled by importing raw materials, manufacturing cheap products, and shipping them back out again. Without trade, the Chinese system would break down with devastating consequences. With it, the Chinese people have been able to begin to claw their way out of the grinding poverty that has gripped the country for a millennia.
Free trade integrates otherwise hostile nations. You don’t go to war with your best trading partner. If you have all the steel and your enemy has all the factories, neither of you are going to be able to build guns once war breaks out.
Free trade makes nations more stable. Unless someone is threatening to take it from you, prosperity is one of those things that makes people less likely to become revolutionaries. A man with a job who can support his family is far less compelled to take up arms to feed his family. A man with a job and a family doesn’t travel half way across the country to take part in a rebellion. A man with a job and a family doesn’t rob stores . Free trade provides jobs and prosperity to countries which desperately need the stability that those things bring.
Support Free Trade
Free trade isn’t the horrible job killer that the doom-sayers claim it is. Free trade increases demand for American goods, decreases the cost of living in America, and makes world a better place for everyone. While I doubt that any of the free trade agreements sitting in Congress right now will be passed in the next four years, we need to fight against the erosion of our current agreements by the Obama administration. Support America. Support prosperity. Support capitalism. Support free trade.
Well, yes and no. While on paper, free trade certainly sounds like a good idea, in practice, it lets many American manufacturing jobs go overseas (or often, over the border into Mexico), flaunt American labor and environmental laws, and produce a cheap product that they simply roll back across the border for additional profits. The whole point of NAFTA was supposed to be raising the economies of neighboring countries to our level, instead we’re simply exploiting their people and their laxer laws to our advantage.
If we’re going to have free trade, we need to keep things on an even playing ground. American companies need to follow American laws no matter what country their operations are based in. That means they follow the same laws they’d have to follow in the United States. All the environmental laws need to be followed, all the labor laws need to be followed, they can’t pay slave wages simply because the people are willing to work for a penny a day, minimum wage laws still apply, they can’t employ minors for hazardous work, just because their parents are willing to allow it, etc.
The simple fact is, we have lost a tremendous number of jobs because it is cheaper overseas. The only jobs that are not going anywhere are the service jobs and those traditionally don’t pay all that well. You can hardly get on the phone and call a company without being routed to India anymore, that’s not “a few jobs”, that’s an entire industry that largely, isn’t American anymore.
I’m all in favor of an open market, but it has to be free. It doesn’t help if American companies run across the borders to make their products if nobody at home has jobs to buy them anymore.