Free Trade Losing Ground
I really thought David Ricardo settled this a long time ago when he discussed wheat trading. But I see this poll from the end of 2010 and I feel concerned -
A new NBC News/Wall Street Journal poll shows that 69 percent of Americans believe free trade agreements with other countries have cost jobs in the United States, while just 18 percent believe they have created jobs. A 53 percent majority—up from 46 percent three years ago and 30 percent in 1999—believes that trade agreements have hurt the nation overall.
I guest host a radio show in Alaska, and I did an entire segment on free trade and I had conservatives calling my show saying I was a fool. I remember people calling in claiming free trade is what killed our manufacturing base, which is a simple position to take on a much more important issue of globalization and competitiveness. Someone called and said that I "really drank the ricardian kool aid" and I remember thinking how much of a compliment I was just paid.
Every chance I get I show people the TED video of Matt Ridley's 'When Ideas Have Sex' (which is also the title of his great book). He very succinctly and clearly articulates the benefits of free trade.
I learned about free trade during my college economics courses, from some very free market professors. I mean, even Paul Krugman supports free trade. And remember Milton Friedman's oft told story of Leonard Reed's "I, Pencil" Or the segment on trade tarriffs in Chapter 11 of Henry Hazlitt's Economics in One Lesson?
I am sure there are some contributors and members here who oppose free trade, and I would love to know why.
- Comment (61)
- · Quote
- · UnfollowFollow (8)
Comments:
Jan '11
Re: Free Trade Losing Ground
We were kicking this topic around a little last week when Dave Carter posted about the safety & training of Mexican truckers.
I was taught the free trade arguments in economics classes (Smith, Ricardo and read on my own as schools won't touch Milton Freidman or Henry Hazlitt). The arguments in favor make sense and sound appealing but I find myself questioning them as never before. They seem to be argued from an 18th century mercantilist point of view (which makes perfect sense) - I think the waters get muddied in the 21st century with fiat currencies and governmental regulations that didn't even seem to be part of the original arguments.
I'm open to the idea and feel we could compete more effectively in the global marketplace without many of these shackles. Granted, that's not 'Free Trade's' problem, it's a problem our national government created. But while you're on the Free Trade bandwagon - what do you think of Ron Paul's stance toward Iran? It's certainly Free Trade! China using the organs of prisoners, and lead in toys - Free Trade! Mexico irrigating their produce with fetid water-Free Trade!
Feb '11
Re: Free Trade Losing Ground
There is no such thing as "free trade", at least for the United States. What we have is a system in which the US opens our market to foreign goods, allowing other nations to get richer exporting to us, allowing the well-connected here to get richer, and making the Americans who lose their jobs poorer.
When people notice this and complain, the response is blather about theory.
Which you have provided. Instead of calling people who disagree with your assessment of the wonders of free trade stupid and ignorant perhaps you should begin with a list of the wonderful benefits your theories have produced for us.
By the way- I oppose free trade because I have a long list of grim memories of what happened when my single parent lost her job at factory in Michigan, courtesy of "free trade".
Edited on November 4, 2011 at 3:16pmOct '11
Re: Free Trade Losing Ground
Xannady - your parent lost their job because of free trade or America produced too many regulations and made it too expensive to produce goods here?
Peter Schiff articulates this perfectly in his testimony before congress, why not take some time and listen to him so I don't have to type it all out.
Part 1 - http://www.youtube.com/watch?v=FLmD9TeUC54
Part 2 - http://www.youtube.com/watch?v=xZbQGpf3D_Q&feature=related
And if you watch Matt Ridley's 'When Ideas Have Sex", in which he literally and mathematically shows how trade has increased prosperity. Further, another chapter in Hazlitt's book that would probably do you good is "The Curse of Machinery" Everyone complains that America is losing these jobs forever. Maybe manufacturing, but other jobs have come along in their place, this is apparent because if they didn't we would have 90% unemployment.
Further, you make it sounds as if America has continued to decline do to these factors, but why is it that during a rampant age of globalization and outsourcing we still saw every income level increase over the last 30 years. Instead of criticizing me, actually look into what I said.
Feb '11
Re: Free Trade Losing Ground
Jason Kline,
1) You failed to correctly spell the handle I use to comment here. So I cannot convince myself that your level of attention to detail is sufficient to actually grasp the incomplete argument against free trade that I presented. I don't think you do, actually.
2) My parent lost their job in 1979, along with vast numbers of other Michigan residents. I don't recall anyone else ever claiming it was too many regulations that caused that. It's always been presented as the wonderful Japanese cars, arriving courtesy of "free trade", that rightfully booted the stupid and lazy UAW members into unemployment. In other words, it was a positive good, and a fabulous consequence of the gloriousness of free trade. That now you suggest it was the fault of government regulation makes me suspect that free traders are starting to worry that the public is no longer eating the dogfood, so to speak.
3) Again, I wanted you to list the wonderful benefits of free trade, not suggest youtube videos. Tell me about those wonderful benefits I have received from "free trade"- and convince me you can actually name some. I'm not, now.
Feb '11
Re: Free Trade Losing Ground
4) Yes, I know machinery makes some jobs obsolete. I've seen that firsthand. My problem is that free traders are like coroners who can't understand the difference between someone who dies of old age and a murder victim- all they see is a corpse. So they never seem to understand that some jobs are not in fact obsolete, but have been lost to the US due to efforts of foreign governments to make their nations more prosperous.
5) I've rambled on too long. But I'd like to add that I'm dubious about all that prosperity you think has happened. I note the vast federal debt, making the US the brokest nation in history, as well as the tens of millions on food stamps. Something is deeply wrong with American governance, and I believe that one important aspect of that is the government policy described as "free trade".
Apr '11
Re: Free Trade Losing Ground
I'd like to add to add to your comprehensive list of sources with an econtalk with Bryan Caplan: http://www.econtalk.org/archives/2007/06/caplan_on_the_m.html The myth of the rational voter. I think it goes a long way to explaining the problem of why people do not understand free trade.
Jan '11
Re: Free Trade Losing Ground
Well, here's that dead horse again.
Valid free trade assumptions include rational pro and con arguments. These can be easily trumped by reflexive thinking, and my guess is that's what your callers were exercising. The question is, where do these illogical reflexive thoughts originate. After all, there's tuns of evidence not only supporting free trade, but documenting the economic consequences of rejecting it. As T. Sowell frequently points out, over a thousand economists took out ads indicating why Smoot-Hawley Tariff act of 1930 would be an economic disaster for this country. The reasoning was clear, concise, and compelling. The bill passed anyway.
Until we establish a working public school system in this country, people will vote for politicians not on the logic and probability of their campaign promises, but on the delusional nonsense they spout.
Regrettably, my assumption is that will never happen; the education establishment is too firmly entrenched. We will continue to make stupid choices, because...
May '10
Re: Free Trade Losing Ground
I'm all for free trade, when it's truly free and unfettered in all directions.
The problem is that when policies, standards, subsidies, etc. are unbalanced on one side, the other suffers unfairly.
Why is it that you don't see this or acknowledge it?
May '10
Re: Free Trade Losing Ground
The problem with free trade theory is the same problem that arises will all social science theory: reality.
In order for free trade to bear fruit as emphasized in Ricardian theory, all parties involved need to embrace the practice. When they do not, trade remains more of a zero-sum competition. Unfortunately, the reality in most the world, including most of the West, is that mercantilism still reigns supreme. This is true even within the US, despite its relative embrace of free trade compared to the rest of the world.
Given the multitude of factors that maintain protectionism, ranging from nationalism, to the illusion of permanence in economic life, to the social dislocation caused by adjustments in favor of comparative advantage, don't expect the world to change its patterns anytime soon. If it didn't happen in the 1990s, it sure as heck isn't going to happen in 2011.
Jan '11
Re: Free Trade Losing Ground
The part of the equation you left out is the vast number of Americans who got richer because they were able to purchase an item of greater quality and/or at reduced cost. That your parent lost a job is regrettable but in no way outweighs the benefits enjoyed by millions of Americans in being able to choose a car that better fit their needs, wants, or budget.
Aug '10
Re: Free Trade Losing Ground
Xennady: Jason Kline,
1) You failed to correctly spell the handle I use to comment here. So I cannot convince myself that your level of attention to detail is sufficient to actually grasp the incomplete argument against free trade that I presented. I don't think you do, actually.
2) My parent lost their job in 1979, along with vast numbers of other Michigan residents. I don't recall anyone else ever claiming it was too many regulations that caused that. It's always been presented as the wonderful Japanese cars, arriving courtesy of "free trade", that rightfully booted the stupid and lazy UAW members into unemployment....
1) You're criticizing Jason for misspelling your handle? Really? Lighten up, Xennedy.
2) It is tragic that your parent lost "their" job. But that is a thing that is seen. What about the things that are unseen? What about the effects on the economy of not making available more lower-priced cars? If an American buys a car whose higher price is due in part to generous union benefits, does that not reduce the car buyer's ability to make other expenditures that might employ Americans?
Jul '11
Re: Free Trade Losing Ground
Not so. Friedman showed in "Capitalism and Freedom" that even unilateral free trade will benefit the country practicing it. Of course, we are talking about national averages here, not the individual worker(s)...
Nov '10
Re: Free Trade Losing Ground
Xennady:
2) My parent lost their job in 1979, along with vast numbers of other Michigan residents. I don't recall anyone else ever claiming it was too many regulations that caused that. It's always been presented as the wonderful Japanese cars, arriving courtesy of "free trade", that rightfully booted the stupid and lazy UAW members into unemployment.
Well, if your parent's job was a union job in Detroit's auto industry, it wasn't so much regulation that caused it as the distortion of the job market by the union. If Japanese wages are not artificially inflated the way that the American auto workers' wages are, naturally they can produce cheaper cars. If the Japanese cars cannot come into the US, then Americans can only buy more expensive, American-made cars. The suffering is spread thin, but there are huge effects all across the economy, on people who can't buy cars or who can't buy other things because so much of their money is going to buy a car.
It's not that the job loss is a "positive good." It's simply a logical consequence of pricing yourself out of the market.
Nov '10
Re: Free Trade Losing Ground
There are good economic explanations of many of the things that are wrong with American governance, but they don't include free trade. I know you don't want to take the time to look at some of the links other people have provided for you, but one conservative axiom, recently repeated by Dr. Sowell on Uncommon Knowledge, is that it is best to arrive at your opinions after you acquire as much information as possible. Otherwise, the opinions aren't really opinions, they are feelings. What I see in your comments is that you feel angry and disappointed about the past and current state of the economy. Anger makes sense, but you can channel it more productively if you back it with sound principles.
May '10
Re: Free Trade Losing Ground
Wade Moore
Not so. Friedman showed in "Capitalism and Freedom" that even unilateral free trade will benefit the country practicing it. Of course, we are talking about national averages here, not the individual worker(s)... · Nov 4 at 1:30pm
The argument in favor of unilateral free trade is based largely on the benefits of purchasing power--the ability of economic units to purchase goods at the most optimal world-market price. Unfortunately, this is premised on the assumption that there is ample money to pay for these goods. This money can be produced (and trade deficits compensated for) either by effective domestic economic growth independent of exports, an injection of international capital, or by currency devaluation. When a company moves overseas, it diminishes domestic production. This is fine if that production is replaced elsewhere, but that's not necessarily a given, particularly if one option for growth (exports) is inhibited. The US has been fairly blessed in the reliability of its domestic economy and willing investors from abroad, but these things could easily turn into a slippery slope.
Either way, I'm sure we both agree that domestic competitiveness remains the core key for success.
Edited on November 4, 2011 at 10:42pmFeb '11
Re: Free Trade Losing Ground
Ricardo argued the case of specialization in trade between England and Portugal. England doing the cloth and Portugal the wine. An argument against Ricardo's analysis I came across years ago - before England went down- was that England ended up rich and Portugal ended up poor
I addresses this very issue here a few days ago when there was some discussion about the possibility of increasing gas and oil production in the US to the point we produced all we needed for domestic consumption. If that happened, but we still are still a free trade nation that oil and gas will be priced at the global rate even domestically. But if we restricted exports the price would come down. Well, it's a bit more complicated because domestic producers might not willing to invest in the US if they could not get the global price for their product.
I will not refuse to listen to someone arguing that free trade is a problem for the US rather than a solution.
Edited on November 4, 2011 at 11:05pmAug '10
Re: Free Trade Losing Ground
"I am sure there are some contributors and members here who oppose free trade, and I would love to know why."
Apparently because we're ignorant mouth-breathers who refuse to accept that Ricardo's theories, expounded in 1817, might still apply today.
Edited on November 5, 2011 at 12:01amApr '11
Re: Free Trade Losing Ground
All things being equal, free trade is a benefit. But all things aren't equal.
I think it was Mark Steyn who cited a statistic showing the some 40 percent of the population works in "minimal skill" jobs; a huge percentage of waiters and such are college grads.
If employment is tough for college grads, think what it must be like for the half the population on the left hand side of the bell curve.
Free trade should be the preferred policy but not a religion.
May '10
Re: Free Trade Losing Ground
Where in Alaska? I'm stationed at JBER.
Jun '10
Re: Free Trade Losing Ground
Klaatu
That your parent lost a job is regrettable but in no way outweighs the benefits enjoyed by millions of Americans...
I'm reminded of a cartoon I saw, a rat with his head in a trap. Behind him is a long line of rats waiting to have carnal knowledge of the trapped rat. In front of him is a rat saying "I don't know why you aren't enjoying this, everyone else is." I guess it all depends on your point of view.
I lost a job to "free trade" once upon a time myself. I didn't enjoy the experience.