Free Trade Benefits All
By David M. Woods
Published November 1, 2006, 9:47 am in Military / Foreign policy, Economic Issues.
For as long as humans have walked on this planet, they have traded with one another. Our ancestors of long ago realized that, if one was a skilled hunter and the other was a skilled gatherer, they could trade their commodities and BOTH would benefit by having both meat AND vegetables for supper.
But today, voices cry out that trade is a bad thing, and thus must be restricted, impeded, regulated, and constrained by government. It's as if they are saying that hunters should only be allowed to eat meat and gatherers should only be allowed to eat vegetables.
The simple fact of the matter is that EVERYONE benefits when all are allowed the freedom to trade goods and services. You don't help someone by restricting that freedom. And if, perchance, a particular trade is harmful, then the parties would not be trading at all in the first place.
Let us examine the myths and fallacies used to support the argument that free trade is a bad thing, and replace them with the following sound economic principles:
Geography is irrelevant
The benefits of trade apply regardless of whether the trading partners are across the street or across the ocean. Political boundaries have no relevance! If it were true that it was harmful to trade with someone on the other side of a border, when why stop at just national borders? By that same logic, trade across state lines should be banned; Texans should not be allowed to trade with Louisianans. But why stop there? People in Houston should be banned from trading with people in Dallas. But let's carry the argument all the way: the Jones household should be prohibited from trading with their next-door neighbors, the Smiths. Does this sound like a modern economic system?
The Trade Deficit is irrelevant
The U.S. trade "deficit", which is imports minus exports, has hovered around $70 billion a month for most of the past year, and is growing. Politicians and pundits often point to it as justification for all sorts of laws and restrictions to constrain free trade.
But that is bad economics all around. Exports are not "better" than imports any more than selling is "better" than buying. If foreigners want to give us cars, computers, TVs, cameras, clothing, and such in exchange for little pieces of green paper with pictures of dead presidents, that should not be a problem.
I have a grocery store around the corner where I spend a few hundred dollars a month. Yet this grocery story has NEVER bought anything from me! Thus, I have a trade "deficit" with this retailer that adds up to hundreds of dollars each month. Does this mean the government should prohibit me from shopping there until the store owners rectify this imbalance?!?
The facts are this: In a dynamic economy, everything eventually cycles around. Importing and exporting and buying and selling all balance out in the long run. This applies equally to both the grocery store around the corner and the merchant on the other side of the world. The worst thing the government could possibly do is to throw in a monkey wrench somewhere to prevent goods and services and money from moving freely about.
Foreign outsourcing of jobs is harmless
Businesses who outsource their labor to other countries receive much undeserved scorn, and the leftist liberals constantly scream at government to "do something" about it.
Interestingly enough, these are the same liberals who scream for laws designed to "help the little guy", and for corporations to divest some of their ill-gotten wealth to those who need it the most. Then when businesses actually do try to create jobs in some of the world's most poverty-stricken areas, they get bashed for doing that. They can't win!
The fact is that poor people in poor nations deserve a job just as much as any overpaid American. And this argument that businesses are "exploiting" poor foreigners is ridiculous, considering that they typically line up for blocks to apply for jobs with American companies. No one is forcing them to work for an American corporation; they could tell the employer to take this job and shove it. But they choose to because it's a far greater opportunity to improve their lives than anything else they have.
Furthermore, in a free country like the U.S., a businessman should have the right to hire whomever they choose. We don't need the employment police looking over managers' shoulders, ready to veto hiring decisions. There is no surer way to destroy jobs.
Plus, if businesses can find a way to reduce their costs, everyone benefits. To say that the government can stop businesses from implementing a plan to cut costs is just a continuation of the Luddite philosophy that innovation and improved efficiency must be stopped! Yes, it was sad when all those who were employed in the vacuum tube industry lost their jobs to the transistor industry. But it's ludicrous to conclude that the government should have banned transistors to preserve vacuum tube jobs. Likewise, it's foolish to advocate laws designed to prevent businesses from implementing ways to make a better product at a better price.
And finally, note that when the economies of poor nations becomes stimulated by U.S. investments and U.S. employment, they in turn spend this money on U.S. products. Like it or not, the world is one big economy. And when the world economy grows, everyone benefits.
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