There's a growing anti-trade sentiment in our country. Much of the
dialogue is grossly misinformed. Let's try to untangle it a bit with a
few questions and observations. First, does the U.S. trade with Japan
and England? Put another way, is it members of the U.S. Congress
trading with their counterparts in the Japanese Diet or the English
Parliament? An affirmative answer is pure nonsense. When I purchased my
Lexus, I had nothing to do with either the Japanese Diet or the U.S.
Congress. Through an intermediary, a Lexus dealer, I dealt with Toyota
Motor Corporation.
While it might be convenient to speak of one country trading with
another, such aggregation can conceal a lot of evil, particularly when
people call for trade barriers. For example, what would be a moral case
for third-party interference, by either the Japanese Diet or the U.S.
Congress, with an exchange between me and Toyota Motor Corporation?
Some might reason that since Japan places restrictions on U.S. products
entering their country, an appropriate retaliatory measure is not to
allow Japanese products to freely enter the U.S. By the way, Japanese
protectionist restrictions on rice imports force Japanese consumers to
pay three or four times the world price for rice. How much sense does
it make for Congress to retaliate against Japan by imposing
restrictions on their products thereby forcing American consumers, say
Lexus buyers, to pay higher prices? Should our rule be: If one country
screws its citizens we should retaliate by screwing our citizens?
Since there is no moral argument for preventing one person from trading
with another, anti-traders shift their argument to a patriotic appeal
such as suggesting that we're losing our manufacturing sector. That
doesn't square with the facts. According to a report given by Dr.
William Strauss, senior economist for the Federal Reserve Bank of
Chicago, titled "Is U.S. Losing Its Manufacturing Base?" the answer is
no. In each of the past 60 years, U.S. manufacturing output growth has
averaged 4 percent and productivity growth has averaged 3 percent.
Manufacturing is going through the same process as agriculture. In
1900, 41 percent of American workers were employed in agriculture;
today, only 2 percent are and agricultural output is greater. In 1940,
35 percent of workers were employed in manufacturing jobs; today, it's
about 10 percent. Again, because of huge productivity gains,
manufacturing output is greater.
The decline in manufacturing employment is not limited to the U.S.
Since 2000, China has lost over 4.5 million manufacturing jobs. In
fact, nine of the top 10 manufacturing countries, which produce 75
percent of the world's manufacturing output (the U.S., Japan, Germany,
China, Britain, France, Italy, Korea, Canada, and Mexico), have lost
manufacturing jobs but their manufacturing output has risen.
Despite the pretense of being a free trade nation, the U.S. has
significant barriers to trade that come in the form of tariffs, quotas
and steep regulatory barriers. Our restrictions are just not as onerous
as many other countries but there's a push to make them so. It's simple
politics. The people who face foreign competition, say management and
workers in the auto industry, are well organized, have narrowly shared
interests and the resources to have considerable clout in Washington to
get Congress to enact trade barriers. Restricting foreign competition
means higher prices for their products, and hence higher profits and
fuller employment in their industry. The people who are benefited by
foreign competition, say auto consumers, have widely dispersed
interests; they are not organized at all and have little clout in
Washington. You never see consumers descending on Washington
complaining about cheap prices for foreign products; it's always
domestic producers who do the complaining.
The relationship between prosperity and economic freedom, including
free trade, is a no-brainer. But if you need hard evidence, check out
the Heritage Foundation's "Index of Economic Freedom". You'll find that
nations having the greatest measure of economic freedom are the most
prosperous and peaceful.
