Why populists are wrong about free trade
When the economy stumbles, fingers often point at free trade and globalization as sources of the woes. But Daniel Griswold argues in his book “Mad about Trade: Why Main Street America Should Embrace Globalization” that free trade delivers relief to American families through lower prices, better jobs and a peaceful world. Griswold is director of the Center for Trade Policy Studies at the Cato Institute in Washington.
By Daniel Griswold
Tune in to cable TV, talk radio, or the blogosphere and you will soon be hit over the head with the message that free trade is destroying America. According to the economic populists on the left and right, imports and outsourcing threaten the wages, jobs, and futures of Main Street Americans.
On trade, as on so much else, the populists have it wrong again. Free trade and globalization are great blessings to families across America.
Now may seem an odd moment to tout the benefits of trade. After all, unemployment is 10 percent and housing and manufacturing remain in a slump. The Great Recession of 2008-09 was not caused by trade, however, but by misguided monetary and housing policies that were “Made in the USA.”
During difficult economic times, import competition allows more American families to keep their heads above water by delivering lower prices on staples such as food, clothing, and shoes. The prices we pay for goods exposed to global trade tend to rise more slowly than inflation or even fall. The imported fresh fruits and vegetables, T-shirts and discounted sneakers sold at big-box retailers are especially important in the budgets of poor and middle-class families.
Trade allows Americans to sell our goods and services in growing markets abroad. Exporting is not just a Fortune 500 phenomenon. With the help of the Internet and shippers such as FedEx, a quarter of a million small and medium-sized U.S. companies now export to global markets. They account for 30 percent of U.S. exports to China, which has become the fourth-largest foreign market for U.S. goods.
For Americans worried about their jobs, it is a Big Lie that we have been surrendering middle-class manufacturing jobs for low-paying service jobs. In fact, since 1991, two-thirds of the net new jobs created in the U.S. economy have been in sectors such as health care, education, and business and professional services where the average wage is higher than in manufacturing. America today is a middle-class service economy.
Yet another myth of the trade debate is that America is “de-industrializing.” In fact, the total volume of output at U.S. factories has been trending up in recent decades, not down. American workers on American soil continue each year to produce thousands of civilian aircraft and aircraft engines, millions of motor vehicles, computers, medical devices, and heavy household appliances, and billions of books, pills, and semiconductors. We produce all that stuff with fewer workers because our manufacturing workers have become so much more productive.
Beyond our borders, the past three decades of expanding trade and globalization have witnessed dramatic global progress. Between 1981 and 2005, the share of the world’s population living on the equivalent of $1.25 a day dropped by half, from 52 to 25 percent, according to the World Bank.
As a global middle class has emerged, so too have more democratic forms of government. The share of the world’s population living in countries that respect civil liberties and the right to vote has climbed from 35 percent in 1973 to 46 percent today, according to Freedom House. And fewer people are dying in wars today than in past decades, in large part because commerce has replaced military competition.
America and the world face daunting tasks today, as in generations past, but expanding trade is part of the solution, not part of the problem.
Steven E. Levingston
March 11, 2010; 5:30 AM ET
Categories: Guest Blogger | Tags: benefits of free trade and globalization; populist views on free trade
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