Thursday, November 30, 2006

Fair Trade Foolishness

Great piece by Robert Samuelson in today's Washington Post:

Just last week Democratic congressional leaders signaled that they may oppose new trade agreements with Colombia and Peru. Who, if anyone, would benefit is unclear. As The Post reported, the agreements' darkened prospects have already led to layoffs in Colombia. In the United States, manufacturers believe the agreements would expand their exports. Peru's tariffs average about 10 percent, Colombia's about 11 percent, says Frank Vargo of the National Association of Manufacturers. Most of these would go to zero under the agreements.

We are dealing with something new here. It transcends traditional protectionism, which tries to shield specific industries and workers from imports. It's trade obstructionism: a reflexive reaction against almost any trade agreement. The idea is that much trade is inherently "unfair." Multinational companies use it to ship U.S. jobs abroad; other countries compete unfairly with low wages and substandard labor practices. (Indeed, lax labor standards are cited to oppose the Peruvian and Colombian agreements.) Vast U.S. trade deficits measure the destructiveness. If trade is so unfair, why encourage more of it?

Much of this indictment is wrong or wildly exaggerated. For example, American trade deficits haven't destroyed U.S. job creation by sending work abroad. Consider: From 1980 to 2006, the trade deficit jumped from $19 billion to an estimated $786 billion, or from less than 1 percent of gross domestic product to about 6 percent. Still, employment in the same period rose from 99 million to 145 million. Job creation defies the trade deficits, whose causes lie largely beyond our control and have little to do with "unfair" trade practices.

The antipathy to expanded trade is hard to understand - particularly given the enormous expansion of wealth in the United States since we began dramatically reducing trade barriers after World War II. But if hostility to trade is hard to figure, it is particularly hard to understand why Democrats oppose measures that primarily enhance exports - which at the very least fits with what they have historically claimed was the good thing about trade.

Hat Tip: NAM blog.

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