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Everyone Prospers With Free Trade

Comment

Trade is win-win. Two people trade only because each values what he gets more than what he gives up. That's why in a store both customer and clerk say, "Thank you."

At the international level, trade is also win-win because it allows countries to specialize in what they do well and trade the extra for things they don't make as well. When free trade is unmolested, the world is richer and has more choices.

But I keep hearing about unfair trade. I'm told that trade allows American companies to exploit people in poor countries and makes Americans jobless.

Tom Palmer of the Atlas Economic Research Institute says those are myths.

Do we exploit people in Third World countries?

"The evidence does not show that," Palmer said. "Multinational companies pay a wage premium. They pay more than local companies pay ... because they want to attract good workers. Look at the Shanghai factory of General Motors. They pay three times what Chinese-owned factories (pay)."

Yet House Speaker Nancy Pelosi says that liberalizing trade with Central America would exploit workers.

"People want to work at those factories. They line up. They compete. Are they competing to get exploited? They're competing for higher-wage jobs. I think that those people know their interests better than Nancy Pelosi does."

Sen. Byron Dorgan called free trade "a race to the bottom. This says to American workers if you can't compete against 30-cents-an-hour labor in some other country, you lose your job."

"Again, evidence doesn't support that," said Palmer. "Look at the iPod. It says, 'Manufactured in China.' But if you look in the back, it says, 'Designed in California.' Most of the value is added by American workers." My colleague at Fox, former Gov. Mike Huckabee, said, "In a country we can only be free if we can feed ourselves, fuel ourselves and fight for ourselves. When we start outsourcing everything, that's a road to being enslaved."

"I hope that Gov. Huckabee thought about that when he was governor of Arkansas, and made sure there was no jobs outsourced to Virginia or Texas," Palmer replied.

"He should have protected the people of Arkansas, right?"

But that's different. We can count on Pennsylvania in a time of war. I don't know that I can count on China.

"If you're trading with them, it makes war much less likely," Palmer said. "We're not going to go to war with Canada. It's our biggest trading partner — $600 billion a year going across the U.S.-Canada border in trade along the longest non-militarized border in the world. Five thousand miles, counting Alaska. That is trade creating peace."

As the French economist Frederic Bastiat put it, "When goods don't cross borders, soldiers will."

Palmer offered another way to think about trade: as a machine — "a machine that allows Florida farmers to turn oranges into (phones). They can't grow cell phones on their trees in Florida. They grow oranges really well. What they can do is take those oranges and trade them for cell phones."

And when people do this worldwide, they get richer. "Just like the case of you buying some coffee at the Starbucks. You could have made your own coffee. But your time might have been better spent doing something else. So you outsourced your coffee production. You made yourself better off. And that young lady who sold you the coffee made herself better off."

Palmer points out that China was once the most advanced society in the world. It had developed the clock, printing, the compass and more. Not coincidentally, while it was advancing technology and science, it was a major world trader.

"And it crumbled because they destroyed their trade. They made it illegal to trade with foreigners. And they turned inward. That set in process a stagnation that only now is being undone. We shouldn't do that to our country."

We're different, aren't we? We know how to make everything we need. "There's always opportunities for new progress. ... Remember watching 'Star Trek' as a kid and they had that weird communicator? Everybody has one now. ... (T)rade made that possible."

John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "Give Me a Break" and of "Myth, Lies, and Downright Stupidity." To find out more about John Stossel, visit his site at <a href="http://www.johnstossel.com" <http://www.johnstossel.com>>johnstossel.com</a>. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

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Comments

5 Comments | Post Comment
Dear John,

We need to engage in free trade regardless of what the rest of the world is doing! Mr. Dobbs seeks an answer as to how one can call it free trade if the US has no barriers to trade while a trading partner employs many tariffs. While we all agree that this situation isn't free trade, it is also true in this example that the US would be engaging in Free Trade while the other party would not be. To close the loop on the problem, one needs to look no further than the lucid argument in Economist Henry Hazlitt's book Economics In One Lesson. Here we find a lucid explanation as to why it is good for us to engage in free trade regardless of what others do. It's all very basic, in the numbers, and when the day comes that Dobbs or anyone examines Hazlitt's figuring and offers up a great case as to why we should be retaliating, I'll change my mind. I won't hold my breath. http://www.fee.org/pdf/books/Economics_in_one_lesson.pdf
Comment: #1
Posted by: Dan Retzler
Mon May 3, 2010 9:15 AM
Dear John,
I am a student at Oregon State University majoring in Ag. Resource Economics. From what I have learned it is evident that free trade is a blessing to both importers and exporters. Free trade is a blessing because it provides variety in our choices of products. Without trade I wouldn't be able to eat a bannana in January. Further, it lowers prices because of comparative advantage. Countries export what they do best and import the rest. This allows importers to receive a lower price for goods they are comparatively worse at producing and exporters a higher price for what they are comparatively best at producing. By specializing in what we do best we then raise the global standard of living. Moreover, if two countries are trading bushels they are less likely to trade bullets.

Free trade is unpopular to some people because it makes intuitive sense to hoard our limited natural resources, keep jobs at home and be self sufficient. However, when you support the slogan "buy american", you are really supporting a society with fewer choices and higher prices.

I love your show and would love to see you do a show on another issue that I know is misinterpreted. That being the debate between conventional agriculture and organic agriculture. There is a big problem, which is that population is to hit 9 billion people on earth by 2050. This would mean we would need to grow 50 to 70 percent more food to meet the demand. There is a lot of debate about how conventional ag. is bad. Is it really? Is organic really better for us? I say no. It would be a great show.

Sean Collins
Comment: #2
Posted by: Sean
Mon May 3, 2010 10:58 PM
I'm a retired engineer. I like free trade, but I can see where it is creating a problem. That problem is the trade deficit. When we buy many good from China, they end up with excessive dollars. Now if they would buy something from us, that would be fine. But on the show you mentioned that they might buy a building for example, or even a company. In that case, they make profit on the building rent, or the corporate profits. This would be most beneficial to them in the long run, and not for us in the long run.
Currently they are buying treasuries. In World War II, Americans bought the treasuries, so the interest stayed right here in America. Now, the interest goes to the Chinese (among others), and then even more dollars pile up in their hands. This is what causes the value of currencies to change exchange rates. But really, can't you see the harm in all those dollars piling up in China?
Comment: #3
Posted by: Ed Dems
Fri May 7, 2010 8:21 AM
There is no such thing as "free-trade" in practice. There is no way to guarantee that the "playing field is fair". Let's just call it Foreign Trade. If the trade financing (e.g. America and China) is a vendor-finance scheme essentially (America is the customer accumulating more and more debt as China returns earned American dollars in the form of a loan), the exchange rate and/or interest rate will eventually adjust so that Chinese products cost much more (incentive to make more stuff in America to export) and the increased interest rates will attract capital as long as the American economy is working. These dynamic forces that operate over decades will make sure that imbalances cannot persist for long and that the economies stay healthy. The government needs to get out of the way so entrepreneurs can start manufacturing companies quickly with private capital and sensible tax rates and regulation.
Comment: #4
Posted by: Yadda
Sun May 9, 2010 9:34 AM
You know, I am so sick of these ivory tower idiots with their tenured positions harping about the joys of free trade. You know who you never see talking about the joys of free trade? Anybody from the middle class. All free trade has done is export damned near every manufacturing job to other countries. Sure there are a few left here, but the wages have gone down down down, along with the benefits. Why? Free Trade! I say let's put tariffs back along with penalties on any company that exports jobs. Along with that we should take away every tax incentive for corporations to export jobs. I would rather pay more at Wal-Mart and the grocery store and see a strong America. We should also withdraw from the World Trade Organization. All the WTO does is grease the rails that slide our jobs right out of the country. And if China shuts off our credit? GREAT! What is the first thing you do when you are dealing with someone that can't handle credit (Like our government). You tear up their credit cards so they can't get credit.
Comment: #5
Posted by: bigkahuna
Sun May 23, 2010 4:44 PM
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