A case for trade

The United States deficit with China $202 billion is big. But that, in itself, is not a bad thing. And Americans benefit enormously from free trade something that is rarely noted, says Investor's Business Daily (IBD).

Consider:

As economist Gary Clyde Hufbauer recently estimated, the average American family's income is about $10,000 higher today, thanks to the dismantling of trade barriers over the last 50 years.

Meanwhile, a University of Michigan study has calculated that family incomes could be increased an additional $2,500 just by reducing the remaining barriers by a third.

We now live in a $12 trillion economy in which one of five factory jobs is supported by exports.

On average, those jobs pay 13 per cent to 18 per cent more than non-trade jobs, according to the U.S. Trade Representative's office.

As U.S. exports grow, so do U.S. jobs.

But it isn't just the United States that's benefiting. According to a recent study in Foreign Affairs by David Dollar and Aart Kray, poor countries that globalised most aggressively saw average annual gross domestic product (GDP) growth rates surge from 1 per cent in the 1960s to 5 per cent in the 1990s. Dozens of other studies have made similar findings, says IBD.

And the debate isn't just academic. Sen. Charles Schumer (D-N.Y.), is pushing a bill to slap 27.5 per cent tariffs on all Chinese imports unless China sharply re-values its yuan against the dollar.

This is protectionism, plain and simple, says IBD. The yuan may indeed be undervalued against the dollar, but a sharp, sudden revaluation could create massive financial instability in China, the United States and the world economy.

Besides, those who'd redress trade imbalances through gimmicks such as tariffs really just a tax on consumption here miss the point. Free trade makes everyone wealthier, says IBD.

Source: Editorial, A Case for Trade, Investor's Business Daily, September 14, 2006.

For text (subscription required): http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=243039096248967

For more on Trade Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=42

FMF Policy Bulletin/ 19 September 2006

Publish date: 28 September 2006
Views: 331

Trade, News

The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation. This article may be republished without prior consent but with acknowledgement to the author.

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