Thursday, December 29, 2005

The Blessings of Free Trade

What is free trade? The Left has adequately defined free trade as something evil, or something that is not natural and should be avoided at all costs. They frame the debate against free trade by citing numerous unfounded case studies and examples of how free trade hurts job growth, abuses child labor laws, denigrates the environment, or damages many Third World countries economies. This is not free trade. These simple talking points appeal to many uninformed people who simply avoid dissecting each of these criticisms and find the evidence behind each claim lacking in every angle of their argument. Free trade is the exchange of goods and services from one country to another without any restrictions. In theory, free trade not only benefits the individual, but it also benefits the world.

To further understand why a liberalized market is essential for sustainable economic growth let’s examine a standard model of what happens in a free trading environment. Let’s use the steel industry as our prime example. Raising tariffs against imported steel from foreign manufacturers will inflict immense damage to the US economy. These tariffs, or taxes, prevent the foreign steel producers from selling the steel to American companies and consumers at a cheaper price than what the domestic steel industry is selling at.

So you may ask yourself, ‘what exactly would be the purpose of these tariffs?’ The protectionist policy of the Left has advocated and cited that the American steel industry will lose thousands of jobs if we eliminate tariffs and allow cheaper foreign steel to be sold to the American consumers. Even though this claim may have some truth to it, the belief that only steel companies drive the economy is flat out deceitful. In 1998, after the elimination of the steel tariffs, only 10,000 jobs had been lost in the domestic steel industry. This number was relatively small compared to the 2.5 million jobs created in 1998, which included an increase in jobs in sectors where companies purchased steel at cheaper prices. The cheaper steel prices enabled car companies, like Ford, and military contractors, like Boeing, to higher more employees. Competition coerces these companies to compete for consumer business, which consequently lowers the steel prices, invokes more innovation, and improves the quality of the steel industry.

A general myth many liberals continue to shriek is the belief that free trade causes more child labor. However, a recent study done by Dartmouth economists Eric Edmonds and Nina Pavcnik conclude that free trade has in fact decreased the need for child labor. The study examined Vietnam, a country that liberalized their market in the 1990s. Vietnam increased exports throughout the 1990s which eventually lead to an increase in wealth in the economy. Thus poor families that see an increase in their income do not need to rely on the labor of their own children for additional income. The analysis of the study found that “real income growth among Vietnamese farming families between 1993 and 1998 can account for nearly one-half of the large decline in child labor in rural Vietnam that occurred over this period."

The basic philosophy of freedom also plays an important role in a free market. When one speaks of the components involved in free trade, many people often forget that it doesn’t just involve countries. It involves individuals living within those countries. To put a restriction on someone from selling goods in a land where they didn’t manufacture the product or grow the commodity strips man away from the primordial aspects of survival. Besides the fact that it’s the “law,” what grounds does someone have to disable or restrict one to sell goods and services in a foreign land? The answer is that nobody on Earth has or should have the authority to dictate such a disastrous trading policy.

The verdict on free trade is already in. NAFTA has been a complete success through the last 11 years and with the recent signing of CAFTA, it seems that more countries are beginning to realize the benefits of a liberalized market. Countries that lower barriers for trade enjoy higher economic standards of living. Next time you hear someone blasting the institutions of free trade, ask them if they enjoy cheaper prices of rice, steel, corn, or bananas. America needs to accept free trade and continue its path to more freedom for the world markets. With fewer barriers for trade, countries will become interconnected with one another. The more interconnected countries become the more free and prosperous the world will grow.

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