Monday, February 07, 2005

Myths About "Free Trade"

The biggest myth about "free trade" is that it exists, or can exist, in the current environment where nearly every aspect of international relations including trade is micromanaged by governmental agencies and NGOs, many of them in close partnership with multinational corporations whose real business is buying favors and stifling legitimate competition. But for the record, I'll endorse Ron Paul's (R-Tx) conception of free trade as worth having around.

With this as background, the following letter which appeared in the latest The New American raises some issues worth discussing:

I just opened the January 10 issue of The New American and read the letter to the editor rebutting William F. Jasper's article "Foreign Nations Target U.S. Steel" (November 29, 2004 issue). Jonathan Ingram, the author of the letter, does indeed present an interesting point of view. However, there is a very simple principle that he has overlooked. This one principle seems to escape all those who present similar "open border" points of view. That principle is that real economic wealth comes from converting raw materials into finished products for which a demand exists. Domestic manufacturing is the foundation of domestic wealth.

It is true that imported steel benefits American consumers of steel--in the short run. But what is routinely overlooked is that no wages are paid to Ameircans, and no wealth is built in this country, from a steel manufacturing industry that lies across the ocean. This leads to dwindling purchasing power amongst steel workers. If manufactured domestically, steel prices would increase. But so would the number of good-paying jobs required to man the plants that produce it. Good-paying jobs increase the purchasing power of those that have them, thus countering the resulting higher cost of consumer goods. This is a self-balancing proposition, the net result being an increase in domestic wealth.

The myth that "our economy would collapse without cheap imports" historically doesn't hold any water. Before offshoring was a household word the United States won two world wars and put men on the moon--not once but several times. That was well before the depletion of American jobs and the flood of good produced offshore. Cheaper goods manufactured overseas results in lower-paying jobs here, while more expensive goods, manufactured in America, produce good-paying jobs and build wealth in this country.

So a choice is in order. Cheaper, offshore goods, low-paying jobs, and a depletion of wealth--or more expensive items, higher-paying jobs, and increasing domestic wealth. I choose the latter.

Lewisville, Texas

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