How America Benefits From World Trade
Doesn’t America benefit from a prosperous world? Isn’t it more secure in a global arena in which other nations and peoples have something to lose if there is chaos, war, and instability? Are most business transactions (and foreign trade) a one-way street where one side “wins” and the other “loses”? When you buy a car or a loaf of bread or an airline trip, do you win while the seller loses?
Free market capitalism and trade do involve constant dislocations. Yet their dynamism generates greater prosperity for all. Compare these results to the economic stagnation under socialism. The incredible dynamics of free markets and trade have lifted standards of living during the last 300 years beyond the imagination of the human race thousands of years before, when most of humanity lived at subsistence levels. Just in the last 50 years, billions of human beings have risen from starvation. As a child in the 1950s, I thought all Asians were short and thin based on genetic differences from healthy Americans and Europeans. I remember visiting Spain in the 1960s and being impressed that so many of the children were up to a foot taller than their parents, who had nearly starved during much of their growing years.
After World War II, America endeavored to rebuild Europe and Asia. We helped them, and also benefited ourselves. Yet now strong voices are constantly telling us that America lost out when trade has brought us quality cars, Walmart affordable clothing, and much else. For a few thousand manufacturing jobs, some would sacrifice these benefits to a hundred million Americans.
Competition made American industry the world powerhouse it is today. I returned to the United States in the 1970s from living in South America and went to buy a new car. I noted how foreign cars had all sorts of features and reliability that American cars lacked. Competition from foreigners brought about the reliable, lower-priced cars we have today by breaking the monopoly of big business and big labor that dominated during the 1950s. Yes, today we have fewer assembly line jobs, but we also have incredibly more jobs in services, computers, trade, education, finance, travel, and so on. Agriculture is an example. We have far fewer jobs in agriculture today yet produce infinitely more foodstuffs, and there are many more jobs that allow greater comfort than being a farm laborer. I would know: I worked a summer on a dairy farm when I was 16.
President Trump’s trade czar, Robert Lighthizer, wants to eliminate the NAFTA protections for investors in Mexico and Canada. He argues that America should oppose the proviso for arbitration of investment disputes because they “create an incentive for American companies to invest internationally and move jobs overseas…. Why is it a good policy of the U.S. government to encourage investment in Mexico?” This issue is the current hang-up in the NAFTA negotiations.
Are we crazy? I explored this issue months ago in an article titled “A Destitute Mexico: Is That What We Want?” Many facts about trade have never been well explained to American voters. First, there is currently a severe labor shortage in America, even in the Midwestern manufacturing centers that Trump says he wants to protect. Millions of jobs are begging because so many Americans don’t have the blue-collar skills needed or even a capacity in basic reading, writing, and arithmetic.
Second, trade statistics don’t accurately measure imports and exports. They may ignore trade in services where the U.S. is very competitive and has very positive trade balances. President Trump’s speeches and tweets only take account of trade in goods, not in services such as advertising, tourism, banking, insurance, transportation, and so on.
Third, trade with China is misrepresented by the statistics. The thrust of our deficits with China are from its assembling of American companies’ products. The best example is the Apple iPhone with parts from Japan, Korea, and all over the world, which China imports. China earns peanuts from its contribution, yet the whole value of the iPhone shows as a trade surplus for China. Much less does it show the benefits to U.S. owners of patents and trademarks and the American jobs in sales, advertising, finance, shipping, and so on. I detailed some of these issues two years ago in an article titled “Trump’s Trade Deficits—How Washington Handicaps U.S. Exporters.”
On the other side are U.S. exports to China, including tens of billions of dollars in agricultural products where the whole value is American-made. No wonder farmers argue that they will become the scapegoats in a trade war.
America’s advanced science and engineering comes in great part from our immigrants. Half of the Fortune 500’s largest corporations were founded by immigrants or the children of immigrants. Thousands of restaurants, builders, and farmers depend upon immigrants for their labor.
As French leader Emmanuel Macron has argued, America set up and has benefited greatly from a rules-based international trade agenda, including a mechanism to resolve trade disputes. The issue of Chinese appropriation (some now say stealing) of American and European technology should be addressed multilaterally. Other nations, working with the United States, can make a more powerful front to negotiate changes in China’s policies and behavior. New technology always escapes national boundaries eventually. Remember in the 18th century when the English tried to prevent America from “stealing” their textile technology?
Tariffs should be the last resort, not the first, in negotiating trade agreements with other nations, mainly because they will hurt nearly all of us by raising prices. America is so strong in part because we get, or at least used to get, many of the smartest, most ambitious people in the world to come here. We have always benefited from the new discoveries that their efforts produce.
Most of Trump’s steel tariffs have been twice postponed but their consequence of lost jobs at steel fabricators caused by higher costs have been widely forecast. There are hundreds of thousands more jobs at companies that use steel than at steel smelters and producers. It would be a vast downhill spiral if this protectionist impulse becomes ongoing U.S. policy.
Jon Basil Utley is the publisher of The American Conservative.