May 3, 2019

YEAH, BUT THEY'RE YELLOW...:

The Case for Free Trade: It is both economic and moral (SCOTT LINCICOME, May 2, 2019, National Review)

Trade and globalization have provided undeniable economic benefits for the vast majority of American families, businesses, and workers. Most obvious are the consumer gains. Several recent studies have found that freer trade with China, for example, has generated, through increased competition and lower prices, hundreds of billions of dollars in U.S. consumer benefits -- benefits that, according to economists Xavier Jaravel and Erick Sager, are the equivalent of giving every American "$260 of extra spending per year for the rest of their lives." Consumer gains from imports, in general tilted toward the poor and the middle class, are especially tilted toward them when it comes to goods that are made in China and sold at stores like Walmart. The magnitude of such benefits also debunks the well-worn myth that free trade is mainly about cheap T-shirts. Indeed, trade's consumer surplus is a big reason that Americans today work far fewer hours to own far better essentials than at any prior time in U.S. history.

Then there are trade's overall benefits for the economy. A 2017 Peterson Institute paper calculated the payoff to the United States from expanded trade between 1950 and 2016 to be $2.1 trillion, increasing U.S. GDP per capita and per household by around $7,000 and $18,000 -- with benefits, again, disproportionately accruing to households in the bottom income decile. The U.S. International Trade Commission, moreover, found in 2016 that U.S. bilateral and regional trade agreements such as NAFTA generated small but significant annual increases in GDP, as well as in employment and real wages among highly skilled and less skilled American workers. As the American Enterprise Institute's Michael Strain has noted, trade-skeptical populists who downplay this impressive macroeconomic boost ignore that, as our current economic moment attests, a small bit of extra GDP growth can mean big things for lower-wage, lower-skill workers in terms of employment and possible government assistance.

Trade and globalization also support American companies and workers, even in manufacturing. The Commerce Department, for example, has estimated that almost 11 million jobs depended on exports of U.S. goods and services in 2016, and foreign direct investment in the United States -- the necessary flip side of our oft-maligned trade deficit -- supported millions more. Meanwhile, American companies that adapt and thrive in today's economy most often do so by making use of imports and global supply chains. The San Francisco Fed, for instance, recently estimated that almost half of U.S. imports are intermediate products purchased by American manufacturers to make globally competitive finished goods; the country's biggest exporters, therefore, are also its biggest importers. Numerous other studies have found that the vast majority of the value of an American company's assembled-abroad product (such as an iPhone, assembled in China) accrues to the U.S. company, including its workers and shareholders -- not to the place of final assembly (despite what a gross bilateral trade balance, which attributes an import's full cost to its final export source, might say).

These supply chains not only deliver modern marvels at amazing prices but also allow American companies and workers to focus on our high-value comparative advantages, such as professional services and advanced manufacturing, and leave the lower-value stuff to other countries and workers who lack such skills. Imports, the San Francisco Fed study found, also support millions of other American jobs in transportation, logistics, and wholesale and retail trade -- indeed, almost half of all U.S. consumption dollars spent on items not "made in the USA" go to these Americans, not to foreigners.

Finally, there are the immense, unseen benefits of import competition on American economic dynamism (a market's rate of change and innovation) and living standards. "When we find ways to get more from less, that means more resources available to expand opportunities elsewhere in the economy," George Mason's Russ Roberts recently noted. "That expansion is unseen. . . . But it's hugely important." Whether this creative destruction comes from trade or technology is irrelevant: The outcome is not just cheaper stuff but better (and once unimaginable) stuff, better jobs, better companies, and better lives. And it can occur only by letting consumers and their capital seek more-productive ends.

Posted by at May 3, 2019 8:35 PM

  

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