Suppose that we did not allow free trade between the 50 American states. Citizens like me in New Jersey would be far worse off if we could not buy pineapples from Hawaii, wine and vegetables from California, wheat from Kansas, and oil from Texas and Louisiana while we sell pharmaceuticals to the rest of the country. The specialization that trade makes possible allows all of us to live better.
The situation is the same with respect to world trade. Both we and the Chinese are better off if we can import inexpensive clothing from China and sell them large-scale computers and data storage equipment.
To be sure, such trade does not make everyone better off, and that is why free trade is often a tough sell, especially during times of hardship.
If I am a textile worker whose job is lost because Chinese imports have caused my factory to close, I feel the pain far more acutely than consumers feel the benefits of cheap clothing. The pain tends to be localized while the benefits are spread broadly. No one person’s benefit can compare with the loss felt by the textile worker. But the total benefits do exceed the costs. And competitive markets have spurred the innovation revolution that has made the U.S. the economic powerhouse that it is.
The solution for the displaced worker is job retraining and adjustment assistance, and to improve the safety net available to displaced workers during the transition period. We also need to revamp our educational system so that it prepares workers for the jobs that are available today — and imparts the flexible skills that make our citizens ready for the future jobs that we cannot even imagine.
Buy American provisions invite retaliation by other nations, and the spread of “beggar thy neighbor” policies throughout the world.
This House provision caused a palpable anxiety during the recent World Economic Forum at Davos, and America’s closest allies are furious. “Buy American” would effectively ban Canadian steel products and other raw materials from infrastructure projects receiving stimulus funds. Foreign steel would only be allowed if domestic products were either unavailable or drove up the cost of the project by 25% or more. If the provision is not diluted, Mr. Obama will find a very hostile reception during his first international trip to Canada later this month.
Hostility has been no less evident in Europe and China. The European Union has said that it will not stand by idly if the U.S. violates its trade agreements and its obligations to the World Trade Organization. The risks of retaliation and a trade war are very real.
I didn’t vote for John Kerry because he was promoting protectionist anti-free trade policies. At this point in time, these policies are even more destructive. The Democrats have to abandon this idiotic idea.
[Link thanks to Yid With Lid]