In class just yesterday, we were unlocking the powerful conclusion that free trade between nations increases consumption possibilities for all--beyond what each nation would have available if it isolated itself from the rest of the world.
This happens because, with trade, each nation is free to produce goods and services in which it enjoys a comparative advantage--an ability to produce a good at a lower opportunity cost than others can.
So, for example, a nation like Canada can grow a lot of wheat, and then use their silos full of it in trade to buy the computers it needs from nations like Japan. That way both nations have computers, they are fed, and--and this is where it gets really exciting--it's possible for both nations to consume more of both goods than would be possible if they were living in isolation with no trade whatsoever, relying only upon their own workers to make all the goods they need.
Which is why it is so troubling that the United States continues to roll out antiquated trade barriers in an effort to "protect" Americans and their jobs. The last presidential administration committed this sin during its first term, imposing hefty tariffs on imported steel. And today we learned that the current administration will impose three years of tariffs on tires imported from China, in an effort to save American tire jobs. The tariff rates will begin at a whopping 35 percent.
But trade barriers such as tariffs make Americans worse off, because they don't let us enjoy the fundamental benefit of free trade in this case: cheaper tires for all. Instead we settle for propping up industries to benefit a few, at the expense of the rest of us, presumably to help our economy. Yet cheap steel and cheap tires are good for our economy, regardless of where they come from.
So that's the economic argument. But I believe there's also a moral dimension here.
In the case of the 2002 steel tariffs, we were deliberately trying to help domestic steel companies by hurting foreign ones. In effect, we were saying that steel jobs for US workers are more important than jobs for foreigners working hard to make life better for themselves and their families. Specifically, in 2002, we were--through our misguided policy actions--saying that human beings here are more valuable than our fellow human beings in China, Japan, South Korea, Ukraine and Russia. And I have a very hard time with that.
And this time it's even more personal, since we are imposing the tire protections against just one country, in an effort to prop up tire-makers in our own who apparently are "better" somehow. Sorry--I just don't buy that.
So let's not permit an "us vs. them," "USA! USA! USA!," mentality to cloud our economic judgment. Free trade makes life better for all, both domestically and globally. And we should tread lightly when our efforts to help a tiny minority cause harm to the rest of us.