Ian Fletcher
Some of Dan’s arguments continue to be mere distractions. Taking North Korea and Burma as proof of the harm of a no-trade (or close to it) policy falls down on the fact that North Korea has a communist economy and Burma a quasi-socialist state-controlled one, economic defects so profound as to guarantee their economic failure regardless of their trade policies.
A more relevant comparison, if one wishes to look at a low-trade economy, would be to the United States in our own pre-WWII tariff era. We had the world’s highest standard of living despite the fact that imports were well under five percent of GDP. (They are 17 percent today.) The average American was roughly twice as well-off as the average Englishman, despite the fact that Britain in this era had imports roughly three times this scale.
It is simply not empirically true that trade per se makes nations rich: not today, not historically. Today, in fact, some of the world’s highest trade-to-GDP ratios are found among impoverished exporters of raw materials, which are neither wealthy nor fast-growing economies.
Dan’s argument for international specialization is valid, but it is not an argument for free trade at all. It is just an argument for trade, which is not the same thing.
Dan claims that the U.S. ranks only 28th in the world in freedom to trade. This is a legalistic paper assessment, which ignores the far more fundamental fact that the U.S. has for decades tolerated annual trade deficits on the order of five percent of GDP. What other continent-sized economy with ample capability for self-sufficiency can even come close to this record?"
That imposing a tariff would violate America’s commitments to the WTO means nothing: we made these commitments and have the legal right to withdraw from them, just as we withdrew from the anti-ballistic missile treaty with Russia in 2001.
As for the threat of foreign retaliation: thanks to America’s huge trade deficit, it is foreign nations, not the U.S., who have the surpluses to lose. Our weakness is actually a position of strength here. Some retaliation is inevitable, but there is no reason to expect it to get out of control.
Dan asserts that protectionism is motivated by nostalgia for an industrial past which ignores the supposed reality that our economic future lies in high-technology and service jobs. But the U.S. has been running a deficit in high technology since 2002. So high-tech jobs are not going to save us. Neither, given the rise of offshoring, are service jobs, given that service jobs immune to off-shoring (because they must be performed in person) are either too elite to help most people (surgeons) or low-paid (waitresses and security guards).
When Dan observes that “most of the net new jobs created in the United States in the past two decades have been middle-class service jobs that actually pay more than the average manufacturing job,” all this means is that the wages of service jobs have not yet been decimated by imports as badly as the wages of manufacturing jobs. This is unsurprising, as Internet-based offshoring began later than the tidal wave of Toyotas and other manufactured goods.
It is no accident that, according to the Census Bureau (see http://www.census.gov/prod/
2009pubs/p60-236.pdf, p.7), real median family income in 2008, the last year for which complete data are available, was actually slightly lower than in 1999. Free trade is not generating rising prosperity, but a relentless economic headwind which “caps” American income growth by competitive pressure from foreign nations, some of which suppress their own wages by undemocratic means.
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Ian Fletcher is an Adjunct Fellow at the U.S. Business & Industry Council, a Washington-based think tank founded in 1933, and author of the new book Free Trade Doesn’t Work: What Should Replace it and Why, available onAmazon.com. USBIC’s web site is at americaneconomicalert.org; the website for Ian’s book is atfreetradedoesntwork.com; Ian’s page at USBIC is at usbic.net/ianfletcher; he may be contacted atian.fletcher@usbic.net.
(For the free trade view, see Dan Griswold's post here)
