The Great Trade Debate: Griswold - Trade barriers rob from the many to benefit a few special interests

by Daniel Griswold

As we wrap up our debate, let me grant Ian’s point that free trade alone is not a magic bullet that by itself delivers prosperity. Economic success also depends on secure property rights, the rule of law, stable money, functioning domestic markets, and moderate levels of taxation and regulation.

Where Ian and his protectionist friends go wrong is their belief that we Americans can make ourselves more prosperous by making ourselves less free to engage in business with people beyond our borders. We are not children who need government elites to save us from ourselves. Americans should be free to decide how we spend and invest our own hard-earned money, whether across the street or across an international border.

 

Protectionism at its core is a tool of income redistribution. It takes from the many and distributes the booty to politically connected special interests, while leaving our economy weaker and less productive.

 

Consider the U.S. sugar program, the poster boy for what is wrong with protectionism. The sugar program uses a system of quotas to restrict imports to about 15 percent of the domestic market. In some years this means U.S. consumers and sugar-using industries pay two or three times the world price for sugar.

 

 Sugar quotas have raised prices for American families, while raising costs for candy-makers, cereal companies, and bakeries. The U.S. Commerce Department calculated in a 2006 report that the sugar program had caused the loss of 6,000 manufacturing jobs. In fact, for every job saved in the sugar-producing industry, the quotas had eliminated three jobs in sugar-consuming industries.

 

A General Accounting Office study found that the sugar program cost U.S. consumers $1.9 billion a year. Of that, $1 billion went straight into the pockets of a relatively small number of sugar beet and sugar cane producers. Another $400 million went to certain foreign producers lucky enough to have quota rights to sell into the protected U.S. market at artificially high prices. The other $500 million simply disappeared each year in lost production, what economist call “deadweight” loss. This in microcosm is what protectionism does to our economy as a whole.

  

America’s remaining trade barriers fall especially hard on low-income American families. In fact, our highest trade barriers are aimed at products that are made and grown by poor people abroad and disproportionately consumed by poor people at home. We are talking about the staples of life—food, clothing, and shoes—that loom largest in a poor family’s budget. Import duties are the most regressive tax our federal government imposes.

 

Repealing our remaining trade barriers would make the basics of daily life more affordable for American families. It would reduce costs for American producers, allowing them to compete more effectively in domestic and global markets. Free trade would bless us with a more efficient and just economy.

 

Americans understand instinctively that competition is good. We benefit when more rather than fewer producers compete for our business. Domestic anti-trust laws are designed to protect consumers from price fixing, bid rigging, and cartels that divide markets among competitors. Yet that is exactly what trade barriers do—they protect a few favored producers from competition, at the expense of consumers and the general welfare.

 

Free trade is not just a matter of sound economics, although it is certainly that. Free trade is also a matter of justice, fairness, and social equity. In contrast, protectionism is a conspiracy against liberty and the public good—a conspiracy encouraged, enabled, and joined by our own government.

 

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Daniel Griswold is director of the Center for Trade Policy Studies at the Cato Institute, a non-profit, non-partisan think tank in Washington. He is author of the new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, available at Amazon.com and major bookstores. More information about Cato and Mad about Trade can be found at freetrade.org and danielgriswold.com. His email is [email protected].

(For the protectionism view, see Ian Fletcher's post here)