Why We Need Free Trade With China And The World

in Economics/World by
   

Recently I have become appalled at the growing rise of protectionism and nativism in the Republican Party. This sentiment has been personified by Donald Trump’s presidential candidacy. Trump, a master of regurgitating economic fallacies and senseless populist rhetoric, has been drumming up support for his regressive trade policies. He has been promoting the idea that the US needs to close itself off from global trade and seek what he deems “fair trade.” His definition of “fair” is the government injecting itself in the voluntary associations between businesses and individuals of differing countries by limiting their choice and freedom. No Donald, nothing is “fair” about that, no matter how you sugarcoat it with fear mongering about the Chinese. The only true “fair” trade is free trade which was first demonstrated by Adam Smith’s rebuke of the Corn Laws in his magnum opus, “The Wealth Of Nations”. We have now had over 200 years of solid proof and knowledge on the woes of protectionism, yet this old lie doesn’t seem to die. Sadly this untruth seems to be gaining the most ground in the supposed free market Republican Party.

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“Fair Trade” was once a slogan and ideal of the left, but the former (current?) leftist Donald Trump could care less about that. He thinks the free flow of goods and services across borders through the process of mutual exchange is inherently a “bad deal” and should be limited at all costs in order to make America great again. What the Donald doesn’t know is that America became great and can only become great again if we rid ourselves from our archaic trade restrictions and impediments. Our nation fought a war of independence in part to free ourselves from the clutches of British mercantilism which strangled our growth and prosperity through their insidious taxes and restrictions on trade.

If protectionism really worked, why not set up tariffs between states, say New York and New Jersey? Why not go further and restrict trade between cities? How about neighborhoods? Even households? If we do that everyone will have a job and be entirely self-sufficient right? No, sadly the reality is civilization and society are based on trade. Humanity has progressed this far through the division of labor, specialization, and mutual exchange. Imagine an individual’s quality of life if they had to produce everything they use on their own? It would be a terrible, bleak and short life indeed. Instead we specialize and work in what we do best and then buy what we need from the market. As a result, with free trade, the individual has access to an ever-growing range of products at ever lower prices. This higher purchasing power has done more to increase one’s quality of life than any social welfare program ever has.

These basic principles of human society seemed to be overlooked by the Donald and protectionists worldwide. The strive for self-sufficiency and autarky has only ever lead to war, strife, and economic ruin for all. Look no further than Nazi Germany for that. Free trade on the other hand has always lead to the promotion of peace and prosperity and lifted untold numbers out of the clutches of poverty.

Of course their main criticism to this will be “..but we will lose jobs!!” Again, another common error in their thinking. With free trade it is true that domestic producers face greater competition from foreign producers, but this increased competition gives them an incentive to improve the quality of their production while keeping prices low in order to compete. At the same time, free trade allows domestic producers to shop around the world for the least expensive products they can use for their own production, which in turn allows them to keep their cost of production down without sacrificing any quality. Yes, in the short run some jobs may be lost, but in the long-term everyone benefits. Tariffs and trade restrictions are nothing more than indirect subsidies to domestic producers who can’t compete on the world market and make up for their inefficiencies with political support through protectionism. The individual consumer is the real loser of protectionism as their cost of living rises and their choices become limited.

To be fair to the Donald, he does have a point when he says we are losing out in global trade deals. He is right, but for the wrong reason. While countries the world over have taken a cue from basic economic theory and opened themselves up to the global market by freeing and liberalizing their economies, the US has been doing the exact opposite. We are losing out economically by remaining closed off to world trade. While other nations prosper from trade, both the left and the right in this country are too preoccupied by ignorantly mocking it. As a result in all major indices of Economic Freedom we have either sunk in the rankings or remained stagnant.

According to the Fraser Institute’s Economic Freedom of the World survey, the United States ranks 17th in economic freedom. So much for “Land of the Free.” Even those “socialist utopias” that Bernie Sanders loves to rave about, such as Finland and Denmark, rank higher than us. This should be a wake up call to the sad state of affairs our country is in today.

So what should true free market capitalists, conservatives, and libertarians support if they want to see their great country prosper once again? Well we could start with free trade with the second largest economy of the world, China.

Yes, you read me right. We need free trade with China and we need it now. Instead of trying to demonize and quarrel with China at every turn, we should do the exact opposite, strengthen our mutual ties.

The Peterson Institute for International Economics’ recent study, “Bridging the Pacific,” has reported that the benefits of a free trade agreement with China would be massive for both countries. United States’ exports would increase by over $400 billion a year, and the United States national income would rise by more than $100 billion annually. Furthermore, there would be at least  1.7 million export-related jobs added to the U.S. economy over a 10 year period, and the American people meanwhile would benefit from the lower prices and wider product choices this deal would provide.

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An agreement of this scale, between the 2 largest economies in the world, would be one of the greatest achievements in the liberalizing of markets in our generation and would lead to immeasurable wealth creation worldwide.

Australia, New Zealand, Japan and South Korea have already beaten us to it, signing their own bilateral treaties with China. What are we waiting for?

Now many would criticize this line of thinking. They would claim that free trade agreements do not equal true free trade. They would instead insist this is rather “managed trade” that creates more rules and regulations than it eliminates. They would point to an agreement such as NAFTA as being a failure and an example of managed trade. Now while this argument has many merits, I believe on the whole, even the worst free trade agreement will still be a net positive in terms of expanding economic freedom and prosperity. Even the much lambasted NAFTA has brought with it over 25 million jobs to the US since its inception, according to FactCheck.org.

We shouldn’t stop with China though. We should seek free trade with as much of the world as possible and we don’t even need to pass a treaty to do it. All that is necessary is the eradication of our own tariffs and restrictions, an action supported by almost 90% of economists according to a 2006 study.

So what are you waiting for? Ignore the lies, and go out and buy that knockoff Chinese jacket. The world will be better off because of it.

Gavin is the Editor-In-Chief and founder of The Liberty Conservative as well as an eCommerce entrepreneur. He is a strong believer in free markets and limited government.