By Cottage Pie
Free trade is the engine that powers the modern world. We see cheap production of goods in East and Southeast Asia, which raises the standard of living in developed and developing countries. The financial industry can push cash and funding across borders in the blink of an eye, funding business operations and enabling startups around the world. We transport food efficiently from the field to the plate in days, preventing rot and loss, which was previously widespread, especially in socialist countries Free trade makes goods and services available for with greater variety and better quality at a lower price than our ancestors could have imagined.
At the same time, in the West, cheap goods, efficient use of food, and startup cash benefit us by raising our standard of living and making sure even those in poverty have basic essentials, such as a refrigerator, telephone, and oven. Overseas, our neighbors stop going to war with each other because prosperity leads to peace. The European Union’s predecessor, the European Economic Community, was part of Winston Churchill’s vision for a post-war Europe partially because it established free trade among Western European countries, but largely to prevent recurrent wars. When countries trade freely with each other, they don’t shoot at each other. Have you seen German tanks roll into Paris lately? Of course, Trump went and screwed it all up.
The G20 finance ministers’ meeting, a semiformal organization of the 20 largest economies’ fiscal managers, met over this weekend and backed away from their long-standing commitment to free trade. Historically, up to last year, the finance ministers committed to resist all forms of economic protectionism (of course the US and EU conveniently ignore this promise in the realm of agricultural subsidies). But Treasury Secretary Steve Mnuchin, as the American delegate, led a battle against this declaration. Mnuchin watered down the language in the ministers’ statement to say countries will “strengthen the contribution of trade to our economies.” This policy is just plain wrong.
“The new U.S president, who has promised to put “America First,” has made no secret of his disdain for multilateral trade deals that he says have treated America unfairly. He insists the only solution is to bring manufacturing jobs back. Trump and Mnuchin are wrong. Not only do trade deals treat America fairly, they help Americans.”
Not much is manufactured in the United States anymore and this is a success, not a failure. Service economies accommodate lower start-up costs, more flexibility for labor to move amongst employers, and safer positions. And shipping manufacturing to robots and overseas benefits Americans of all stripes. From the card swipe at the gas pump to telephone banking, increased efficiency allows Americans to get things done better, faster, and cheaper, without substantial cost of jobs. Today, a car costs less, as a percentage of income today, than in 1970, and is safer, cheaper to operate, with better amenities. But the real power of automation and trade is where it helps at home.
For instance, you can buy a cheap washing machine from Mexico for only $300 (in 2017), at well under one percent of the annual income. And the availability of that washing machine is what makes a lot of American progress possible. The washing machine frees up a household member to work, teach the children, and perform other tasks, at very little cost. Protectionist policies, such as increased taxes on foreign goods, will just drive up the cost of these goods, and others made abroad, like makeup, furniture, and food. This only hurts those at the margins.
Those affected most, like the rest of Trump’s policies, are Trump’s voters. This is no different from the result from killing the Affordable Care Act. Those hit hardest by the change are those who voted for it. Those who are teetering on the edge of poverty right now will be pushed over the poverty line, and into a level of income inequality we haven’t seen since the 1920s. Keeping trade open and flowing will do the most for American workers and it is the government’s job to ensure that what we import is safe. Beyond that, the government should be promoting sales of American goods and services abroad, to ensure that free trade works for all.
American service jobs, from finance to education and Internet to health care, are the critical jobs that improve the quality of life for all of us. There is more than enough to go around as long as we commit, as a country, to providing education and training to everyone who needs it and ensuring that basic needs, such as healthcare, are met for every citizen. If we can help our citizens participate in the economy, we can sell these same services not just to our fellow countrymen, but to everyone in the world for generations to come. The global economy has worked to our advantage and it will continue to do so, if we let it.