Pudlugger
06-19-2007, 07:35 AM
Free-Trade Fraud
By INVESTOR'S BUSINESS DAILY | Posted Monday, June 18, 2007 4:20 PM PT
Journalism: If you laid all the economists in the world end to end, goes an old joke, they still wouldn't reach a conclusion. But there's one thing almost all economists agree on: Free trade is good. Yet the media don't get it.
Beyond The Bias: Fifth In A Series
More on this series
This month marks the 77th anniversary of an economic event that lives in ignominy: The signing of the Smoot-Hawley Tariff Act, the anti-free-trade bill that helped push the world into depression. It should be forever etched in the minds of both the media and the public they serve. Sadly, that's not the case.
Instead, on an almost monthly basis, the release of the trade deficit data becomes yet another occasion for hand-wringing and general economic anxiety among pundits and reporters alike. We fret over the "unprecedented" size of the deficit. Over "what it means" to workers. And to competitiveness. We worry new trade deals "won't be in our interest."
But it's an inconvenient truth, to coin a phrase, that free trade is one of the surest drivers of economic growth known to man. This isn't merely opinion: It's backed up by ample statistical evidence, unlike the anecdotal tales of free-trade woes usually told.
And what the evidence shows is that, instead of being a problem, the trade deficit seems to actually boost economic growth.
Dan Griswold of the Cato Institute recently looked at the economy going back to 1980 and found
By comparison, GDP averaged 3% in years when the trade deficit increased a modest 0.5% or less of GDP and 4.1% when trade red ink rose (or "grew worse") by 0.5% or more.
Those who worry solely about the deficit forget that U.S. exports are in fact soaring right now. It's just that, because we're growing faster than most of our counterparts, we're buying more goods than we're selling.
In 2006, U.S. exports were $1.47 trillion, up 25% from 2001, when President Bush entered office, and 165% since 1990. Yes, we had a deficit of $763 billion. But everything we buy overseas at a lower price improves our standard of living and helps domestic businesses that import key inputs. The deficit is really just an accounting concept — it has few real-world impacts.
The question for Americans is: Do we want to give up inexpensive clothes and well-made but cheaper foreign autos and other goods to be forced to pay more for nearly everything and at lower quality?
The point is, we don't have to. Free trade enriches those who undertake it. It makes consumers much richer, and helps ensure that global resources are used wisely. It keeps inflation down.
The benefits of greater trade are indeed many.
As the chart below shows, total trade — exports plus imports — as a share of GDP has surged from 11% in 1970 to 28%. Real GDP over this time has risen 203% to just over $11 trillion. It's not an exaggeration to say we largely owe our extraordinary wealth to trade.
How did it happen? Since 1960, the U.S. has pushed through six major global or regional trade deals, ranging from the Kennedy Round of world trade talks in 1962 to NAFTA in 1994 and more recently 2005's Central America Free Trade Agreement. Those deals slashed tariffs and invisible trade barriers.
Over that time, the U.S. economy has surged. Today, per capita GDP adjusted for inflation is $38,087, a gain of 162% since 1962. That's how much our collective standard of living has gone up.
We're not alone in benefiting from trade. So has the world economy, which has boomed. On a per-person basis, real average incomes have more than tripled since 1950 worldwide. And in once-poor areas with the greatest trade liberalization — like East Asia — growth has been even greater, soaring 5,675% from 1950 to 2003.
And yet despite this, a recent cover of the respected journal International Economy shows a giant ship dubbed "FREE TRADE" sinking fast in perilous waters, above the headline "Is Globalization In Trouble?" These days, it's a legitimate question.
Everywhere you look in the media — from Lou Dobbs and Pat Buchanan to BusinessWeek and even the lofty Economist— questions are being raised about the value and validity of free trade.
Give Bush credit: Seeing that much of the world was dragging its feet on new trade agreements, he has signed 14 separate free-trade deals with nations or regional blocs in an effort to keep the world and U.S. economies growing.
Yet, there's talk of not renewing Bush's fast-track trade authority, granted by Congress in 2002 and expiring this month. It should be a slam dunk, but sadly it's not. It's time for those who are against free trade to end the scare tactics and outright falsehoods.
In recent years, countries as diverse as Singapore, Colombia, Chile, Guatemala, Morocco, Mexico, South Korea and Taiwan have all signed deals with the U.S. and freed up trade. All have seen marked improvements in their economies and democracy.
The U.S. economy isn't weaker for this, but stronger. Thanks to free trade, we have more jobs, more income, more wealth, bigger homes, nicer cars, more and better appliances, home computers, swimming pools, on and on, thanks.
Yet, since 1970, we've had 34 trade deficits out of 37 years. The three surpluses, by the way, all came in recession years.
Free trade is a winner — a truth to which we wish the media and their Democratic friends in Congress would open their eyes. We and the rest of the world would be better off for it.
By INVESTOR'S BUSINESS DAILY | Posted Monday, June 18, 2007 4:20 PM PT
Journalism: If you laid all the economists in the world end to end, goes an old joke, they still wouldn't reach a conclusion. But there's one thing almost all economists agree on: Free trade is good. Yet the media don't get it.
Beyond The Bias: Fifth In A Series
This month marks the 77th anniversary of an economic event that lives in ignominy: The signing of the Smoot-Hawley Tariff Act, the anti-free-trade bill that helped push the world into depression. It should be forever etched in the minds of both the media and the public they serve. Sadly, that's not the case.
Instead, on an almost monthly basis, the release of the trade deficit data becomes yet another occasion for hand-wringing and general economic anxiety among pundits and reporters alike. We fret over the "unprecedented" size of the deficit. Over "what it means" to workers. And to competitiveness. We worry new trade deals "won't be in our interest."
But it's an inconvenient truth, to coin a phrase, that free trade is one of the surest drivers of economic growth known to man. This isn't merely opinion: It's backed up by ample statistical evidence, unlike the anecdotal tales of free-trade woes usually told.
And what the evidence shows is that, instead of being a problem, the trade deficit seems to actually boost economic growth.
Dan Griswold of the Cato Institute recently looked at the economy going back to 1980 and found
By comparison, GDP averaged 3% in years when the trade deficit increased a modest 0.5% or less of GDP and 4.1% when trade red ink rose (or "grew worse") by 0.5% or more.
Those who worry solely about the deficit forget that U.S. exports are in fact soaring right now. It's just that, because we're growing faster than most of our counterparts, we're buying more goods than we're selling.
In 2006, U.S. exports were $1.47 trillion, up 25% from 2001, when President Bush entered office, and 165% since 1990. Yes, we had a deficit of $763 billion. But everything we buy overseas at a lower price improves our standard of living and helps domestic businesses that import key inputs. The deficit is really just an accounting concept — it has few real-world impacts.
The question for Americans is: Do we want to give up inexpensive clothes and well-made but cheaper foreign autos and other goods to be forced to pay more for nearly everything and at lower quality?
The point is, we don't have to. Free trade enriches those who undertake it. It makes consumers much richer, and helps ensure that global resources are used wisely. It keeps inflation down.
The benefits of greater trade are indeed many.
As the chart below shows, total trade — exports plus imports — as a share of GDP has surged from 11% in 1970 to 28%. Real GDP over this time has risen 203% to just over $11 trillion. It's not an exaggeration to say we largely owe our extraordinary wealth to trade.
How did it happen? Since 1960, the U.S. has pushed through six major global or regional trade deals, ranging from the Kennedy Round of world trade talks in 1962 to NAFTA in 1994 and more recently 2005's Central America Free Trade Agreement. Those deals slashed tariffs and invisible trade barriers.
Over that time, the U.S. economy has surged. Today, per capita GDP adjusted for inflation is $38,087, a gain of 162% since 1962. That's how much our collective standard of living has gone up.
We're not alone in benefiting from trade. So has the world economy, which has boomed. On a per-person basis, real average incomes have more than tripled since 1950 worldwide. And in once-poor areas with the greatest trade liberalization — like East Asia — growth has been even greater, soaring 5,675% from 1950 to 2003.
And yet despite this, a recent cover of the respected journal International Economy shows a giant ship dubbed "FREE TRADE" sinking fast in perilous waters, above the headline "Is Globalization In Trouble?" These days, it's a legitimate question.
Everywhere you look in the media — from Lou Dobbs and Pat Buchanan to BusinessWeek and even the lofty Economist— questions are being raised about the value and validity of free trade.
Give Bush credit: Seeing that much of the world was dragging its feet on new trade agreements, he has signed 14 separate free-trade deals with nations or regional blocs in an effort to keep the world and U.S. economies growing.
Yet, there's talk of not renewing Bush's fast-track trade authority, granted by Congress in 2002 and expiring this month. It should be a slam dunk, but sadly it's not. It's time for those who are against free trade to end the scare tactics and outright falsehoods.
In recent years, countries as diverse as Singapore, Colombia, Chile, Guatemala, Morocco, Mexico, South Korea and Taiwan have all signed deals with the U.S. and freed up trade. All have seen marked improvements in their economies and democracy.
The U.S. economy isn't weaker for this, but stronger. Thanks to free trade, we have more jobs, more income, more wealth, bigger homes, nicer cars, more and better appliances, home computers, swimming pools, on and on, thanks.
Yet, since 1970, we've had 34 trade deficits out of 37 years. The three surpluses, by the way, all came in recession years.
Free trade is a winner — a truth to which we wish the media and their Democratic friends in Congress would open their eyes. We and the rest of the world would be better off for it.