The mystical power of free trade
Some people find it hard to believe it really works, but it does
By Michael Kinsley
December 6, 1999
Web posted at: 1:27 p.m. EST (1827 GMT)
Free trade is always a hard sell. In all of social science, the
proposition that comes closest to being scientific, in terms of
being theoretically provable and true in real life, is that a
society benefits from allowing its citizens to buy what they
wish--even from foreigners. But people resist this conclusion,
sometimes violently, as in Seattle last week. Why?
A couple of reasons. First, the principle of free trade may be
true, but it's not obviously true. In fact, it's
counterintuitive. If a factory shuts down because of a flood of
cheap foreign products, how is that good? If middle-class
Americans find themselves competing with foreigners being paid
practically nothing and living in squalor, how can this send
Americans' standard of living up and not down? If another nation
is willing to pollute its air and water in order to produce goods
for sale in the global economy, how can America join that economy
and still hope to keep its own air and water clean?
There are answers to these questions, but they take a bit of
background and a bit of persuading. Students of economics are led
step by step through layers of reasoning until the moment they
see the light. Skeptics think that the whole routine is like
induction into a religious cult and that free trade is more like
an article of religious faith than a sound policy recommendation.
These skeptics are wrong, but their skepticism is understandable.
The other reason it's hard to sell free trade is that any given
example tends to benefit a lot of people in small ways that are
hard to identify and tends to harm a few people a lot in ways
that are vividly evident. When that factory shuts down, the
unemployed workers know they've suffered a loss, and they know
why. And it's a big enough loss to stir them politically. It will
affect their vote at least, if not cause them to march in the
streets.
By contrast, budget-conscious clothes shoppers (maybe those same
workers) who are able to save a few bucks on a new sweater are
not likely to realize they are enjoying a bargain as a result of
global trade or to take to the streets to defend their right to a
cheap sweater. Or suppose the U.S. slaps a tariff on foreign
sweaters and the foreign country retaliates by raising a tariff
on something we're selling them--the people who would lose their
jobs aren't even identifiable for sure, though for sure they
exist. Likewise the people who lose jobs because shoppers who
have to pay more for sweaters have less money to spend on other
things.
It's by considering all these things--the risk of losing your job
one way minus the risk of losing it another, the extra money you
make if your industry is shielded from foreign competition minus
the extra money you pay for goods and services that are
protected--that you reach the conclusion that on average, free
trade benefits us all. Yes, there are various economic theories
about circumstances in which all this may not be true, but their
authors win prizes precisely because the circumstances are
unusual. In general, the numbers work irrespective of what
policies other countries follow. They just get worse if one
country's trade restrictions lead other countries to impose more
of the same. Trouble is, who's got time for all that math?
Still, a half-century of general prosperity in the U.S. has
created a climate of toleration, if not enthusiasm, for the
free-trade gospel--mostly, indeed, as a gospel of our civic
religion rather than out of anyone's buying the math. Alarm about
imports tends to ebb and flow with the economy--less in good
times, more in bad. So how, in the best times ever, did the World
Trade Organization become the global bogeyman? No earnest college
kid ever hitched across the country to carry a picket sign
against the General Agreement on Tariffs and Trade, the WTO's
predecessor, although its function was similar. It took decades
for the CIA, the Trilateral Commission and the Council on Foreign
Relations to achieve their places in the pantheon of political
paranoia. The WTO has joined them in just four years. And it is
despised across the entire political spectrum, whereas these
other groups symbolize evil only to one political extreme or the
other.
Part of the explanation is the special nature of our current
prosperity, which is widening the income gap rather than
narrowing it, as in the past. Part is the growth of global
economic forces that are actually impinging on national
sovereignty, even though it's the paranoid hysterics who say so.
But the WTO isn't responsible for either of these trends, both of
which are probably inevitable and neither of which undermines the
basic case for free trade or for an organization empowered to
promote trade through binding arbitration of trade disputes.
Maybe it's the name. If you call yourself the World Trade
Organization, you can't complain much if people dial your 800
number and gripe about world trade. If a bunch of heads of
government plan a triumphalist self-celebration in Seattle, you
can't blame party poopers for showing up to horn in on the
publicity. But really, the WTO is O.K. Do the math. Or take it on
faith.
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Cover Date: December 13, 1999
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