What’s Not Fair about Free Trade? | 5-Minute Videos

What benefits the world economy more: government-imposed trade regulations or the free exchange of ideas and commerce? For Daniel Hannan, president of the Institute for Free Trade, freedom always wins.

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Script:

Suppose someone invented a pill that let you live to the age of 120 in perfect health, and then die painlessly.

That pill would put a lot of people out of business. It would be bad news for doctors and nurses. It would be catastrophic for medical insurers. It would throw millions of home care staff out of work.

But would anyone see those as good reasons to ban it?

And would anyone care where the pill had been invented? In their country or someone else’s?

What goes for that pill goes for any other product that would improve our lives. We shouldn’t make things harder to obtain simply on the grounds that they originate somewhere else.

Actually, a lot of people disagree with that idea. Opponents of free trade — and there are many — say things that sound perfectly reasonable. Things like:

“We need to protect our strategic industries!”

“We can’t survive these expanding trade deficits!”

“We must grow our own food!”

“We want trade to be fair!”

“We can’t compete with slave-wage economies!”

All those arguments sound like common sense. But all of them would ban our miracle pill. All of them would leave us poorer.

Let’s take them in order.

Protectionism:

Trade barriers don’t protect industries; they make them inefficient, uncompetitive, and dependent on state handouts.

As Ronald Reagan put it:

“Instead of protectionism, we should call it destructionism. It destroys jobs, weakens our industries, harms exports, costs billions of dollars to consumers, and damages our overall economy.”

Trade Deficits:

There is no correlation between a country’s balance of trade and its economic growth.

The greatest benefit of trade is cheaper imports because they save consumers money that then gets spent on other stuff, which is what drives growth.

If, say, China wants to subsidize its steel production, that’s a gift to our construction workers, our car makers, and our consumers, courtesy of the Chinese state.

Growing your own food:

You know which country leads the world in that? North Korea. It has made self-sufficiency — juche — its ruling principle. Yup, that’s North Korea, the world’s leader in manmade famines.

The way to have secure food – or secure anything — is to source it from the widest possible variety of suppliers. That way you are not at risk from a shock or disruption — which might as easily happen in your own country as anywhere else.

Fair Trade:

The only thing that’s fair is not putting the government’s thumb on the scales. Protectionism by definition, privileges some politically connected lobby over the general population. The way to “protect” our industries is to make them more competitive. And you do that by lowering taxes and cutting regulations.

Competing with lower-wage economies:

That’s what makes poor countries richer — and makes rich countries richer. Lower wages let developing nations compete and let wealthier countries focus on higher-skilled, higher-paying jobs. The iPhone is assembled in China, but the design and the profits are in the USA.

Look at the global impact. As recently as 1981, 40 percent of the world’s population lived in extreme poverty. Today it is 8 percent. 300 people have escaped extreme poverty since you clicked on this video. That’s 300 new arguments for free trade.

So why doesn’t everyone get it?

See the rest

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