CEI Adjunct Fellow Fran Smith, coauthor of the new CEI study “Free Trade without Apology,” talks about the recently passed free trade agreements with Colombia, Panama, and South Korea. The agreements will lower tariffs and other trade barriers between the U.S. and the other countries, and are expected to reap billions of dollars of economic benefits. The agreements also contain a number of trade-unrelated provisions, such as labor and environmental standards. These erode our trading partners’ sovereign lawmaking power, and are best avoided in future agreements.
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This video is a quick primer on trade from George Mason University economics professor (and CEI adjunct) Don Boudreaux, who literally wrote the book about it. Well, a book about it; see also here and here for quality reading on trade, not to mention Fran Smith and Nick DeLong’s new CEI study, “Free Trade without Apology.” Click here if the embedded video doesn’t work.
Congress is likely to take up stalled free trade agreements with Colombia, Panama, and South Korea when it returns from its August recess. Adjunct Fellow Fran Smith talks about the good and bad parts of the agreements. Billions of dollars of economic benefits are offset by trade-unrelated provisions, such as labor and environmental standards. These erode our trading partners’ lawmaking sovereignty. An increase in trade adjustment assistance also seems likely. This gives money and training to workers who lose their jobs because of international trade.
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Posted onMay 4, 2011|Comments Off on Free Trade Agreements Don’t Kill Jobs
Trade is going to be a hot issue this summer. Pending free trade agreements with Panama, Colombia, and South Korea might finally pass. Opponents of liberalization are already on the attack.
My colleague Jacque Otto already covered the creative destruction defense of trade today. Over at the Daily Caller, I look at employment data and find out that the labor force has grown by 23 million people since NAFTA passed. Doesn’t sound like a job-killer, does it?
Just as trade doesn’t kill jobs on net, neither does it create them on net. The real advantage of trade is that it allows people to specialize and become more productive. That is how economic growth happens:
When governments lower trade barriers, they allow more people to exchange and to work together. In economics jargon, the size of the relevant market gets bigger. And the bigger the relevant market, the more people can specialize.
Readers familiar with Adam Smith will recognize this as his division of labor. Everyone knows that specialized workers are more productive than jacks of all trades. That’s why Henry Ford’s assembly lines were so much more productive than his competitors’. The same number of people could suddenly produce more cars in less time, because they had a more specialized division of labor.
Workers didn’t have to waste time switching from one task to another. They got very good at their tasks. And because they knew their jobs so well, they were better able to come up with new, better ways of doing them. Rising productivity is how an economy grows. Prosperity doesn’t depend on the number of jobs. It depends on how much stuff workers can create.
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CEI Senior Fellow Greg Conko discusses his recent trip to Kenya where he met with members of Parliament and other officials about the best way to regulate the introduction of genetically modified crops to the country.
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Posted onDecember 18, 2010|Comments Off on Country of Origin Labels Are False Advertising
Don Boudreaux makes good sense on why country of origin labels only tell part of the story of where a product comes from:
Yes, Mr. Hoch’s socks say “Made in Swaziland,” but who developed the computer software to operate the loom that wove the cloth used to make his socks? Who designed the loom itself? Who figured out how to transform crude oil into the elastic in the socks? Who devised the method for pooling risks so that the Swaziland factory is profitably insured against fire and that the cargo ship carrying his socks to America is profitably insured against sinking?
In fact, Mr. Hoch’s socks – and nearly everything else that he consumes – should be labeled “Made on earth,” for they truly are global phenomena.
Read the whole thing. Keep it in mind the next time someone grouses —falsely — that America doesn’t make anything anymore, or that Americans buy too many goods from foreigners.
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There is lots of talk about trade wars lately. We especially need to get tough on China, our politicians tell us. Over at The American Spectator‘s AmspecBlog, I highlight why real wars and trade wars are very, very different . It’s time to put that misguided analogy to rest.
CEI Adjunct Fellow Fran Smith talks about the EU-Korea free trade agreement that takes effect next year, and why the US-Korea FTA stalled, to the economy’s detriment. Fran also talks about NAFTA’s impact on jobs, and why imports are a good thing.
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And hence it is, that to feel much for others and little for ourselves, that to restrain our selfish, and to indulge our benevolent affections, constitutes the perfection of human nature; and can alone produce among mankind that harmony of sentiments and passions in which consists their whole grace and propriety.
That sentence is more important to understanding how markets work than most people realize. The ability to feel empathy is part of what makes us human. It is also what makes market economies possible.
Without empathy, killing the customer would be at least as common as serving him. Mutual exchange — trade — is an act of peace. That wouldn’t be possible without the human ability to put ourselves in others’ shoes and feel for them. After all, it’s a lot easier to hit someone and take their stuff. And yet few people do. Empathy is a big reason why.
Adam Smith was one perceptive guy. Others have filled in gaps in his thought, and proven him wrong on some details. That does not take away from the fact that he was as perceptive as any thinker in history.
Posted onJune 8, 2010|Comments Off on Explaining Free Trade in Under Three Minutes
Sometimes, the fastest, most effective way to explain economics is to tell a story. One of the best-done examples is in Steven Landsburg’s book The Armchair Economist, where he tells David Friedman’s “Iowa Car Crop” story to get readers to think about trade (see pp. 197-99).
[T]here are two technologies for producing automobiles in America. One is to manufacture them in Detroit, and the other is to grow them in Iowa.
Okay… how does that work?
First you plant seeds, which are the raw material from which automobiles are constructed. You wait a few months until wheat appears. Then you harvest the wheat, load it onto ships, and sail the ships eastward into the Pacific Ocean. After a few months, the ships reappear with Toyotas on them.
Sounds almost magical. But it happens millions of times every day. The lesson is that trade is about specialization. A farmer doesn’t know how to build a car. But he can still have one by sticking to his specialty – growing wheat. He can trade his surplus to other people who do nothing but specialize in building cars.
This cuts both ways. Most factory workers don’t know a thing about farming. But by concentrating on building cars, they eat far better than if they grew their own wheat. The nature of trade is that everyone wins when they specialize. The only limit on specialization is the size of the market.
Restrictions on trade – tariffs, quotas, antidumping duties — shrink that market. And by shrinking the market, they limit specialization, which is the source of all prosperity. It’s good to grow cars in Iowa.