Free Trade Rules

Free trade, despite it enormous benefits, is constantly under attack.  Yesterday I heard a radio ad, with the sound of a toilet flushing, and the a voice over saying something like "that is the sound of 3 million jobs being lost due to NAFTA".  Since the US unemployment rate when NAFTA was passed was over 7% and is currently under 5.5%, its hard to figure out just how they did their math.  The problem is that it is relatively easy to spot job losses due to foreign competition (cars, apparel, memory chips) and much harder to find the jobs that were created due to lower cost materials supplies and increased exports.

Virginia Postrel has a really nice article in the NY Times (yes, reg required) on how industries and jobs have prospered due to NAFTA.

Economists argue for free trade. They have two centuries of theory and experience to back them up. And they have recent empirical studies of how the liberalization of trade has increased productivity in less-developed countries like Chile and India. Lowering trade barriers, they maintain, not only cuts costs for consumers but aids economic growth and makes the general public better off. 

Even so, free trade is a tough sell. "The truth of the matter is that we have one heck of a time explaining these benefits to the larger public, a public gripped by free trade fatigue," the economist Daniel Trefler wrote in an article last fall in The American Economic Review.

If you don't want to register, she has a longer excerpt at her site here.


  1. BridgetB:

    The biggest problem with the "sell" of free trade is the fact that it is rarely defended on a moral basis.

    Postrel, who should interject the moral basis for capitalism, never does. At least I havent seen her do it. Freidman does a bit, Sowell very little as well.

    The problem with most free trade defenders is the pragmatic approach. How does one combat the bromide of "economic planning, for the Good of the People" with econometrics? Aint gonna happen.

  2. Bobby:

    Free trade???

    Does that mean a level playing field and doing business with trading partners who have simular values, ethics, or morals? (substitute "business practices" if these ideas are upsetting to you)

    Does free trade mean doing business with partners who ignore concerns such as using child labor, using hazardous materials (which may be illegal to use in the states), using unsafe worker guidelines, etc.?

    Does free trade mean moving jobs from America to offshore countries so that global companies can increase profits?

    There are millions of examples of statistics that can explain away resistance to the so called free trade, but giving away our manufacturing jobs for jobs at the fast food or other service industry type jobs may not be the best move for a long range "American Strategy". It is time to think our best interests not the global view to an improving economy.

  3. Tom:

    Perhaps when they were talking of jobs being lost they meant... in OTHER countries?!?

    I know it's hard to remember - or maybe care about - but there are one or wto other people in the world besides Americans.

  4. Jennifer:

    Does Free Trade use the same rules as outsourcing and if so what are they?