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Mad About Free Trade

Daniel Griswold on why Main Street should embrace globalization and reject the protectionist swindle.

By 10.27.09

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Daniel Griswold is not shy about sharing the high aspirations he harbors for his superlative new book Mad About Trade: Why Main Street America Should Embrace Globalization. The Cato Institute scholar seeks nothing less than to marshal whatever evidence necessary to induce Americans to fall "crazy in love with the opportunities that our new and more open world is creating before our eyes, not only for ourselves but, more importantly, for our children." Such an ebullient, Friedmanesque happy warrior attitude has hardly been a hallmark of conservative-libertarian economics writing of late, and, as a result, Griswold has managed to compose a volume as accessible and persuasive as it is indispensable, as fresh and uplifting as it is firmly grounded in accumulated wisdom -- a rare bird, indeed.

"This is a scholarly book with attitude," Griswold explains. "Advocates of free markets need to close the deal by appealing not only to the head but to the heart as well. We are the ones who can talk about opportunity and hope. The other side has no positive vision to offer, only fear."

Griswold was kind enough to recently expand on some of the ideas in Mad About Trade for TAS.

John Mackey of Whole Foods has been very vocal about his belief that there is a real need to "re-brand" capitalism if proponents hope to prevent its virtues from being completely lost on the average person. Mad About Trade seems to suggest something similar, especially when you argue free traders have failed to connect unequivocal data to "our deepest American values of fairness, compassion, competition, freedom, progress, peace, and the rule of law."

DG: John Mackey is right. Free trade has been wrongly branded as something for the benefit of big business at the expense of average Americans. Most Fortune 500 companies benefit from globalization, and that is fine. They employ a lot of Americans and sell a lot of U.S.-brand products around the world. But trade is also about benefiting tens of millions of low- and middle-income American families by insuring competition for their consumer dollars. Free trade is about creating better, more sustainable jobs for our children, building relationships with people in other countries, lifting hundreds of millions of people out of poverty, and sending young girls in developing countries off to school rather than to the field. Our task shouldn't be that difficult. Evidence and economic logic are on the side of free trade. We just need to tell the story in a way that connects with people in their everyday lives.

Has the current economic crisis and the protectionist rumblings it has inspired made the message of Mad About Trade any more pressing?

DG: I originally planned to have the book out by early 2009, but I'm glad I procrastinated long enough to factor the Great Recession into my narrative. The current economic climate doesn't really affect the argument. The opponents of free trade will argue that it is destroying jobs and impoverishing us even when the unemployment rate is low and the economy is humming. But a recession does deepen worries about losing jobs to imports and outsourcing. With the economy in a slump, and Democratic leaders eager to indulge such anti-trade constituencies as the AFL-CIO, the message of Mad About Trade is timelier than ever. I spend several pages recounting the history of the Smoot-Hawley tariff of 1930, and how our national leaders wisely reversed course after the war and embraced the liberalization of trade. It would be a tragedy if we had to relearn that lesson.

"The growth of trade and other measures of globalization has stirred more anxiety than gratitude among Americans," you write, even as it increases choices and lowers prices for consumers -- "a more immediate and effective lifeline to families struggling to stay afloat during tough economic times than any lumbering government stimulus package." What do you believe is the most common -- or pernicious -- misconception the average American has about free trade?

DG: A leading contender is one of the "big lies" of the trade debate: that we have been trading away high paying manufacturing jobs and replacing them with low paying service jobs such as flipping hamburgers and cashiering at big-box retailers. The truth is a lot of the manufacturing jobs we've lost didn't pay all that well. And most of the service sector jobs that have been added in the past two decades are solidly middle class. Citing data from the Bureau of Labor Statistics, I found that two-thirds of the net new jobs added between 1991 and 2008 were in sectors where average wages were actually higher than in manufacturing. We remain among the world's leading manufacturing nations, but the American middle class today earns its keep in the service sector.

Why should a unionized worker support free trade when their union vehemently opposes it?

DG: Not everybody wins from adopting free trade, and some unionized workers in some industries have benefited -- unjustly, I would add -- from existing trade barriers. But for most unionized workers trade is more friend than threat. Unionized dockworkers obviously benefit when trade expands. Unionized government workers and teachers benefit as consumers while facing no foreign -- or any other -- competition. Unionized Boeing workers would be out of their jobs without access to global markets. Unfortunately, organized labor leaders in this country have taken a hostile stand against trade, and they now have the ear of people in power. The large majority of American workers who do not belong to a labor union will pay the price in lost opportunities.

This relates to the problem you note in Mad About Trade of "what is seen and what is unseen."

DG: This is the cross we carry in the debate. The short-term losses from transitioning to free trade are visible and localized. An apparel factory closes in North Carolina, a call center is outsourced. Sugar growers lobby furiously to keep import quotas in place because their livelihoods depend on a protected domestic market. But the benefits of free trade, while far greater in total dollars, are diffused: A single mother saves $20 shopping on Saturday at a supercenter, you find just the right car or blouse because of import competition, a small start-up creates ten jobs writing specialized software for a global market. You could say one of my goals in writing the book was to make the benefits of trade visible to my fellow Americans.

Similarly obscured, ill-advised government regulation has been essentially given a pass in the current downturn by a Fourth Estate fixated on individual consumption. When you write, "production divorced from consumption is akin to slavery," it has the feel of a revolutionary statement. Why is it important to defend consumption?

DG: The trade debate in Washington is all about producers. They have the trade groups and lobbyists. We impose tariffs on steel, socks, or tires, in a misguided attempt to protect "our" producers at the expense of "their" producers. Lost in the political equation are consumers, who are always the front-line casualties in any trade war. Consumption is not a dirty word. Without it, we would all be starving, naked, homeless, and quickly dead. Our paychecks do us no good if we cannot translate money into tangible goods and services. Protectionism is really about working harder for less.

There has long been a concerted, semi-perverse attempt on the part of protectionists to suggest that free trade is tantamount to a war on the world's poor.

DG: I may need to expand the category of "big lies" about trade, because that is certainly one of them, too. In 1820, 80 percent of the world's population lived in what we would define as poverty. After a lot of globalization and growth, we humans managed to cut the global poverty rate to 52 percent by 1981, according to the World Bank. In 2007, on the eve of the current recession and after 25 years of even more rapid globalization, the poverty rate had been cut by more than half again, to 25 percent. And poverty has fallen the most rapidly in those developing countries that have embraced the global economy most aggressively, such as China, Vietnam, India, and Chile. Life expectancy and literacy rates are up significantly in the developing world during that same period, while rates of infant mortality, malnutrition, and child labor are down. The critics of globalization are in denial about all this.

How can trade serve as "the market's trust buster" more effectively than government?

DG: We need to see trade as the free-market's anti-trust policy. Americans understand instinctively that competition is good. It keeps producers honest. Trade barriers leave us at the mercy of a smaller number of domestic producers who can raise prices and gouge consumers and the general public. I have some fun in the book citing the wording of our domestic anti-trust law and showing how protectionism violates the spirit if not the letter of the Sherman anti-trust act of 1890. This is as close as I get to endorsing a "conspiracy theory."

How would you rate the Obama administration on trade?

DG: I would give the administration a "D" so far. On the plus side, President Obama wisely backed away from his rash campaign promises to threaten to withdraw from NAFTA and to brand China a "currency manipulator." He has also started to chip away at our misguided trade and travel embargo against Cuba. But on the negative side he slapped tariffs on Chinese tires, refused to lift quotas on imported sugar, signed major bills that included "Buy American" provisions and a ban on Mexican truck drivers, and he has refused to urge Congress to pass pending trade agreements with Colombia, South Korea and Panama. This president says nice things about free trade, but he will not stand up to the anti-trade forces within his own party.

How does the "protectionist swindle" dumb down our economy?

DG: Much of what is driving the current wave of globalization is technology. The jet engine, containerization, the Internet, and international telecommunications have probably done more to juice globalization than all the trade agreements that have been signed in the past 40 years. People who are "mad about trade" in the negative sense should really be upset with technology. One effect of trade barriers is to undo the great work of the scientists, engineers and entrepreneurs who developed all those technologies. Tariffs are a kind of anti-technology. We have this fantastic, almost magical wealth machine called free trade, and the politicians and protectionists want to throw sand in its gears.

The final chapter of Mad About Trade offers "A Trade Agenda For a Free People." How is our personal freedom tied up in trade?

DG: A core argument for free trade is personal liberty. It is fundamentally about our freedom to exchange what we have produced with another person, whether they live across the street or an ocean. Protectionism, in contrast, is all about big government telling us how we should spend our money and how we should deploy our productive resources.

Which of the suggestions you offer would you most like to see implemented?

DG: My first two items are to repeal all trade barriers that disproportionately hurt poor Americans, and then to repeal all barriers that hurt the competitiveness of U.S. companies that rely on imported machinery, raw materials, and intermediate inputs. It just so happens, by a funny coincidence, most of our existing barriers fall in one of those two categories. We don't need to sign any complicated trade agreements with other countries to get the job done. I advocate that Congress put all such self-damaging trade barriers in one omnibus bill for an up or down vote. If Congress passed such a bill, I could leave my current job and take up a new cause.

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