In 2019, the Center for Freedom and Prosperity released this video documenting the benefits of free trade.
The case for free trade between nations is the same as the case for free trade between states. Or between cities. Or between households.
Economists from the right and left agree that we all become richer when there’s more competition and more specialization.
Sadly, this common-sense understanding of trade is not very popular in Washington. Both Biden and Trump are protectionists, either because they don’t understand economics or because they want to get votes and money from special interests.
To understand the cost of Biden-Trump protectionism, let’s look at a recent study by the Peterson Institute for International Economics.
The authors, Gary Clyde Hufbauer and Megan Hogan, calculated what global trade has meant for American prosperity. Here are just a few of the highlights.
This Policy Brief updates previous estimates of the payoff from globalization to the American economy… The bottom line, argued here,
is that post-World War II engagement with the world economy by the United States generated cumulative gains over several decades that, in the year 2022, lifted annual US GDP by 10 percent in that year, about $2.6 trillion… The $2.6 trillion in gains in 2022 work out, on average, to about $7,800 per person and $19,500 per household.18 Average gains in 2022 would have been considerably larger but for political headwinds that have slowed trade expansion.
For wonky readers, here’s Table 1 from the report.
As you can see, every bit of economic analysis concludes that free trade leads to a bigger economic pie, while protectionism produces the opposite result.
Sadly, there are big headwinds against pro-growth global trade today.
It’s not just Biden and Trump. The European Union wants to use global warming as an excuse to impose huge trade taxes.
Backsliding on trade is bad news for rich people and rich countries. Even worse, it’s bad news for poor people and poor countries. Simply stated, copying Herbert Hoover (or copying North Korea!) is not a good idea.
P.S. Makes me miss Reagan even more than usual.
P.P.S. I sometimes disagree with the Peterson Institute.
oiltranslator: Who was president in 1914? Who was president in 1919? Which president created and pushed for the league of nations? In case you don’t know, the answer to all three questions is Woodrow Wilson. It’s Hard to blame Republicans for a Democratic president’s policies, especially since he had a majority democrat congress for six years.
The 1914 Harrison and 1919 Volstead act AND Versailles Treaty made production, transportation and trade of possibly 10% of all commerce into asset-forfeiture felonies. THIS is what Republicans call Free Trade. There were 2 Wesley Livsey Jones laws, one crippling coastwise shipping but the other made a felony of a six-pack two days before Bert Hoover took office. The League of Nations began lobbying for strangling trade in addictive and non-addictive drugs alike 02SEP1929, the day stock prices went from rising to falling. The 1930 tariff added searching-at-gunpoint to shipping on the high seas. Anslinger worsened matters until German Pharma finally financed Hitler’s party whose key demand was “abrogation of the peace treaties of Versailles and Saint-Germain.” The C. Manifesto income tax is WAY worse than any tariff.
I suspect you’re missing one of the truly important points, Dan.
A very good reason for restricting trade with China is because they have no compunction in stealing trade secrets. Then they go into competition with the injured party with far lower prices….
Truly shameful behavior that restricting trade helps to curtail.