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Everyone Prospers With Free Trade

Why protectionism will only make things worse

John Stossel
April 29, 2010

Trade is win-win. Two people trade only because each values what he gets more than what he gives up. That's why in a store both customer and clerk say, "Thank you."

At the international level, trade is also win-win because it allows countries to specialize in what they do well and trade the extra for things they don't make as well. When free trade is unmolested, the world is richer and has more choices.

But I keep hearing about unfair trade. I'm told that trade allows American companies to exploit people in poor countries and makes Americans jobless.

Tom Palmer of the Atlas Economic Research Institute, one of my guests on my Fox Business News show tonight, says those are myths.

Do we exploit people in Third World countries?

"The evidence does not show that," Palmer said. "Multinational companies pay a wage premium. They pay more than local companies pay ... because they want to attract good workers. Look at the Shanghai factory of General Motors. They pay three times what Chinese-owned factories (pay)."

Yet House Speaker Nancy Pelosi says that liberalizing trade with Central America would exploit workers.

"People want to work at those factories. They line up. They compete. Are they competing to get exploited? They're competing for higher-wage jobs. I think that those people know their interests better than Nancy Pelosi does."

Sen. Byron Dorgan called free trade "a race to the bottom. This says to American workers if you can't compete against 30-cents-an-hour labor in some other country, you lose your job."

"Again, evidence doesn't support that," said Palmer. "Look at the iPod. It says, 'Manufactured in China.' But if you look in the back, it says, 'Designed in California.' Most of the value is added by American workers." My colleague at Fox, former Gov. Mike Huckabee, said, "In a country we can only be free if we can feed ourselves, fuel ourselves and fight for ourselves. When we start outsourcing everything, that's a road to being enslaved."

"I hope that Gov. Huckabee thought about that when he was governor of Arkansas, and made sure there was no jobs outsourced to Virginia or Texas," Palmer replied. "He should have protected the people of Arkansas, right?"

But that's different. We can count on Pennsylvania in a time of war. I don't know that I can count on China.

"If you're trading with them, it makes war much less likely," Palmer said. "We're not going to go to war with Canada. It's our biggest trading partner—$600 billion a year going across the U.S.-Canada border in trade along the longest non-militarized border in the world. Five thousand miles, counting Alaska. That is trade creating peace."

As the French economist Frederic Bastiat put it, "When goods don't cross borders, soldiers will."

Palmer offered another way to think about trade: as a machine—"a machine that allows Florida farmers to turn oranges into (phones). They can't grow cell phones on their trees in Florida. They grow oranges really well. What they can do is take those oranges and trade them for cell phones."

And when people do this worldwide, they get richer. "Just like the case of you buying some coffee at the Starbucks. You could have made your own coffee. But your time might have been better spent doing something else. So you outsourced your coffee production. You made yourself better off. And that young lady who sold you the coffee made herself better off."

Palmer points out that China was once the most advanced society in the world. It had developed the clock, printing, the compass, and more. Not coincidentally, while it was advancing technology and science, it was a major world trader.

"And it crumbled because they destroyed their trade. They made it illegal to trade with foreigners. And they turned inward. That set in process a stagnation that only now is being undone. We shouldn't do that to our country."

We're different, aren't we? We know how to make everything we need. "There's always opportunities for new progress. ... Remember watching 'Star Trek' as a kid and they had that weird communicator? Everybody has one now. ... (T)rade made that possible."

John Stossel is host of Stossel on the Fox Business Network. He's the author of Give Me a Break and of Myth, Lies, and Downright Stupidity. To find out more about John Stossel, visit his site at johnstossel.com. This column first appeared at Reason.com.

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