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Hearings on Capitol Hill, during which Republican Sen. William Roth
of Delaware and Democratic Sen. Daniel Patrick Moynihan of New York told
administration trade representative Charlene Barshefsky that a proposed
trade agreement with mainland China was in trouble in Congress,
highlight the fact that more than 200 years after Adam Smith’s “Wealth
of Nations” virtually invented economics as a serious discipline, most
politicians don’t have even a rudimentary understanding of why free
trade is beneficial. All of these people are college graduates (at
least). But any self-respecting professor would have to give them a
failing grade in Econ. 101.

What had the senators concerned — besides Beijing’s calculatedly
ill-timed bluster intimating that it might choose to settle the question
of Taiwanese reunification by force and (still) doesn’t welcome
criticism or advice on the matter — was vice president and presidential
candidate Algore’s recent promises in private meetings with U.S. labor
leaders. Mr. Gore left the distinct impression with labor leaders that
he would insist on stronger “environmental and workers’ rights
protections” (an ideologically charged description of a set of
controversial policies most news stories use as if it were an objective
formulation rather than a bit of propaganda) if China trade were
renegotiated during a Gore presidency.

Subsequently, of course, Mr. Gore insisted that he supports the
administration’s position this year, which is to win agreement for a
deal negotiated last year that has few of the kind of “worker
protection” mandates labor leaders have incorporated into their current
description of “fair” (which in practice means anything but free) trade.
But the senators say the mixed signals from the administration — we
support this deal but Gore might load it up with all kinds of
trade-inhibiting regulations if elected — will make it more difficult
to win over undecided lawmakers.

Numerous comments could be made about the insistence by all sides
that trade deals be used to advance political objectives rather than to
make trade freer of political baggage. I’d like to concentrate, however,
on the kinds of “worker protection” and “environmental safeguarding”
measures that Gore, labor leaders and many of the daffy-lefty protesters
at the Seattle WTO meeting think should be incorporated into
any trade liberalization agreements.

The basic goal of such demands — though details and specifics may
differ depending on the political climate and the stages at which
various negotiations might stand — is to require foreign countries to
put in place the same (or largely similar) government rules and
regulations that the United States has in place before trade can be
completely open. We have minimum-wage laws; they gotta have ‘em. We have
OSHA; they gotta have something similar. We have elaborate laws and
bureaucracies that expensively and mostly ineffectually provide a false
promise of environmental protection, so they gotta have ‘em too.

You can see a “level-field” equity argument for such provisions. For
various reasons, labor (at least in comparison to the rest of the world)
is expensive in the United States, and both workers and companies have
to operate under the aegis of all the alphabet-soup agencies and work
rules the government has decreed over the last several decades. How can
U.S. workers and companies, therefore, be expected to compete with
workers and companies in countries where workers earn pennies a day,
where there are hardly any environmental bureaucracies, where companies
aren’t second-guessed constantly by bureaucrats, where (in some cases)
companies actually get direct subsidies from the government?

Even if you ignore the fact that with all those impediments the
United States dominates world commerce, you still might entertain a
question about the fairness of it all. It’s telling, however, that few
of the “fair traders” advocate dismantling the stifling regulatory
apparatus the U.S. government has erected to level the playing field. If
anything, most want even more — and they want to mandate that other
countries have them too. Only when all the countries in the world have
exactly the same rules and regulations regarding labor and commerce can
we even think about implementing free trade. Otherwise it wouldn’t be
fair.

But Adam Smith argued that it was precisely the fact that different
countries were different that made free trade beneficial. If we
homogenized them many of the advantages of free trade would disappear.

Among Smith’s classic examples were bananas and wine grapes. You
probably could grow bananas in his native Scotland, he averred, with
expensive and elaborate hothouses and intensive labor. Likewise you
could probably find a way to grow wine grapes, although the quality
might never approach the quality of those grown in areas of France and
Italy where the natural climatic conditions allow wine grapes to thrive
with merely conscientious rather than manic attention from the farmer.

But what would be the point when such commodities can be grown much
more cheaply in some other country? Even with high shipping costs — and
they were higher as a percentage of final consumer prices in Smith’s day
than they are today — it was still cheaper for Scots to import bananas
and wine than to try to produce them domestically. Scots benefited from
the trade by getting access to goods and services not
produced with maximal efficiency in their own country, and producers in
countries where it made economic sense to grow bananas and wine grapes
benefited by having the Scottish market as well as their own domestic
market.

The term Smith used to describe the conditions that produced such
“win-win” situations was “comparative advantage.” Some countries could
perform certain economic tasks — whether growing bananas or putting
together assembly lines or creating banking institutions — better than
others could, while those other countries would excel at something else.
Free, unfettered trade makes it possible for consumers in all parts of
the world to have access to the best quality, lowest-priced goods and
services produced in other parts of the world.

Insofar as a widget from country A was cheaper than one from country
B, a consumer effectively had his wealth increased by having a choice –
and while richer people would (of course) be able to enjoy more of all
this variety, this freedom of choice is especially important to
lower-income people.

It wasn’t only climate, geography or the presence of valuable raw
materials that could confer a comparative advantage in some area of
economic endeavor on a country. Different population characteristics,
customs, social conditions, legal structures and traditions could also
be a source of comparative economic advantage. The important thing, in
Smith’s view, was to allow entrepreneurs in each country to do their
utmost to use their country’s characteristics to create the best
feasible blend of goods and services, and then, through free trade, to
allow consumers in other parts of the world to enjoy the benefits of
their ingenuity.

Furthermore, where objective conditions were similar, free trade
would spur producers in the home country to do better to compete with
products from abroad — or go into another line of work. In all of this,
freedom of exchange leads toward the most efficient and desirable (as
defined by consumers voting with their money in unforced exchanges)
allocation of capital, labor, foods and services. Freedom and free
trade create the best conditions for the wealth of nations — all
nations — to grow and spread among an ever-larger proportion of the
population.

If you enter into negotiation with the demand that we won’t allow
more trade until other countries become just like us, however, it
subverts the very respect for differences — and recognition of the fact
that wealth and progress arise from differences among people and
countries rather than from sameness that creates the most signal
benefits of free trade. (It also implants the haughty and utterly
unsubstantiated assumption that the United States has created the ideal
system of rules and regulations and other countries should be eager to
emulate it.)

This is all pretty elementary. But we live in a world in which
stubborn ignorance about elementary economics is a badge of pride –
perhaps even of moral superiority growing from the disdain for petty
money-grubbing those raised in posh hotels can afford among many of the
chattering classes. And I would rather believe it is ignorance that
sustains such absurd agendas.

If Algore and the laborites actually do understand economics, then
the agenda looks appreciably narrower. They would then understand — it
would be utterly transparent — that imposing welfare states on Third
World countries would essentially cripple those countries economically,
limit competition, and redound to the narrow self-interest of American
union leaders. As if those countries didn’t already have enough
problems.

Now I assume that most people seek their own self-interest most of
the time, so the idea that union leaders would do so isn’t exactly
shocking. The question is whether they should be able to commandeer the
coercive powers and other resources of the state (including the taxes
extracted from the productive amongst us) in the pursuit of their
self-interest. My contention, the essential libertarian proposition, is
that for labor leaders — or business leaders or anybody else — to do
so is morally reprehensible, economically counter-productive and
socially divisive.

Let all pursue their self-interest through uncoerced, voluntary
relationships — where the incentive is for deals, bargains and
agreements to be “win-win” or they won’t take place — and we’ll all be
richer and freer.

That’s the essential benefit of free trade. But while most people can
understand the benefits over the long haul and over the entire spectrum
of society, most people can also see short-term situations or
circumstances where limiting somebody else’s freedom will benefit them
inordinately. Insofar as the public at large is ignorant of economics
– and our ghastly government schools and invincibly ignorant media have
seen to that — they can get away with it and often enough even portray
themselves as benefactors rather than parasites or vampires.

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