Unless you don’t mind if our country slides into fiscal bankruptcy and oblivion, then trade policy needs to be your No. 1 issue in this year’s election.
Free trade is bad for America, because free trade:
- Causes persistent trade deficits
- Increases the unemployment rate
- Is the main contributor to our budget deficits and national debt
- Reduces our national GDP (Gross Domestic Product)
- Subsidizes foreign imports at the expense of domestic production
- Makes it harder to find and buy American-made products
- Reduces American wages, destroying our capacity to buy
- Encourages producers to evade U.S. laws and rewards them for doing so
- Is based on double standards
- Erodes our national sovereignty
- Suggests that the grass is always greener on the other side
- Is contrary to what our Founding Fathers had in mind
Before I tackle the above points one by one, let me address another one first for the American voters who are primarily concerned with “social issues.” Free trade is the root cause of many of the social problems and challenges we face today, since it puts Americans in unemployment lines, stressing families and marriages, increasing the divorce rate, and depriving our kids of stable home environments. Few things are more humiliating and disgracing to a family breadwinner who can’t win any bread through no fault of their own.
Now, to the bullet points above:
- Free trade causes persistent trade deficits
Every free trade agreement the United States has ever entered into has either turned a trade surplus into a trade deficit or made an existing trade deficit worse. Our last national trade surplus was during the Ford administration, and coincided with America switching from what could be defined as a closed economy to an open economy.
- Free trade increases the unemployment rate
The government estimates that for every $1 billion of trade deficits, we lose between 16,000 and 20,000 jobs. Since free trade either turns trade surpluses into trade deficits or makes current trade deficits worse, it’s a no-brainer that free trade costs American jobs and increases the unemployment rate.
- Free trade is the main contributor to our budget deficits and national debt
Unemployed Americans, displaced from their jobs through outsourcing to foreign countries, pay no taxes to America. Only American workers pay taxes to America. Workers in foreign countries pay no taxes to America. If Americans aren’t paying taxes, the receipts of the U.S. Treasury decline, adding to our budget deficit and national debt.
- Free trade reduces our national GDP (Gross Domestic Product)
Any economist will tell you (even free trade-leaning economists) that trade deficits subtract from economic growth. Protectionist China, for example, routinely flirts with double digit growth rates, while our free trade-obsessed growth rate languishes between two and three percent or worse.
- Free trade subsidizes foreign imports at the expense of domestic production
A subsidy is defined as granting exemptions to production cost burdens to one company in a given industry and not granting the same cost burden exemptions to another company in the same industry. New Balance, for example, makes 25 percent of their shoes in the U.S., and consequently pays 7.5 percent per American worker into the Social Security Trust Fund while the employer also pays 7.5 percent. When any American job is outsourced, the laid off American worker no longer pays into Social Security, and the employer no longer has to pay their 7.5 percent into Social Security on the worker who is now in a foreign country. If 100,000 jobs are outsourced to China, for example (which is not hard to imagine since at least 100,000 Chinese workers are making toys for the U.S. market alone) the U.S. loses $600 million a year in Social Security payments based on a conservative salary of $40,000 for those formerly employed American workers. Nike, Reebok, and Adidas make no shoes in America, and therefore are subsidized to the tune of 15 percent by not having to pay into Social Security alone.
- Free trade makes it harder to find and buy American-made products
Retailers like to carry lower production-cost imports vs. higher production-cost domestic goods. Case in point: Retailers like Foot Locker carry mostly the imported New Balance shoes rather than the American-made ones since they can enjoy a higher mark-up for the imported shoes. Other retailers would rather stock their shelves with lower-cost imports than American-made items for the same reason.
- Free trade reduces American wages, destroying our capacity to buy
When President Harding was challenged by the argument that consumers benefit from cheaper imports, he replied, “One who values American prosperity and … American standards of wage[s] and living can have no sympathy with the proposal that easy entry and a flood of imports will cheapen our cost of living. It is more likely to destroy our capacity to buy.”
- Free trade encourages producers to evade U.S. laws and rewards them for doing so
Companies currently employing American workers are under constant pressure to outsource their jobs to foreign countries in an effort to “compete.” Free trade protects law evaders and punishes law abiders. Companies that employ American workers and abide by and absorb the cost of American laws deserve protection from those companies that employ workers overseas and do not abide by and absorb the cost of American laws.
- Free trade is based on double standards
Free trade makes it possible to subject companies that produce within our borders to one set of rules and laws, while subjecting companies that produce outside our borders to a different, lower-cost set of laws. We have one set of rules for those who produce within our sovereign borders and another set of rules for those who produce outside our borders while still enjoying the privilege of sharing in our economy and competing with U.S. companies, who must abide by U.S. laws (labor laws, tax laws, health care mandates, family-leave laws, etc.)
- Free trade erodes our national sovereignty
Why would we create the WTO (World Trade Organization) and then lobby that world government body to vote in favor of America’s interests? We would do better to act unilaterally and set our own trade policy according to America’s interests, not wait for some other world body to agree with us and tell us we can do what we want to do.
- Free trade suggests the grass is greener on the other side.
Everyone wants to sell to us because we have the most lucrative market in the world. We have high wages (although not the highest in the world) and high standards that are the envy of every other country. Why would we surrender our market to other nations in exchange for other nations surrendering their market to ours?
- Free trade is contrary to what our Founding Fathers had in mind
No founding national document – be it the U.S. Constitution, the Declaration of Independence, or the Federalist Papers – mentions free trade or free markets in any sense of the terms. So self-professed “Constitutionalists” and others who tell us that the United States was founded upon free markets and free trade are either lying or delusional. Article I, Section 8, Clause 3 of the U.S. Constitution grants Congress the power “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes”. Regulation and taxes are a violation of free markets, since the word “free” as defined by Webster’s Dictionary is “not under control of some other arbitrary power; not constrained, hindered or hampered; without cost or payment; having a government that does not impose arbitrary restrictions, etc.” Therefore, any taxation or regulation as defined by Webster is a violation of free markets. Nowhere does any founding U.S. national document suggest trade should be unregulated or “free.” So we should stop kidding ourselves that the U.S. Constitution (or any other founding national document) suggests that free trade and free markets were ever intended for our country.