Daily Archives: March 13, 2008

Free Trade as Litmus Test

I’m really excited about this post. What follows is a guest post from my friend at Johns Hopkins, Nick Chidiac. Nick always impresses me with the breadth and depth of his political knowledge; I value his opinions on political issues. He’s writing about free trade, which is an issue I do not know much about, and criticizing Obama, which is something I haven’t done much of lately.

This originally started out as a “note” on facebook, but I asked Nick if I could re-post it on my blog and he agreed, bolstering it with additional facts for its republishing.

I hope to make this type of guest post from politically-informed friends of mine a more regular feature.


Free Trade as Litmus Test
by Nick Chidiac

You’ve probably heard me mention free trade a disproportionate number of times. Free Trade is something I loved about William Jefferson Clinton, and hate about the current Democratic candidates. I’ll get to why it is so important in a minute, but I’ll start with a brief summary of why it signals a good presidential candidate.

Free Trade is something that is clearly, and unambiguously good. It is fought by large special interests, and its benefits are spread to the common man, who at times doesn’t even realize his benefits. It is politically unpopular, and takes a leader with vision to support it. Free Trade is a great example of what is right, vs. what is popular. A politician will not ordinarily reap political benefits from supporting it, and instead pays a hefty toll of political capital. This is an important trait that separates a statesman from a political hack.

As for free trade itself, I’ll first begin with the economic benefits to America. Free Trade creates high paying US jobs, reduces prices for goods, furthers innovation, and brings capital into the United States. According to the OECD in 2004, the United State’s reemployment rate is double that of the next best country’s. That is no accident, the openness and dynamism of our economy causes that. The US unemployment rate over the last 15 years is far lower than it has ever been in US history for an extended period of time. The damage of protectionism can quickly be measured by the absurd costs borne by society when free trade is restricted. The Textile Quota system was designed to protect US textile jobs. These jobs, which paid less than $40,000 per year, cost US civil society over $220,000 per job. A McKinsey report a few years ago, did a study and found that for every dollar spent overseas on outsourcing, at least $1.12-$1.14 in value is created in the United States. Let me repeat that, every time we send a dollar overseas, we get more than $1.12, its free money (to a point, but locally it goes on for a long time). In 2002, Bush passed a massive tariff on steel; this ‘saved’ approximately 4000 jobs. It also destroyed an excess of 400,000 jobs in steel using industries (Detroit, have any comments?). To put these numbers in perspective, the same 2004 McKinsey report said that 2 million out of the 150 million jobs in America are created and destroyed every month.

Free trade moves bad jobs away from America, and replaces them with good jobs. “Hell with the Lid Off”, is now a paradise that hosted the 2005 bassmaster championship, and has growing industries in biotechnology, healthcare, robots, and finance. Don’t forget the cheap prices due to free trade, which help regular families take care of their needs and they have more choices when they go to the store.

The jobs losses that free trade is blamed with are almost entirely due to technological advancement yet oddly, you don’t hear technology criticized. It’s an easy fix for those that do. With NAFTA, a law was passed that anyone who loses their job due to the new trade would get compensation and job training. Less than 5000 felt the need to apply, and all of them were taken care of.

Beyond the massive economic benefits for the United States, which also go to any country that trades with us, Free Trade also brings geopolitical benefits that are seldom tallied. Free Trade helps regular people build up economic power, separating it from the state, and weakening the relative position of tyrannical regimes. This is also a benefit for democratic, capitalistic countries, which get their economic situations bolstered, making them more resistant to extremism and violence. The Senate is currently endangering Colombia and helping Hugo Chavez by not passing a free trade deal with the country that has been proposed several times. This is short sighted, and stupid.

I’m keeping this short, provide any example or argument that you think works against free trade, and I’ll walk you through it step by step. I also promise this, if Obama doesn’t smarten up, I will vote against him in the general election. I know he will eventually become president, the way I know Sidney Crosby will win a Stanley Cup, but to me, Obama isn’t ready until he has the temerity to stand up for himself on this issue.