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Free Trade Is Good But For Who?

by Chris Poindexter

International trade is shaping up to be one of the major issues in this year’s presidential campaign. Donald Trump, the presumptive Republican nominee, is squarely at odds with Republican groupthink on free trade and even Hillary Clinton flip-flopped on her support of the Trans-Pacific Partnership, or TPP.

When it comes to the effect of trade on the economy how you see the results may depend on where you fall on the income scale. For the very top earners in our economy, free trade is a winner. Free trade lowers the costs of goods and services which is an immediate benefit to the profitability of businesses and corporations. In business saving a dollar is better than a dollar in new business because savings is pure profit while it costs money to develop new business.

Consumers Do Benefit

To be fair, consumers also benefit from lower trade barriers by getting access to lower cost goods manufactured overseas. All you have to do is watch the insanity of Black Friday at an electronics store to gauge your fellow American’s willingness to choose cost over our national best interest. If you think free trade is bad for the country, you’re in the minority. Despite the rhetoric from candidates, a majority of Americans think free trade is good for the country and economy and that agreement crosses idealogical and party lines. Only thirty-eight percent of Americans see free trade as bad thing.

Lifted Millions Out Of Poverty

Proponents point out that free trade has lifted millions around the world out of poverty. The question for many at the bottom of the economic ladder here is who cares? If you’re a steelworker in the Midwest watching the demolition of a steel plant you worked at for twenty-five years, how much satisfaction would you get from knowing you helped provide jobs and raise the standard of living in Xinhua province in northern China?

It didn’t sound like anyone in Indianapolis was cheering that people in Monterrey, Mexico were going to be able to lift themselves out of poverty when Carrier announced it was moving 1,400 jobs out of the country.

The Impact Is Real

The negative effects on jobs and those at the lower end of the economic scale are real and probably more significant than most people realize. Most of the downsides associated with free trade have fallen on the middle class and that’s one of the reasons why Republicans are suddenly at war with their own base voters and Democrats are moving away from support of free trade, even though sixty percent of Democrats generally favor it.

U.S. Wields Economic Power Poorly

Part of the problem is that the U.S. has shifted from a reliance on economic power to a reliance on military power. Too often we let other countries game the global trade system because it benefits a particular constituency. When other countries cheat we frequently fail to use the power that we already have when it comes to taxing imports from countries which are magnifying themselves at our expense.

What’s definitely being left out of the calculation in trade agreements is the effect on the middle class and creating a taxing mechanism to provide support for workers, like those 1,400 at the Carrier plant in Indianapolis, who lose jobs to global outsourcing. We’ve largely stood by and watched as the middle class has steadily been eroded over the years and now that oversight is coming back to bite in the current election.

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