“Lowering of our tariffs will provide an increased flow of goods for our American consumers. Our industries will be stimulated by increased export opportunities and by freer competition with the industries of other nations for an even greater effort to develop an efficient, economic, and productive system. The results can bring a dynamic new era of growth.”
John F. Kennedy
35th president
“Our goal must be a day when the free flow of trade, from the tip of Tierra del Fuego to the Arctic Circle, unites the people of the Western Hemisphere in a bond of mutually beneficial exchange.”
Ronald Reagan
40th president
“We forged the Trans-Pacific Partnership to open markets, and protect workers and the environment, and advance American leadership in Asia. It cuts 18,000 taxes on products made in America which will then support more good jobs here in America. With TPP, China does not set the rules in that region; we do.”
Barack Obama
44th president
“We’ve made other countries rich while the wealth, strength, and confidence of our country has disappeared over the horizon. One by one, the factories shuttered and left our shores, with not even a thought about the millions upon millions of American workers left behind. The wealth of our middle class has been redistributed across the entire world. But that is the past.”
Donald J. Trump
45th president
“We’ll buy America to make sure everything from the deck of an aircraft carrier to the steel on highway guardrails is made in America from beginning to end. All of it. All of it.”
Joe Biden
46th president
This newfound skepticism is misguided: the economic, political, and moral case for free trade is as strong today as it was when Adam Smith penned The Wealth of Nations almost 250 years ago.
The
Trade has delivered innumerable benefits to U.S. consumers, producers (even in manufacturing), and workers. It enables the U.S. economy to harness its strength in advanced manufacturing and skill‐intensive services and fuels the “creative destruction” that breeds innovation and raises living standards.
Contrary to conventional wisdom, imports are not a drag on the U.S. economy or the price we pay to sell goods and services abroad. In fact, rising imports coincide with stronger economic growth.
To see how the benefits of trade play out in reality, let’s look at a signature American product:
Meanwhile, common claims that trade has destroyed American manufacturing industries and workers have been wildly oversold. The U.S. manufacturing sector remains a global leader, and common signs of deindustrialization—manufacturing’s declining number of jobs and share of the economy—are happening in all industrialized nations, even China.
The
The
As Adam Smith wrote, “Man is an animal that bargains.” We have built communities, cultures, and societies around commerce. When people can pursue their self‐benefit freely through trade, society at large benefits.
The morality of trade doesn’t stop at the water’s edge: trade, and American leadership in reducing barriers to trade, has produced immeasurable benefits for the world’s poorest people.
Clear economic benefits—and the prospects for even more—have led many developing countries to lower their trade barriers unilaterally:
“[A]s countries have turned away from import substitution policies toward export promotion, they have discovered that they become more competitive when they can join global supply chains by reducing imported input costs. …Given the preferences of global supply chain operators, more intense competition to attract foreign investors has promoted liberalization.”
SO, IT’S REALLY MY HONOR TO START THIS PROCESS. IT’S GONNA BE A VERY FAIR PROCESS.
IT’S GONNA BE VERY FAIR TO OTHER COUNTRIES, ESPECIALLY THOSE THAT TREAT US WELL.
AND, WE LOOK FORWARD TO IT AND WE LOOK FORWARD TO HAVING LOTS OF MILLS OPENING UP, LOTS OF PLANTS OPENING UP, BOTH STEEL AND ALUMINUM AND OTHER THINGS.
WE’LL BE DOING OTHER THINGS, VERY POSITIVE THINGS. BUT YOU ARE GREAT PEOPLE.
WOULD YOU LIKE TO TAKE A PICTURE IN THE OVAL OFFICE? I ASSUME YOU’VE ALL BEEN MANY TIMES IN THE OVAL OFFICE.
COME ON. LET’S GO AND DO THAT. LET’S GO AND DO THAT.
STEVE MNUCHIN: SIGNING? SIGNING?
PRESIDENT TRUMP: YES, I’M GOING TO DO THAT.
WE’LL GO INTO THE OVAL OFFICE. WE’RE GOING TO SIGN THIS UP. WE’LL GO INTO THE OVAL OFFICE AND HAVE A PICTURE, OKAY? OKAY. THANK YOU.
*Clapping*
*Cameras snapping photos*
PRESIDENT TRUMP: COME ON AROUND HERE, FOLKS.
*Cameras snapping photos*
PRESIDENT TRUMP: STEEL.
*Clapping*
Furthermore, protectionism is immoral because it elevates protected entities’ welfare not merely above all others’ welfare but at their direct expense—only because the beneficiaries are politically more important than the victims. Steel tariffs are a good example.
The
The lone alternative to free trade, protectionism, has repeatedly proven to impose far higher costs, generate far fewer benefits, and foster far more political dysfunction. Tariffs, quotas, buy‐local mandates, and other protectionist policies harm most Americans, fail to reduce trade barriers abroad (and may invoke retaliation), and engender political dysfunction. Usually, protected firms are not revived but instead return to the government for more protection.
$620,000
per job created or saved.
$10,673,122
Nucor Corporation, Cleveland Cliffs, U.S. Steel, American Iron & Steel Institute, United Steelworkers Union, and various other steel producers combined.
$9,704,282
Jones Act vessel operators, U.S. shipbuilders, maritime unions, and Jones Act advocacy groups combined.
$11,743,273
American Sugar Alliance, American Crystal Sugar, U.S. Beet Sugar Association, Florida Sugar Cane League, Fanjul Corp, and various other U.S. sugar growers and producers combined.
Protectionist policies also undermine national security because they weaken the country’s manufacturing sector (making the nation less resilient), reduce economic growth, and create distortions that can divert resources from sectors that are essential to national security.
In sum, international trade’s disruptions, while real, are far outweighed by its benefits for both the country and the world. Common criticisms wither under the facts and can’t obscure the inefficacy of free trade’s lone alternative, protectionism.
Seismic shifts in industrial production, the rise of China, and a global pandemic surely require new and better U.S. policies, but abandoning free trade will not only fail to fix those problems, but also leave us
poorer and less secure in the process.
The “China Shock”: Myths and Realities
Trump’s Trade War: Not So Good and Easy to Win
China’s Real Strengths… and Weaknesses
A Better Way to Address the China Challenge
Free trade continues to have strong economic, geopolitical, and moral justifications, and its protectionist alternative imposes far higher costs while making us all poorer and less secure in the process.
Bacchus, James. “Biden and Trade at Year One: The Reign of Polite Protectionism.” Cato Institute Policy Analysis no. 926, April 26, 2022.
Bacchus, James. “Trade is Good for Your Health.” Cato Institute Policy Analysis no. 918, June 30, 2021.
Bacchus, James, and Inu Manak. “Free Trade in Environmental Goods Will Increase Access to Green Tech.” Cato Institute Free Trade Bulletin no. 80, June 8, 2021.
Barattieri, Alessandro, and Matteo Cacciatore. “American Protectionism and Construction Materials Costs.” Cato Institute Briefing Paper no. 133, February 9, 2022.
Grabow, Colin. “Rust Buckets: How the Jones Act Undermines U.S. Shipbuilding and National Security.” Cato Institute Policy Analysis no. 882, November 12, 2019.
Grabow, Colin, Inu Manak, and Daniel J. Ikenson. “The Jones Act: A Burden America Can No Longer Bear.” Cato Institute Policy Analysis no. 845, June 28, 2018.
Ikenson, Daniel J. “Tariffs by Fiat: The Widening Chasm between U.S. Antidumping and the Rule of Law.” Cato Institute Policy Analysis no. 896, July 16, 2020.
Ikenson, Daniel J, and Simon Lester. “The Pandemic Does Not Justify Protectionism or Deglobalization.” Cato Institute Pandemics and Policy, September 15, 2020.
Lincicome, Scott. “Doomed to Repeat It: The Long History of America’s Protectionist Failures.” Cato Institute Policy Analysis no. 819, August 22, 2017.
Lincicome, Scott. “Manufactured Crisis: ‘Deindustrialization,’ Free Markets, and National Security.” Cato Institute Policy Analysis no. 907, January 27, 2021.
Lincicome, Scott. “Should the U.S. Government Subsidize Domestic Chip Production?” Wall Street Journal, February 27, 2022.
Lincicome, Scott. “Testing the ‘China Shock’: Was Normalizing Trade with China a Mistake?” Cato Institute Policy Analysis, no. 895, July 8, 2020.
Lincicome, Scott. “The Pandemic Does Not Demand Government Micromanagement of Supply Chains.” Cato Institute Pandemics and Policy, February 24, 2021.
Lincicome, Scott, and Huan Zhu. “Questioning Industrial Policy.” Cato Institute White Paper, September 28, 2021.
Lincicome, Scott, and Inu Manak. “Protectionism or National Security? The Use and Abuse of Section 232.” Cato Institute Policy Analysis no. 912, March 9, 2021.
