Page 21 - Forbes - USA (December 2019)

“With all thy getting, get understanding”

FACT & COMMENT

By Steve Forbes, Editor-in-Chief

International Trade Is Good

19

International trade is in bad odor these wasn’t the result of trade but of bad govern-
days, being blamed for massive job losses ment policies regarding money, taxes and reg-
and draining wealth from the U.S. The rap ulations. Just look at how much better the U.S.
is wrong: Trade creates far more resources did when taxes were cut in late 2017 and suf-
and jobs than it destroys. focating regulations began to be peeled back.
Free markets are always changing, with The only thing holding us back now: the un-
businesses opening, closing, growing or certainty surrounding current trade disputes.
shrinking. New technologies upend exist-
ing ways of doing things. The “churn” in Well-Meant But Misplaced
the labor market is enormous, with literally
millions of jobs in a typical year being ex- Parochial Protectionism
tinguished and millions more being created.
The railroad industry, for example, was one Back in 1926 Governor Ralph Owen Brew-
of the U.S.’ largest employers after WWII, with more than ster of Maine fancied that a “Buy Maine Products” cam-
1.4 million workers. Today the total is around 170,000. In paign would invigorate his state’s troubled economy—and
the late 1940s there were 350,000 telephone operators. this was before the Great Depression. Hence this bro-
Automatic-switching equipment did in those jobs. Ditto the chure, published by the state. (A line runs at the bottom
once ubiquitous office typing pool. Yet, at the same time, the of each page, denoting from
number of jobs created burgeoned and wages rose. which Maine mill that particu-
But for very understandable emotional reasons, when lar page’s paper came.) Brew-
companies shut down or downsize facilities here and set ster and his colleagues argued
up similar ones in a foreign country, the political fallout that making an effort to buy
can be intense. “Benedict Arnolds” snarled the Democratic locally made products was not
presidential candidate, John Kerry, in 2004. The U.S. tex- parochial or protectionist but
tile industry employed hundreds of thousands of people in would save their constituents
the early 1900s, primarily in New England. Then those jobs money because of reduced
moved to southern states. The bitterness in the areas expe- distribution and transporta-
riencing plant closings was real, but there were no calls to tion costs—as if consumers
punish the companies that moved, as they were still with- couldn’t do their own comparison shopping. The booklet
in our nation’s borders. However, after WWII, when those lists literally hundreds of local businesses, ranging from
jobs began migrating overseas, primarily to Asia, the issue makers of barrels, bobbins, shoes, box shooks, saws and
of textile imports to the U.S. became a heated trade issue. sleighs to manufacturers of “proprietary medicines.”
To smooth political waters, “trade-adjustment” pro- The effort helped gain notoriety for Brewster, who later
grams were enacted for “displaced workers,” occasional im- became a U.S. senator. But, of course, the campaign did
port quotas were slapped on politically sensitive products, nothing to stimulate Maine’s economy, though it did no
and every once in awhile, a temporary tariff was imposed, harm, either, because the Constitution prohibits the states
particularly on items deemed to have been “dumped”—that from imposing tariffs and other restrictions on items of in-
is, sold here at prices below the cost of making them. The terstate commerce.
trend toward freer trade, though, was dominant. Sadly, the national government went protectionist, big-
Supply chains became more sophisticated, especially with time, four years later by enacting the devastating Smoot-
the creation of container ships, which drastically reduced Hawley Tariff Act, which played a critical role in destroying
shipping costs. Between 1985 and 2005, global trade qua- the stock market and bringing about the Great Depression.
drupled. Without trade, handheld devices, equal in capabil- Herbert Hoover’s presidency never recovered. F
ity to the supercomputers of a generation ago, would not be
possible and certainly not at today’s remarkably low prices. INTRODUCING What’s Ahead,
What made trade the target it is today is the economic the new podcast hosted by Steve Forbes.
stagnation that followed the 2008 crisis. But that slowdown Subscribe now on iTunes or GooglePlay Store.

D E C E M B E R 3 1 , 2 0 1 9 F O R B E S . C O M