Saturday, July 16, 2016

JOHN CHUCKMAN COMMENT: IN RESPONSE TO AMERICANS WHO BLAME FREE TRADE AGREEMENTS FOR LOWER WAGES AND OPPORTUNITIES - THE WAY FREE TRADE ACTUALLY WORKS AND HOW IT GENERATES INCREASED WEALTH


COMMENT


The economic truth of free trade is fairly simple.

Both, or all, countries involved become richer over time.

However, that does not apply to every individual or industry in either country. It applies to the average.

The additional wealth of free trade is generated by the economic principle of specialization under which each country does more of what it does best and less of what it does less well. Clearly there must then be winners and losers in the various sectors of an economy. There's no escaping that outcome.

You must distinguish between community interest on this topic and individual interests.

In the rearrangements which take place under a trade treaty, there will always be individual winners and losers.

Also, since all free trade agreements are actually administered free trade under a detailed set of rules (as opposed to theoretical completely free trade), there may actually be sectors of either economy almost targeted for sacrifice as gains are permitted in others.

The overall validity of free trade is proved by Western history. Centuries ago, individual villages, never mind nations, tried to do everything for themselves from shoe-making to bread-baking.

But transportation opened access from one village to the next, and people discovered the bread-maker in one place was better than in the other place, and just the same for the shoe-maker.

Thus, free trade was born, and the modern era got going, and our wealth has grown immensely.

Exactly the same principles hold on a global scale, too, now that we have efficient global transportation and communications. There's simply no stopping it in the long term, unless you want to be a kind of modern Luddite.

The world inexorably will move to be truly globalized, with shifts in population too and rules and laws governing all international movements.

This is the future classical economics dictates, unless you want to work against them, much like some shoe-maker of poor skill in a village in 1521.