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October 5, 2015

The Conservative Case For Free Trade And Agreements Like TPP

  Rare

You know times are strange when conservatives and libertarians have to defend free trade, but that’s precisely what’s likely to happen as Congress takes approval of the just-approved Trans-Pacific Partnership (TPP) free trade agreement.

We don’t yet know the specifics of the 12-country agreement that was finalized in Atlanta over the past several days, but for many people on both the right and left, the specifics are almost secondary. They think free trade hurts U.S. workers and the economy.

For example, GOP presidential front runner Donald Trump claims to be a free trader, but he complains, “Our country is in serious trouble. We don’t win anymore. We don’t beat China in trade. We don’t beat Japan, with their millions and millions of cars coming into this country, in trade. We can’t beat Mexico, at the border or in trade.”

This sentiment comports with a growing protectionist bent among conservatives, who seem to think that the U.S. loses when individuals and companies buy from another country and win when we sell to other countries.

But free trade isn’t about “beating” another country, it’s letting individuals and companies buy and sell what they want. If you think a foreign-made car is the one that best meets your needs and budget, YOU WIN—regardless of whether Japan, Germany or the U.S. made and sold it.

And if a foreign car manufacturer can make a better car at a lower price, it should win.

Several years ago, when the U.S. was negotiating a different free trade agreement (FTA), I heard famed economist Walter Williams tell an audience that an FTA he wrote would be much shorter and simpler, to wit: You can sell whatever you want to us, and we can sell whatever we want to you.

Few economic principles are more sacrosanct among free market economists than the benefits of free trade.

As Milton Friedman said: “In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history are where they have had capitalism and largely free trade.”

By saying “largely free trade,” Friedman was likely conceding that most FTAs have some limits and restrictions, just as TPP will. The political reality is we won’t get full free trade, but the preference is for as few limits and restrictions as possible.

The reason economists support free trade is competition forces sellers to constantly improve their game—improving quality, lowering cost and innovating—or they lose market share. In other words, free trade is simply the consistent application of the free market.

One of the oldest practices of industries and businesses is to look for ways to get the government to (1) make it very hard for competitors to enter the market and (2) seek various favors and handouts to give one company or industry a competitive edge over others. And virtually every government has complied to a greater or lesser degree.

The purpose of the FTAs is to reduce or eliminate some or most of those restrictions—which for conservatives is almost a universal good. But it isn’t easy, because those who have successfully persuaded the government to make their business easier by using its power to reduce competition will criticize the changes.

One doesn’t have to be an ardent defender of every provision in the TPP—in fact, someone might be very disappointed with some of them. But if the TPP takes major strides in eliminating trade restrictions—and at least initial indications are that it will lower many tariffs and increase U.S. access to more markets—that could be huge step forward for consumers and the economy.


 

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