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FORBES ASIA FEBRUARY 20 20International Trade Is Good
FACT & COMMENT
By Steve Forbes, Editor-in-Chief“With all thy getting, get understanding”International trade is in bad odor these
days, being blamed for massive job losses
and draining wealth from the U.S. The rap
is wrong: Trade creates far more resources
and jobs than it destroys.
Free markets are always changing, with
businesses opening, closing, growing or
shrinking. New technologies upend exist-
ing ways of doing things. The “churn” in
the labor market is enormous, with literally
millions of jobs in a typical year being extin-
guished and millions more being created.
The railroad industry, for example, was one
of the U.S.’ largest employers after WWII,
with more than 1.4 million workers. Today the total is around
170,000. In the late 1940s there were 350,000 telephone op-
erators. Automatic-switching equipment did in those jobs.
Ditto the once ubiquitous office typing pool. Yet, at the same
time, the number of jobs created burgeoned and wages rose.
But for very understandable emotional reasons, when
companies shut down or downsize facilities here and set
up similar ones in a foreign country, the political fallout
can be intense. “Benedict Arnolds” snarled the Democratic
presidential candidate, John Kerry, in 2004. The U.S. tex-
tile industry employed hundreds of thousands of people in
the early 1900s, primarily in New England. Then those jobs
moved to southern states. The bitterness in the areas expe-
riencing plant closings was real, but there were no calls to
punish the companies that moved, as they were still with-
in our nation’s borders. However, after WWII, when those
jobs began migrating overseas, primarily to Asia, the issue
of textile imports to the U.S. became a heated trade issue.
To smooth political waters, “trade-adjustment” pro-
grams were enacted for “displaced workers,” occasional im-
port quotas were slapped on politically sensitive products,
and every once in awhile, a temporary tariff was imposed,
particularly on items deemed to have been “dumped”—that
is, sold in the U.S. at prices below the cost of making them.
The trend toward freer trade, though, was dominant.
Supply chains became more sophisticated, especially with
the creation of container ships, which drastically reduced
shipping costs. Between 1985 and 2005, global trade qua-
drupled. Without trade, handheld devices, equal in capabil-
ity to the supercomputers of a generation ago, would not be
possible and certainly not at today’s remarkably low prices.
What made trade the target it is today is the econom-
ic stagnation that followed the 2008 crisis. But that slow-Well-Meant But Misplaced
Parochial ProtectionismINTRODUCING What’s Ahead,
the new podcast hosted by Steve Forbes.
Subscribe now on iTunes or GooglePlay Store.Back in 1926 Governor Ralph Owen Brews-
ter of Maine fancied that a “Buy Maine Products” campaign
would invigorate his state’s troubled economy—and this
was before the Great Depression. Hence this brochure, pub-
lished by the state. (A line runs at the bottom of each page,
denoting from which Maine
mill that particular page’s paper
came.) Brewster and his col-
leagues argued that making an
effort to buy locally made prod-
ucts was not parochial or pro-
tectionist but would save their
constituents money because of
reduced distribution and trans-
portation costs—as if consum-
ers couldn’t do their own comparison shopping. The book-
let lists literally hundreds of local businesses, ranging from
makers of barrels, bobbins, shoes, box shooks, saws and
sleighs to manufacturers of “proprietary medicines.”
The effort helped gain notoriety for Brewster, who later
became a U.S. senator. But, of course, the campaign did
nothing to stimulate Maine’s economy, though it did no
harm, either, because the Constitution prohibits the states
from imposing tariffs and other restrictions on items of in-
terstate commerce.
Sadly, the national government went protectionist, big-
time, four years later by enacting the devastating Smoot-
Hawley Tariff Act, which played a critical role in destroying
the stock market and bringing about the Great Depression.
Herbert Hoover’s presidency never recovered.down wasn’t the result of trade but of bad
government policies regarding money, taxes
and regulations. Just look at how much bet-
ter the U.S. did when taxes were cut in late
2017 and suffocating regulations began to be
peeled back.
The only thing holding us back now: the un-
certainty surrounding current trade disputes.