March 20, 2017

Real Talk on Trade

Donald J. Boudreaux

Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
Summary

Myths about trade are many, and are easily exploited for political advantage. Yet the truth about trade–verified overwhelmingly by economic theory and by centuries of experience–is that it unquestionably improves ordinary people's standard of living. 

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Trade and globalization are under more blistering assault today than at any time since World War II. This assault comes from across the political spectrum. President Donald Trump is unabashedly skeptical of free international trade. So, too, is Sen. Bernie Sanders, whose hostility to trade prompted candidate Hillary Clinton to reject much of her husband's trade-freeing policies.

Is the case for free trade really as weak as many politicians and pundits now insist? No.

The case for free trade remains as strong as ever – and that strength is great. The problem is not with trade but with misconceptions about trade.

No misconception looms larger than the one that claims that trade increases long-term unemployment. It's true that trade destroys some particular jobs. For example, when Americans buy more imported steel, some American steelworkers likely lose jobs. Being concentrated in a handful of industries, jobs lost to trade are easy to see. But the same trade that destroys jobs also creates jobs elsewhere in the American economy. These job gains, being spread across many industries, are difficult to see. But they are real.

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