January 26, 2011

Free Trade Agreements Don't Impact American Jobs

Don Boudreaux is a strong proponent of free trade, but argues that politicians are wrong to think that this will create American jobs. 

“In an ideal country, we wouldn't need free-trade agreements, but unfortunately politics get in the way,” said Don Boudreaux. “As a second best, these agreements do move us in the right direction.” 

However, there is a fundamental misunderstanding about how trade works, he says. 

“Many people associate increased exports with gaining jobs and increased imports with losing jobs, and this is simply wrong,” said Boudreaux. “ Trade is great for economic growth, improves quality of products, increases the degree of specialization for businesses and workers, but there is no evidence that it has any long-term impact on jobs, it simply reallocates them.” 

“The President is right that this will increases U.S. competition and makes innovation potentially more profitable, but reducing trade restrictions doesn't affect jobs,” he said. “However, reducing restrictions on these businesses benefitting from trade will make a difference. Reducing taxes, regulations, and creating a more certain political climate will certainly help.”

“Free-trade agreement's next big hurdle will be Congress,” said Boudreaux. “As one of two nationally elected officials less susceptible to special interests than members of Congress, let's hope the President uses his fast-track authority  on these bills.”