MCViewPoint

Opinion from a Libertarian ViewPoint

Why we all need education in economics and international trade

Posted by M. C. on July 8, 2022

BY TED TUCKER, OPINION CONTRIBUTOR

What has not changed, however, are the fundamental truths by which economies operate. And the benefits of free trade are more than just access to higher-quality, lower-priced goods — a point underscored by the recent baby formula shortage, caused in part by a limited number of domestic formula companies under strict government policies designed to keep out foreign producers. Studies show that globalization actually boosts the American economy by reducing inefficient domestic industries and providing resources and opportunity for innovation, in turn raising wages and improving living standards.

As prices at the gas pump and on our store shelves rise, President Biden recently mentioned he would consider lifting some tariffs on China in an attempt to combat exorbitant inflation. It’s an issue he has addressed before, noting that inflation is his “top economic priority.” And while doing away with tariffs is a start, there’s more to be done to encourage international trade — the real solution to combating rising costs. Simply stated, all barriers to free global trade limit competition and allow domestic producers to increase prices, a contributing factor to inflation. But somewhere along the way, elected leaders have forgotten this basic economic concept and have turned to policies limiting an international marketplace.

A global pandemic and subsequent runaway deficit spending have contributed to a historic level of inflation. Now, Republicans and Democrats alike are questioning U.S. participation in international trade and suggesting that weaning ourselves from a global free market is the right answer. In doing so, they are ignoring a basic economic truth: voluntary trade creates wealth.

Look no further than the president’s State of the Union address: “Instead of relying on foreign supply chains, let’s make it in America,” Biden said, receiving applause from both sides of the aisle. And Democrats recently revved up support for this effort, including Sen. Tammy Baldwin (D-Wis.), who introduced the Supply Chain Resiliency Act. She noted, “Our ‘made in America’ economy has been neglected, exposing us to shocks that leave us unable to produce or acquire the things we need, putting our health, economy and security at risk.” 

However, it isn’t just Democrats who want to curtail international trade. Others, such as Sen. Mike Crapo of Idaho, the ranking Republican on the Senate Finance Committee, have said the need to domestically produce critical items such as computer parts and semiconductor chips “was there solidly before, but the Russian invasion [of Ukraine] just puts an exclamation point on it” — making it clear that both parties have experienced an abrupt change on this issue over the past several years.

What has not changed, however, are the fundamental truths by which economies operate. And the benefits of free trade are more than just access to higher-quality, lower-priced goods — a point underscored by the recent baby formula shortage, caused in part by a limited number of domestic formula companies under strict government policies designed to keep out foreign producers. Studies show that globalization actually boosts the American economy by reducing inefficient domestic industries and providing resources and opportunity for innovation, in turn raising wages and improving living standards. In fact, the Bureau of Economic Analysis notes at least half of America’s imports are inputs for U.S. manufacturers, not consumer goods. These imports reduce imported-input costs, ultimately lowering a manufacturer’s production costs and facilitating economic growth.

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