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Once upon a time or as we economists like to say, “Hypothetically”,
free trade was “a good thing”. This is “hypothetical”
in the same sense that the technology that produced phone trees
or the internet or intelligence gathering tools was also a good
thing. Humans are capable of diverting, perverting, or otherwise
abusing any technology: the internet connects our youth to predators;
phone trees branch out haphazardly, leaving us with inadequate options
and responses; intelligence sometimes finds weapons of mass destruction
where they don’t exist – or doesn’t find them
where they do.
But these are the marginal failures of technology, the tip of a
very large iceberg whose successes are masked by the deep waters
of “things taken for granted” and whose failures sow
the seeds of improvement. With the right guidance, the internet
is a marvelous educational tool for our children. Phone trees can
be programmed to provide logically complete sets of options and
quick responses to our needs. And new tools, such as visual analytics,
are rapidly enhancing our ability to process intelligence data.
The problem may not be with the tool, but rather with the use to
which it is put or the hands into which it is placed. In redressing
problems we should take care not to throw out the baby with the
bath water.
As with technology, free trade gets a bad rap for the way in which
it is misused. Free trade does not taint our pets’ or our
own food supply; people do. Free trade does not force us to buy
cheaper goods which we know to have been made in sweat shops; we
choose to do so. Free trade does not impoverish our workers; inadequately
progressive domestic tax and education systems can do that for us.
Free trade and technology are mechanisms to improve efficiency and
productivity. But tools can be applied in more or less efficient
ways. As voters, producers, and consumers, we need to periodically
evaluate the consequences of how we choose to use them. Our ability
to correctly identify and analyze inefficient use or unwanted consequences
will determine the efficacy of our policy responses. This requires
an understanding of the costs and benefits – immediate and
long term, direct and indirect – of the way we invoke free
trade.
Consider the example below contrasting imports that improve domestic
efficiency with imports that may distort it by failing to recognize
long term or indirect effects associated in this case with energy,
not trade, policy.
- A ready supply of Imported semiconductors facilitated rapid
spread of computer technology with its attendant benefits –
and some admitted costs as well. These products have a relatively
high ratio of price to size and weight. This means that transportation
costs are a relatively small component of their overall cost and
are not likely to be a significant barrier to trade.
- On the other hand, while some imported products complement seasonal
variability of domestic supplies, they may be underpriced and
overconsumed. Fruits from the southern hemisphere are much appreciated
during our winters. These typically have relatively low ratios
of price to size and weight, making transportation cost an important
factor. The price of an imported peach may not fully reflect the
cost of protecting the supply of fuel used to transport it or
our concern for long term energy security. In this case we may
overconsume imported peaches. This is not the result of free trade,
but of our failure to recognize all the costs associated with
it.
Free trade carries risks to be sure, but to insulate ourselves
from those risks would preclude the expanded opportunities and
returns it makes possible. Individual preferences or other benefits
not noted here may still lead us to reach for that peach in December.
Alternatively, by importing semiconductors, we may simply be passing
on environmental problems associated with their production to
a country more willing to absorb – or less willing to acknowledge
– them. In any event, a better understanding of the indirect
and long term consequences of how we use our tools – technological
or free trade -- may improve our chances of living happily ever
after in this increasingly interdependent world.
Contact Information:
Email: Liz at inkweb dot org |
