Free+Trade+Good

It is considered to be beneficial for the economy as a whole. The US is THE champion of open markets. If we turn away from free trade, “America and the rest of the world are in deep trouble.” –__Economist__, “The Return of Economic Nationalism,” 2/9/09
 * Free Trade Good** 2/9/09
 * What is it?** Free trade is a market model in which trade in goods and services between or within countries flows unhindered by government-imposed restrictions such as taxes, tariffs, or subsidies.


 * Reasons Why:**
 * Free trade is better for consumers:** Free trade is generally known for decreasing prices by ensuring that countries and people specialize in their comparative advantages. Lower prices for consumers means that consumers can spend less on necessities, enabling them to spend more on other things in their lives, thus improving their standard of living.


 * Free trade's consumer benefits outweigh the costs to some producers:** While some producers certainly do lose-out from free trade, all consumers benefit (in addition to many producers benefiting). The weight of these benefits outweighs the costs to producers that can't compete with foreign producers.


 * Economically beneficial competition:** "As today's global economy offers unparalleled opportunities for the U.S., continuing to expand trade by lowering barriers to goods and services is in America's economic interest. Freer trade policies have created a level of competition in today's open market that engenders innovation and leads to bet­ter products, higher-paying jobs, new markets, and increased savings and investment. Small business, a critical component of the U.S. economy, creates two out of every three new jobs and accounts for about one-quarter of America's exports.


 * Free trade improves the global allocation of resources:** Trade improves global efficiency in resource allocation. A glass of water may be of little value to someone living near the river but is priceless to a person crossing the Sahara. Trade delivers goods and services to those who value them most.
 * According to the National Center for Policy Analysis:**
 * ===== A Harvard study which examined data from developing nations over the period 1970 to 1990 found that those with open trade policies registered economic growth at an average rate of 4.5 percent annually -- compared to only 1 percent among those with closed borders.=====
 * ===== And among developed nations, the Harvard study found GDP among those with open policies during the same 20 year period grew an average of 2.3 percent annually -- contrasted to growth of only 0.7 percent annually among those with restrictive policies.=====
 * ===== Finally, a 1993 study by the Organization for Economic Cooperation and Development established that protectionism costs the world economy upward of $450 billion a year.=====

“History has shown that Buy American provisions can raise the cost and diminish the effect of a spending package. In rebuilding the San Francisco-Oakland Bay Bridge in the 1990s, the California transit authority complied with state rules mandating the use of domestic steel unless it was at least 25 percent more expensive than imported steel. A domestic bid came in at 23 percent above the foreign bid, and so the more expensive American steel had to be used. Because of the large amount of steel used in the project, California taxpayers had to pay a whopping $400 million more for the bridge. While this is a windfall for a lucky steel company, steel production is capital intensive, and the rule makes less money available for other construction projects that can employ many more workers.” Jan 31, 2009 article in the New York Times titled “If We Buy American, No One Else Will.”
 * Example of a failure of Nationalism:** 1930, the lawmakers Reed Smoot and Willis Hawley exacerbated the Depression by raising American tariffs.
 * Regarding Buy American (why a bad idea):**

“The ‘Buy American’ provisions in the stimulus bill are alarmingly nationalistic. They would not even boost American employment in the short run, because—just as with Smoot-Hawley [see above “Example of a Failure of Nationalism]—the inevitable retaliation would destroy more jobs at exporting firms. And the political consequences would be far worse than the economic ones. They would send a disastrous signal to the rest of the world: the champion of open markets is going it alone.” –__Economist__, “The Return of Economic Nationalism,” 2/9/09