The Protection Racket
Pete Du Pont, writing in the Opinion Journal, takes a look at the protectionist bent of the Democrats and wonders why. Because the evidence that free trade works is obvious. Protectionism, on the other hand, may save a few jobs in a certain sector, but at the price of higher costs to other segments of society.
Simply put, markets work. A recent Global Insights analysis concludes that Wal-Mart's 1985-2004 expansion of sales resulted in a 9.1% drop in the price of food at home, a 4.2% drop in the price of other goods and commodities, and a 3.1% decline in consumer prices overall, saving the average working family about $2,329 per year. And with that came a net increase of 210,000 Wal-Mart jobs in 2004 alone.
And trade agreements open market opportunities. The North American Free Trade Agreement, signed into law by President Clinton in 1993, has expanded total trade between the U.S, Canada, and Mexico by 172%. U.S. exports to Mexico have grown by 189% and to Canada by 111%. U.S. agricultural exports to Canada have doubled, to $10.6 billion from $5.3 billion, and to Mexico even more–to $9.4 billion from $3.6 billion. More than one million jobs were created in America by NAFTA.
Overall the U.S. Trade Representative's office says that 10.4% of the 2005 American GDP is the result of U.S. exports of goods and services. The Peterson Institute says that globalization boosts the U.S. economy $1 trillion annually, or about $10,000 per household. There is no question that trade both increases jobs in some areas and decreases them in others, both internationally and domestically. When cars replaced carriages, computers replaced typewriters, and E-ZPass replaced toll-takers in America, some jobs were lost and other were gained.
The new Doha round of World Trade Organization talks has been delayed by America's and France's refusal to agree to reducing agricultural subsidies. Perhaps these are negotiating positions, but would the U.S ever agree to reduce farm subsidies for greater international trade access? In a Pelosi-Reid Congress certainly not–U.S. farmers received $47 billion from the U.S. government in 2004, about 18% of farm income–but for the American people free trade and lower agricultural subsidies would be a substantial step forward.
The protectionism is, of course, being driven by the unions. The Democrats are paying them back for their support. In the process, they may yet tank the economy. That could be enough to throw them out of office in 2008. We'll see.
