Thomas Donlan of Barron’s offers his assessment of the latest high-profile free-trade proposal.
Trade issues confuse citizens and politicians. The economic benefits of trade are so universal and so powerful that only those most willing to ignore the national interest can find costs to outweigh the benefits.
But there are costs, and it’s undeniable that the trade deal is unpopular. More than 25 years of hostility, stoked by unionists, environmentalists, and ambitious politicians, have conditioned the American political market to reflexive skepticism about trade deals with anybody, even Canada.
When a country opens itself to more imports, it opens its businesses and workers to competition. That’s not a bug, that’s a feature, because without competition those businesses and workers do not have the strongest possible incentives to employ themselves in the most profitable occupations of their labor and capital. Without tough competition, managers do not have to increase productivity and the quality of their products and services.
Tough competition, of course, does not always mean that our country’s businesses and workers will be winners in the short term. That’s why every trade deal is preceded by warnings of a “giant sucking sound,” as Ross Perot put it in the 1990s, and followed by sad-sack television reports of Rust Belt cities crumbling.
The destructive effects of trade are visible and concentrated. Conjure up Flint, Mich. Some Americans do lose their businesses and their jobs, though no liberalization of trade has ever slowed the national economy. The benefits of trade, however, are diffuse, even though most advances in trade policy have brought improvements in national income and wealth. For every Flint, there are many Houstons and Phoenixes, invisible beneficiaries of a more open economy.
