Free Trade Benefits the United States

I'll start with my arguments and then do a rebuttal.Free trade poses an existential threat to human survival97% of climate scientists agree that humans are causing global warming. [1] Climate change harms agriculture, human health, ecosystems, water supplies, and the economy. [2] If greenhouse gas emissions continue at their current rate, we'll soon reach a tipping point, after which runaway climate change will make the planet uninhabitable to humans. [3]Free trade is incompatible with reducing emissions, slowing climate warming, and saving our planet. Under a free trade regime, prices are set solely by supply and demand, so social costs like climate change and environmental damage aren't reflected in a good's price. Economists call these unaccounted social costs an "externality." Free trade is driven by prices, so if prices are wrong due to externalities, free trade will produce bad outcomes.For example, transportation costs. Free trade encourages goods to be made in one place and used very far away. The transportation costs are not only a waste of energy but they also increase the amount of carbon dioxide in the atmosphere, which speeds up climate change. And, not only does free trade fail to account for carbon emissions from transportation, it also fails to account for carbon emissions from harmful production facilities, as well as radioactive waste from nuclear power, or pollution from pesticides, chemicals, and heavy metals. In fact, free trade not only permits environmental damage but encourages it, as a way to grab a cost advantage.A potential solution is a small, uniform tariff for all imports. This would encourage local production, thereby avoiding an enormous amount of wasted energy in transportation. Another idea is a carbon tax; the US could penalize imports of fossil fuels and other harmful energy-intensive industries. This would help discourage greenhouse gas emissions and encourage clean production facilities and renewable energy sources.Free trade is unsustainableFree trade lets the US import more than it exports (i.e. deficit trading). To make up the difference, the US must assume debt. As a result, foreign countries own over $30 trillion in US assets, and the US net international investment position is -$5.445 trillion. [4] The harm to the economy is huge. In 2001, the Economic Strategy Institute estimated that deficit trading shaves at least one percent per year off our economic growth. [5] Economist William Bahr estimates that our trade deficit since 1991 has made our economy 13% smaller than it otherwise would be. [6] Other economists estimate that trade deficits have stunted GDP growth by up to 20%. [4] And trade deficits also destroy jobs (e.g. trade deficits with China cost the US 2.8 million jobs between 2001 and 2008). [7] Free trade increases economic inequalityThe Stolper-Samuelson theorem, an underlying mechanism of free-market economics, says that freer trade raises returns to the abundant facctor of production and lowers returns to the scarce once. [11] In the US, the abundant factor is capital and the scarce one is labor. Thus, according to the Stolper-Samuelson theorem, free trade increases economic inequality. [12] [13] The jobs that suffer most are those that are easily traded for cheap labor abroad. This primarily impacts low-skill workers, who either lose their job or get paid less. Of course, that means free trade hurts most Americans, as most American work the sorts of blue-collar jobs that are easily traded. So we're talking about a massive impact here: a minority gets richer (and these are folks who are already rich), while the vast majority gets poorer. This is unfair. Making an extra $10,000 will improve the well-being of a middle-class family more than losing $10,000 will reduce the well-being of a billionaire. Given that fact, it makes no sense to redistribute wealth to the rich through free trade. Besides, inequality contributes to mental illness, drug abuse, obesity, and teenage pregnancy. It fosters crime and vioelence. It lowers life expectancy. And it's been shown to harm trust and community life, and overall child well-being. [14] [15] This explains why the US has so many problems with drug abuse, crime, imprisonment, and obesity when compared with other countries, since the US is so unequal. There's no other explanation. And the case against economic inequality isn't just based on social impacts. New OECD analysis has found a "negative and statistically significant correlation" between income inequality and economic growth. [16] In other words, inequality also slows economic growth.RebuttalInnovation. Pro says free trade increases innovation. But the evidence shows otherwise; free trade harms innovation. [8] Pro's argument rests on the false assumption that more competition necessarily means more innovation. But economists have found the opposite: after a certain point, more competition reduces innovation! [9] [10] Less competition means less market uncertainty, which gives companies more confidence to invest in innovative R&D. Pro underestimates the role that market stability and market concentration plays in innovation. This has led economists to say that the relationship between competition and innovation is an inverted U-shape. In other words, competition only increases innovation up to a certain point, after which more competition actually harms innovation. [8] cites empirical data showing that free trade harms innovation; economic theory cited in [9] and [10] supports this result.Lower prices. Pro says free trade lowers prices. But what Pro misunderstands is that free trade affects relative prices, not the price level (the latter being affected by macro and monetary factors). Free trade lowers the relative price of imports; by necessity, the relative price of exports must go up. Thus, consumers only benefit from free trade if they buy more imports than exports. That's not something we can rely on, as many consumers prefer exported goods rather than imported goods (e.g. in Argentina, most consumers eat mostly beef, which also happens to be Argentina's biggest export). Pro's own sources clearly state their limitation to imports.Economic growth. Pro's argument rests on the mistaken theory of comparative advantage. Comparative advantage is the idea that it's beneficial to import some goods (including services) in order to free up our workforce to produce more-valuable goods instead. The theory doesn't work because it assumes workers move easily between industries. If workers can't move, imports won't push a nation's economy into industries better suited to its comparative advantage. Instead, imports will just kill off existing industries and leave nothing in its place. Many workers don't have the skills or don't live in the right place to move between industries. Free trade will leave these workers unemployed. This problem is compounded because of at-will employment and relatively low minimum wage in the US. The result is folks with PhDs in physics making minimum wage because they can't find a better job. In effect, free trade leads to both less jobs and lower wages. The human cost is obvious but there's an economic one as well: when skills that cost money to acquire (e.g. physics) aren't used, the economy loses large investments in human capital. These losses put the whole economy at risk. Nobel laureate James Tobin put it this way: "it takes a heap of Harberger triangles to fill an Okun gap." A Harberger triangle is the area in a supply and demand diagram that measures the loss of taxation (i.e. the benefits of free trade). An Okun gap is the loss in output and employment when the economy falls below potential. Tobin's point is that the benefits of free trade are tiny compared to the huge cost of running our economy below full capacity due to imports and lost jobs. Other benefits. Pro also lists a host of other benefits that supposedly follow from free trade. But these "benefits" are bare assertions. Pro doesn't actually offer any evidence/argument about these benefits. There's simply no link between these "benefits" and "free trade."A final point. Free trade creates win-lose situations. Consumers enjoy lower prices on imported goods, but the relative price of exports goes up. And as a result, workers lose their jobs, and get paid less. Given that consumers and workers are ultimately the same people, there's no way to determine whether these consumers/workers gain more than they lose. No theorem in economics guarantees that the gains of consumers from lower prices on imports outweighs the loss of workers (and higher prices on exports, and lower wages). [1] http://climate.nasa.gov...[2] http://www.ipcc.ch...[3] http://rsta.royalsocietypublishing.org...[4] http://www.bea.gov...[5] http://origin.www.uscc.gov...[6] http://www.huffingtonpost.com...[7] http://www.epi.org...[8] http://www.tuanluong.com...[9] http://www.rieti.go.jp...[10] http://www.nber.org...[11] https://en.wikipedia.org...[12] http://www.citizen.org...[13] http://citizen.typepad.com...[14] The Spirit Level, by Pickett and Wilkinson[15] https://www.equalitytrust.org.uk...[16] http://www.forbes.com...