The United States Should Promote Free Trade

I am going to break up his arguments into four points so I can address them more specifically. I. Protectionism and the Early Economy of the USMy opponent's point here is that tariffs and other forms of protectionism, the antithesis of free trade, helped to make America's economy grow as much as it did. However, my opponent is confusing correlation with causation. Not only did tariffs not help America grow, they were detrimental to economic growth because it restricted international trade, and therefore a source of incoming capital and potential satisfaction for consumer demand. On a macroscopic level, the U. S. was in the middle of its industrial revolution, while the British had already had most of theirs. Free trade forced British industries to compete with the world, making them better and more efficient. That allowed the Britain to experience its industrial revolution sooner than countries like the U. S. , where tariffs subsidized inefficient and failing businesses. The U. S. eventually did surpass Britain in exports, but only because of the rapid growth in population and capital relative to Britain. [1]In addition, if you look closely at the U. S. 's economic expansion during that period, you'll see that it was not tariff protected industries that led America's surge during the late 19th century. The fastest growing industries were transportation, distribution, utilities, communications, and construction. Protected steel mills and textile factories were relatively stagnant. [2]But how did America's fledgling industries grow? One of the beauties of pure Laissez Faire Capitalism is it allows for producers to enter the marketplace if they have a product that is just as, or greater than the efficiency of the current state of the product. This is facilitated by the loan - "Plenty of new firms, especially sole proprietorships, don't make money in their first few years of operation. But so long as the present value of the firm's expected future cash flows is positive, the firm's owners should be able to borrow money to finance the first few years as they develop experience, name brand trust, etc. " This is how industries grow in Laissez Faire Capitalism. [3]II. How Tariffs WorkNow I will explain how tariffs are a net cost on society. Here is the essential argument: "Prior to the tariff, the price of the good in the world market (and hence in the domestic market) is Pworld. The tariff increases the domestic price to Ptariff. The higher price causes domestic production to increase from QS1 to QS2 and causes domestic consumption to decline from QC1 to QC2 This has three main effects on societal welfare. Consumers are made worse off because the consumer surplus (green region) becomes smaller. Producers are better off because the producer surplus (yellow region) is made larger. The government also has additional tax revenue (blue region). However, the loss to consumers is greater than the gains by producers and the government. The magnitude of this societal loss is shown by the two pink triangles. Removing the tariff and having free trade would be a net gain for society. [4][5]Tariffs would hurt lower and middle class families by forcing them to pay higher prices for goods. Tariffs increase consumer goods, especially goods such as clothes and food. Since low income people spend a much larger percentage of their income on consumer goods, they are disproportionately hurt by tariffs. For example, even our currently fairly low tariffs transferred $11.8 billion from American consumers to farmers, amounting to an annual 'food tax' of about $100 per household. Therefore, they do not help the common man, but hurt him. [6]III. How Outsourcing WorksOn its face, my opponent makes a valid point. However, if we look closer, we see that my opponent's argument rests on a crucial fallacy - the broken window fallacy, or the tendency for economic policies to be judged only on their short-term and immediately foreseeable consequences. As Henry Hazlitt puts it, however, "The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups. " Outsourcing is only seen through the lens of what it costs, and not what it gains. [7]To begin, outsourcing is often the result of government regulation through non-free trade policies itself: "It is obvious that in unhampered labor markets, wages (at least for some occupations) would be lowered as a result of free competition. Changing demand conditions and technical advances make some occupations obsolete. The workers in those sectors either have to re-educate themselves to be able to perform different tasks, or become unemployable at a certain wage level. Market dynamics force nearly everyone to readjust from time to time—few are spared these painful changes. But refusing to carry out this readjustment by using government coercion only creates opportunities for the foreign workers willing to work for much less then their American counterparts. " In other words, my opponent's case backfires here. [8]Outsourcing is not inherently bad, and their is a good case for it. "A forthcoming paper in the American Economic Review looked at 57 American industries from 2000 to 2007. The study found that even though some people lost jobs due to outsourcing, the greater efficiencies the industries realized allowed them to hire even more people in the United States than were laid off. People tend to count the losses, but they don't count the gains. " So, on net, outsourcing is actually a benefit, and not a cost. "[9][10]IV. Price TagWhile this is true, this leads to dumping. The foreign producer ends up losing money, and eventually has to stop business in that country. So eventually, only domestic industries are left, and the effect of comparative advantage is not realized. In fact, Alan Blinder states that "one study estimated that in 1984 U. S. consumers paid $42,000 annually for each textile job that was preserved by import quotas, a sum that greatly exceeded the average earnings of a textile worker. That same study estimated that restricting foreign imports cost $105,000 annually for each automobile worker's job that was saved, $420,000 for each job in TV manufacturing, and $750,000 for every job saved in the steel industry. "[11][12]Further, "In the year 2000 President Bush raised tariffs on imported steel goods between 8 and 30 percent. The Mackinac Center for Public Policy cites a study which indicates that the tariff will reduce U. S. national income by between 0.5 to 1.4 billion dollars. "[11][13]Again, overall, tariffs are a net cost. Sources[1]: Crafts, Nicholas. Britain's Relative Economic Performance, 1870–1999. London: Institute of Economic Affairs. [2]: . http://www.nber.org...[3]: . http://mises.org...[4]: Stockman, Alan C. Introduction to Economics. [5]: Mankiw, N. Gregory. Macroeconomics. [6]: . http://www.oecd.org...[7]: Hazlitt, Henry. Economics in One Lesson. [8]: . http://mises.org...[9]: . http://money.cnn.com...[10]: . http://cep.lse.ac.uk...[11]: . http://economics.about.com...[12]: . http://www.econlib.org...[13]: . http://www.mackinac.org...NOTE: Source 10 was quoted from source 9 and sources 12 and 13 were quoted from source 11.