More and more American companies are importing components and raw materials to manufacture their final products. To produce or purchase all the components they need within the U.S., these companies would have to divert labor, capital, and other resources from the high-end, advanced processes involved in production of their finished goods. Free trade therefore maximizes a company's ability to produce better products by leaving the production of minor components to countries that do not have high-end manufacturing capabilities. This international division of labor has paid off in many high-tech industries. For example, America now produces more of the technology that makes up the worldwide Internet computer network, and more of the computer hardware needed to access it, than any other country.
Free trade increases domestic competition, which in turn spurs innovation.
Supporters of protectionism argue that foreign competition threatens U.S. jobs and the profitability of American firms. In most cases, however, competition forces companies to become more efficient and innovative. Indeed, it is the foundation of the free enterprise system. Without competition, companies are under no external pressure to build better and cheaper products, the innovative cycle breaks down, and companies become bloated and inefficient. In the end, consumers pay higher prices and have fewer good products from which to choose.