Free trade is always a hard sell. In all of social science, the proposition that comes closest to being scientific, in terms of being theoretically provable and true in real life, is that a society benefits from allowing its citizens to buy what they wish - even from foreigners. But people resist this conclusion, sometimes violently, as in Seattle last week. Why?
A couple of reasons; first, the principle of free trade may be true, but it’s not obviously true. In fact, it’s counter intuitive. If a factory shuts down because of a flood of cheap foreign products, how is that good? If middle class Americans find themselves competing with foreigners being paid practically nothing and living in squalor, how can this send Americans’ standard of living up and not down? Students of economics are led step by step through layers of reasoning until the moment they see the light. Skeptics think that the whole routine is like induction into a religious cult and that free trade is more like an article of religious faith than a sound policy recommendation. These skeptics are wrong, but their skepticism is understandable.
The other reason it’s hard to sell free trade is that any given example tends to benefit a lot of people in small ways that are hard to identify and tends to harm a few people a lot in ways that are vividly evident. When that factory shuts down, the unemployed workers know they’ve suffered a loss, and they know why. And it’s a big enough loss to stir them politically. It will affect their vote at least, if not cause them to march in the streets.
By contrast, budget - conscious cloth shoppers (maybe those same workers) who are able to save a few bucks on a new sweater are not likely to realize they are enjoying a bargain as a result of global trade or to take to the streets to defend their cheap sweater. Or suppose the U.S. slaps a tariff on foreign sweaters and the foreign country retaliates by raising a tariff on something we’re selling them - the people who would lose their jobs aren’t even identifiable for sure, though for sure they exist. Likewise the people who lose jobs because shoppers, who have to pay more for, have less money to spend on other things.
It’s by considering all these things - the risk of loosing your job one way minus the risk of loosing it another, the extra money you make if your industry is shielded from foreign competition minus the extra money you pay for goods and services that are protected - that you reach the conclusion that on average, free trade benefits us all. Yes, there are various economic theories about circumstances in which all this may not be true, but their authors win prizes precisely because the circumstances are unusual. In general, the numbers work irrespective of what policies other countries follow. They just get worse if one country’s trade restrictions lead other countries to impose more of the same. Trouble is, who’s got the time for that entire math?
What does the passage mainly discuss?