Where We Stand: Our Principles On Promoting Economic Freedom Through Global Trade

Free trade stretches the consumer’s dollar by offering greater choices at lower prices. It makes manufacturers more competitive in the global market by allowing access to less expensive components of the production process. It encourages innovation through global competition. Domestically, free trade is therefore one of the most direct routes to boosting the standard of living of Americans and strengthening the competitiveness of American industry. It makes it easier for Americans to attain their goals and fulfill their desires and is an important element of economic freedom.

Free trade is also good for America’s interests abroad. With the freedom to create products in which they are most competitive in the global market, people in other countries become more productive. Standards of living abroad rise symmetrically, creating new stakeholders in foreign countries, reducing the breeding grounds for terrorism, and diminishing the incentives for illegal immigration to the United States.

Empirical evidence of these benefits is provided in the Index of Economic Freedom, published annually by The Heritage Foundation and The Wall Street Journal.Countries that have opened their borders to freer trade clearly have experienced faster economic growth.

Special interests seek to hold back the tide of trade liberalization and the benefits of change. Special industrial interests focus on subsidies through protection instead of innovation through competition and lower costs through lower regulatory barriers. Anti-globalization groups mobilize in support of wealth redistribution instead of encouraging poverty alleviation by higher standards of living through increased job opportunities and reduced costs of necessities. Workers fear current job loss instead of considering how globalization stretches the dollar and offers new opportunities to earn a higher wage. Environmentalists seek to block globalization without considering that higher incomes abroad are the most direct route to greater global concern for the environment.

The recent tariff on imported steel is one example. The key question about “fair” trade is: Fair to whom? Was the steel tariff fair to consumers who had to pay higher prices for items containing steel? Was it fair to U.S. manufacturers of products containing steel? The increased steel price raised their production costs and made them less competitive in global markets. The only groups to whom this barrier appeared to be fair were the domestic producers of steel and steel workers. They received a subsidy at the expense of consumers, other workers, and other manufacturers. In other words, “fair” trade is just a euphemism for trade protection.

Calls for mandatory environmental protection or stricter labor laws in other countries are only disguised attempts to increase production costs abroad, eliminating competition. The concern is less about the environment and workers abroad and more about protecting the pocketbooks of special interests in the United States.Hence, the only fair trade is free trade, for it is the only form of trade that does not create distortions that benefit one group over another.

The U.S. Trade Representative should work tirelessly to ensure that an agreement to open markets around the world does not founder on the shoals of recalcitrant special- interest groups in agriculture or manufacturing.

The United States has made important strides in free trade in recent years. Bilateral free trade agreements have been signed into law with Canada, Mexico, Chile, Singapore, Australia, Jordan, and Israel. Congress and the Administration must continue this momentum by supporting: (1) the Free Trade of the Americas Agreement and existing bilateral free trade negotiations with Panama, the Andean countries, the Southern African Customs Union (SACU) countries, and Thailand; (2) completed negotiations with Bahrain, Morocco, and the Central American countries and Dominican Republic; and (3) expanding the scope of bilateral agreements to other countries.

This alliance would be a “coalition of the willing,”with membership requiring only a legislative agreement, not a formal treaty. Member countries would simply agree to open their markets and eliminate tariffs for all other members of the alliance.

The precondition for membership would be a demonstrated commitment to open markets as measured by scores of 1 or 2 in the trade, capital flow, property rights, and regulation components of The Heritage Foundation’s Index of Economic Freedom. Currently, 12 countries would qualify for a GFTA, and 19 countries would need to improve in one of the four areas. Free trade is an important step down the road to prosperity in all nations. The United States should show by example how countries benefit by opening their markets as widely as possible.