The Costs of Isolationism
For the past two and a half decades, the U.S. has not only been more of a free trader than she was previously, she has been the country most thought of in terms of free trade with the exception of a few isolationist gaffs along the way (such as the current President’s attempt to protect the domestic steel market by artificially inflating the cost of imports). In our view, executive and legislative policies at the Federal level that encourage free trade have benefited nearly all U.S. citizens. Sure, there have been a few who like to grovel about declining wages for non-skilled factory workers or the fact that through free trade, it’s unlikely we’ll ever see UAW members be able to ask for the equivalent of a six figure salary or lifetime guarantees of healthcare and pension packages ever again. But for the most part, we feel the benefits of free trade far outweigh the costs.
Where are the benefits we speak of? You enjoy them every day from the time you wake up to when you turn out the lights at night. Consider that morning cup of coffee. If you bought your premium coffee beans at Costco for the equivalent of $2.99 to $3.99 a pound, think about how much more such a quality product would cost if we did not have trade agreements with South America, Africa and other regions to allow their products to reach our markets? How about when you start your car in the morning? We’d challenge you to name any other country where such a large number of families can afford two cars—and yes, the gasoline to put in them (globally speaking, our gas is still cheap relative to European and nearly all other countries where it is not subsidized). In the U.S., cars are relatively cheap from a purchasing power perspective because so much of the automotive tier two and three parts and components are coming from global suppliers as well as domestic suppliers who’ve invested to improve productivity to keep them competitive.
When you get home at night and you click on that television or surf the web, there’s a reason that your computer or plasma TV has been actually declining in price relative to its performance and size for the past few years. And that’s because despite rising prices in the underlying commodity markets (e.g., resins, metals, and electronics), global trade and productivity gains have enabled OEM’s and resellers to lower their price. Consider a 50” Panasonic, plasma monitor that today costs around $1,500. A year ago, the same model was over $3,000. In the U.S., price deflation―thanks to low or non-existent duties for high technology and electronics and automotive products―constantly improves the standard of living for everyone, stretching how far our dollars go.
But might the U.S. not fully value the benefits of free trade? It seems that even mainstream Republicans―long the defenders of free markets―are abandoning the free trade plank. According to a recent Wall Street Journal-NBC News Poll, “By a nearly two-to-one margin, Republican voters believe free trade is bad for the U.S. economy, a shift in opinion that mirrors Democratic views and suggests trade deals could face high hurdles under a new president.” Certainly when “six in 10 Republicans” in the poll “agreed with a statement that free trade has been bad for the U.S. and said they would agree with a Republican candidate who favored tougher regulations to limit foreign imports,” it is a sign that we will not continue to enjoy the increased purchasing power benefits that free trade has been giving us for very long.
At Surplus Record, we’re all for letting the voice of the people rule the day. After all, that’s what made our nation into the great place it is today and will be tomorrow. But our country better be willing to pay up for introducing isolationist trading policies. From shelling out more for that morning cup of coffee to being forced to downsize to one car, Middle America will pay for the cost of isolationism.