79-08-A6
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Free Trade vs Protectionism[edit]
Transcript[edit]With Congress soon to decide whether the United States will endorse the new multi-national trade agreements worked out in Geneva, the question of trade protectionism versus free trade is a hot topic of discussion. The Institute for Contemporary Studies has come out with a timely book entitled Tariffs, Quotas and Trade : The Politics of Protectionism. In it, Professor Richard Sweeney of Claremont Men's College, makes a strong case for free trade. He says, "The case for free trade is based on the simple truth that voluntary exchange between two people is mutually beneficial -- otherwise they wouldn't do it or continue to do it." He goes on to point out that while what he calls "trade liberalization" benefits a nation as a whole, it can hurt some industries and groups within the nation. He says that those who gain "come out so far ahead that they could compensate completely those who lose -- and the gainers would still be ahead". The problem lies, of course, in the fact that the losers generally are not compensated for their loss. This leads to cries for trade protection such as we are hearing these days. Yet protectionism, in the form of higher tariffs, quotas on imports and so forth , almost always leads to retaliation ; sometimes even trade war. Back in the early Sixties, we slapped high tariffs on small pickup trucks (a move aimed at the time at Volkswagen) and then found chickens we exported to Europe were being subjected to new, higher duties. It was called The Chicken War. Whether or not we get into any new "Chicken Wars" will depend on how carefully Congress deals with the complex new trade agreements. When cries go up for protection, we need to remember that a great many American jobs are dependent on import-export trade. The people who work at our ports; people involved in transportation; those involved in marketing and selling imported products. Also, as Professor Sweeney points out, "it is often forgotten that many U.S. industries depend on imported materials and components". He makes the point that the root cause of our international trade problem is our own domestic inflation. Until we get a handle on it, we cannot solve the trade deficit problem; we can only attack the symptoms. Meanwhile, special temporary provisions, such as tax benefits, can always be considered for U.S. industries which have been especially hard-hit by imports. On balance, making trade as free as possible is the best course for any nation, especially one such as ours whose dealings have such a great impact on the world's economy. This is Ronald Reagan. Thanks for listening. |
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