XXXXX FREE TRADE XXXXX
We support free trade with all nations. Tariffs (along with excise taxes) should only be used to fund the necessary functions of government. (Ideally there would be no tariffs or excise taxes.) Tariffs should not be enacted to block trade from other countries. A tariff is a tax on American people. Embargos should only be used against countries the United States has declared war with, so we therefore oppose trade embargos against Cuba and Iraq. We all hate oppressive dictators, but that does not justify causing innocent people to starve or die of disease as a result of it. Cutting off trade will not hurt the leaders of Iraq and Cuba; only their people will be. Cutting trade with these countries also hurts American food and pharmaceutical companies.
The principal argument for free trade is the issue of freedom itself. People should be free to buy from and sell to whomever they want. But there are also very sound economic reasons for free trade.
ECONOMICS OF FREE TRADE:
When countries trade, they are able to specialize in whatever they can make best. Some resources are best used for making certain products. For example, it would make little sense for Idaho to grow cotton, just like it would make little sense for Alabama to grow potatoes. This same argument holds true when used for different countries. More goods can be made with the same number of resources, which means lower prices and a greater standard of living overall. Free trade is NOT a zero-sum game.
Opportunity cost is the cost of using resources, measured by the benefit given up by not using them in their best alternative use. For example, if Bill goes out and parties and the next best thing for him to do was study for an exam, the opportunity cost of partying was the better grade that he would have gotten from studying minus the grade he got not studying.
Comparative advantage is defined as the ability of a nation, individual, region, firm, etc. to produce something at a lesser opportunity cost of other products forgone than another nation.
Absolute advantage is being able to produce more of a good with a given amount of resources.
Even if a country is best at making all goods (that is, they have an absolute advantage in everything), they still cannot do everything by themselves. What counties should then do is specialize in what they have a comparative advantage in.
Here's a simple example: A lawyer can type twice as fast as her secretary. Should she then fire her secretary and do all her secretary's typing herself? No, she should not. Her time is best spent doing lawyer work.
This means countries should produce whatever they have a comparative advantage in. (That is, they should produce whatever they have to give up the least to do.) This is explained in much more detail at http://www.internationalecon.com/
Some common myths about
trade:
1. American workers cannot keep up with lower-paid workers in other countries.
This is a complete distortion of the truth. American workers are paid more because
they are more productive. That is, they produce more and deserve to be paid
more.
2. We must protect
the U.S. Steel industry for national security reasons.
The United States military only purchased 0.1 % of steel produced in the U.S.
in 2001. Even a drastic cut in the amount of domestic steel production would
not risk national security.
3. The trade deficit
is impoverishing America.
The trade deficit is a myth. If the U.S. buys more goods from Japan than Japan
buys from the U.S. that is considered a trade deficit for the U.S. But Japanese
are not just going to leave their U.S. dollars in a hole in the ground. If they
are not going to buy American goods, they will invest their money in the American
economy. It is important to note that the last time the U.S. had a trade surplus
(1992), there was a recession that followed. (Correlation does not mean causation,
but this does weaken the argument that a so-called trade surplus is something
desirable.)
POLITICS OF FREE TRADE
A policy of free trade benefits both sides and is the best way to come to peace. If two nations' economies depend on each other, the cost of war is greatly increased. They will be less likely to go to war. This is why Thomas Jefferson stated in his first inaugural address, "Peace, commerce and honest friendship with all nations -- entangling alliances with none."
We support immediate withdrawal from NAFTA (North America Free Trade Agreement), GATT (General Agreement on Tariffs and Trade) and the WTO (World Trade Organization). These organizations violate Article I, Section 8, clause 3 of the U.S. Constitution, which gives Congress the power to regulate commerce with foreign nations. It does not say anywhere that Congress may give its power to anyone else. Those organizations are not free trade; they are managed trade. Government agreements are not needed for free trade. In fact, free trade, by definition, occurs when government is not involved in trade. We also oppose all foreign aid to subsidize other nations' economies.
* LINKS:
The International Economics Study
Center
Institute for International Economics
Spotlight on Globalization
from Free-Market.net
Cato Institute Center for Trade Policy Studies
Truth About Trade
"The
Case for Free Trade" by Milton Friedman
* NOTE: The views of these
organizations do not necessarily reflect those of the Libertarian Party, but
they generally show a good defense of free trade.