Better balance |

Better balance

David Le Vine

The rationale in favor of free trade agreements is really pretty simple. Workers in each country produce and sell whatever they best can. Goods and services move freely without quotas or tariffs and everyone benefits by being able to purchase items at the lowest world prices. Jobs are created in many countries, inflation is minimized and consumers can use the savings to buy additional items thereby creating additional jobs. Utopia!

Not quite. Because of our relatively high cost of labor, we can’t sell as much as we buy and that results in a $500 billion annual trade deficit. That equates to between 5 million and 8 million more jobs in other countries producing goods and services for our consumption.

OK, what can we do about the deficit and that loss of jobs? Well we could stop “free trade,” but that would cause havoc with the economies of many other countries as well as depriving our own farmers and manufacturers of valuable export business. Additionally, we would lose the opportunity to buy attractive and less expensive products.

A second unsatisfactory alternative is to do nothing except listen to a few economists who will assure us that it’ll all work out in the long run. While we’re waiting for that to happen, we can also listen to politicians tell us that they will “level the playing field” and then all will be well.

But perhaps there is another alternative. That being to have free trade to the extent that it is kept in balance. Putting it in other terms, we trade freely as long as there is not a significant deficit or a surplus with another country. If there is – we or they – impose tariffs in order to stop or substantially reduce the imbalance. The result is that jobs are equitably created throughout the world, each country produces the goods and services that best fit its capabilities, and we all share in the benefits.

It may not be a perfect solution but it would bring back jobs without creating economic chaos.

David Le Vine

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