Tag: economics

You Don’t Need a PhD in International Development to Know that Protectionism is Xenophobic

You Don’t Need a PhD in International Development to Know that Protectionism is Xenophobic

“You [do]n’t need a Ph.D. in economics to understand that American workers should not be forced to compete against people in Mexico making 25 cents an hour.” –Bernie Sanders

I am not exactly sure why Bernie Sanders thinks that Americans deserve to earn more money than Mexicans for the same amount of work. 25 cents an hour is certainly not a desirable wage, not for me and not for a Mexican factory worker, but when the other option is starving, the Mexican factory worker’s decision to work for 25 cents an hour makes a lot more sense. Trade protectionism, the opposite of free trade and what Sanders is advocating, does nothing to help the Mexican factory worker. Rather, it takes away the factory worker’s only source of income.

Most arguments for protectionism are based on nationalistic prejudices about “protecting American jobs.” By forcing American companies to do business in America, we secure jobs for Americans at the expense of Mexicans (or any other foreigner). The implication of Bernie’s comments is, of course, that Americans deserve those jobs more than Mexicans. Not only do Americans deserve those jobs, but they deserve to do them for 29 times the pay (using Bernie’s 25 cent figure and a minimum wage of $7.25). They deserve to do the same jobs for 60 times the pay, when taking into account Bernie’s fight to make the minimum wage $15/hour. Why is work done by Americans worth 60 times the work done by Mexicans? Because the Americans were lucky enough to be born here.

Such sentiment can be summarized in one word: xenophobia.

So what would a world with free trade look like? Probably a lot like the United States. The United States itself is a free trade zone. We do not tax imports from state to state. As a result, we have affordable access to cheese from Wisconsin, oranges from Florida, and oil from Texas. We do not need to impose tariffs or restrictions from country to country any more than we need them from state to state.

The benefits of free trade are numerous: increased economic growth, access to high-quality low-cost goods from around the world, efficiency and innovation, competitiveness, and fairness. The United States is in a position to lead the rest of the world to free trade, by ending its trade restrictions (tariffs, embargoes, immigration restrictions, etc.). When the U.S. imposes tariffs on other countries, they impose tariffs on Americans to even the scales.

Free trade is beneficial to Americans, not just people in the developing world. The only people who benefit from restricted trade are the special interests that benefit from decreased competition (ex. the very corporations Sanders claims to despise). The Mercatus Center points out that these restrictions usually hurt many more people than they help:

Despite receiving protection from foreign competition for many decades, large firms have steadily left the US steel industry due to high fixed costs and competition from smaller firms. Tariffs on steel increase costs in steel-consuming industries, which employ 12 million Americans, compared to the 190,000 Americans employed in the steel-making industry.

Free trade has the ability to reallocate jobs based on efficiency, rather than holding Americans back in jobs where we have no comparative advantage. The reallocation of jobs based on comparative advantage leads to increased productivity and market efficiency. Unfortunately, many “free trade” agreements we see pass through congress are not free trade agreements at all, but corporate welfare in disguise. If that were Sanders’ complaint, I could get on board. Free trade is not about signing a treaty with select countries to promote corporate interests; it is about opening up the global market to improve the quality of life for everyone.

By insulating and protecting American workers, we bar underprivileged workers in other countries from competing on a global scale. Opponents of globalization have argued that that’s actually a good thing, but that just does not make sense economically. By shutting developing countries out of global trade, we stagnate their chances of economic growth, reinforcing global wealth disparities, and we greatly limit our own access to high quality and affordable goods from around the world.

Being fortunate enough to have been born in the United States does not make you more deserving or more valuable than anyone else in the world. The implication of driving foreign actors out of American markets is fundamentally xenophobic and based in nativist prejudices and tendencies.