Guest Post: Dave Chappelle Understands Free Trade Better Than Most Politicians

Chappelle’s words of wisdom should be inscribed on plaques to be placed on the wall in the White House.


by Allan Golombek

Dave Chappelle is a great comedian. But he may be an even better economist. He certainly understands free trade a lot better than some of the people who are currently in charge of directing U.S. trade policy.

In a recent comedy routine, Chappelle provided a succinct explanation of why it makes more sense for the United States to import some goods from China rather than try to pursue a protectionist trade policy aimed at producing everything domestically.

The Difference Between Wearing and Making Nikes

Chappelle summarized President Trump’s position vis-à-vis China: “I’m gonna go to China, and I’m gonna get these jobs from China and bring ‘em back to America.” Chappelle then interrupted his Trump soliloquy, asking: “For what, so iPhones can be $9,000? Leave that job in China where it belongs … I wanna wear Nikes, I don’t wanna make those things. Stop trying to give us Chinese jobs.”

Chappelle’s words of wisdom should be inscribed on plaques to be placed on the wall in the White House, the office of the US Trade Representative, and the Department of Commerce — and the trade ministries of some other countries. The reason people buy imported goods is because they feel they are getting a better deal for their money than if the product was made domestically.

Would it make sense for us all to make our own footwear, assemble our own smartphones, grow our own food, and — for that matter — build our own homes? If we tried to do that, where would we get the time and energy to treat cancer, create new technologies and medications, or give Pilates lessons? If we had to make our own iPhones and Nikes, would we be able to afford to buy them? And what would we have to give up to be able to?

Moreover, by offshoring the assembly of iPhones and Nikes, we actually keep domestic jobs competitive. Most of the value added to an iPhone occurs in the United States — Chinese workers assembling them and adding some of the parts just makes Americans more competitive. Nike employs tens of thousands of people in Vietnam, but the company also employs thousands in metropolitan Portland — jobs that pay better, jobs that can be maintained only by offshoring some of the less complex and lower-paying work.

Warning: NSFW Language

An Economy Needs More than Exports

Growing an economy is not a matter of turning imports into exports. Robust economies do more of both. The opportunity to import actually helps achieve productivity and prosperity more than the opportunity to export because it does more to broaden choice. Importing widens the circle of potential suppliers competing to meet the needs of intermediate producers. When a country opens its borders to imported goods, it facilitates comparative advantage, importing inputs from countries that are more efficient at making them — and thereby making domestically-produced final products more competitive.

On the other hand, countries that have tried to fight reality and produce everything for themselves have paid the price. In which economy would you rather live — North or South Korea? In the early 1970s, both countries had roughly the same GDP per capita. One of the reasons South Korea has raced ahead is that North Korea has pursued autarky. South Korea has become so much wealthier not simply because it exports far more, but because it exports and imports far more. By buying things they need from other countries, they free themselves to do the things they are best at doing. Importing is not a necessary evil; it is a necessary ingredient.

Unfortunately, many look at imports as money leaving an economy instead of value entering it. Many look back fondly to a time when almost all goods sold in the United States were manufactured in the United States. Perhaps we could resurrect that world — but only if we were willing to give up the iPhones, Nikes, laptops, medical technologies, and all of the other modern goods that trade has made possible.

The reason we are able to maintain a 21st-century lifestyle is because we pursue a 21st-century economy. Bringing back the 1970s economy would also entail bringing back the 1970s lifestyle that came with it.

By importing from developing countries, we are in effect hiring people at a cheaper price than we could obtain at home. There is a word for the result — “progress.”

Reprinted from RealClearMarkets.

Allan Golombek is a Senior Director at the White House Writers Group.

This article was originally published on FEE.org. Read the original article.

Guest Post: Economic Localism Is No Better than Economic Nationalism

The best path toward enriching everyone is allowing everyone to trade with everyone else.

by Steven Horwitz

As Black Friday has continued to expand in recent years, one response to its orgy of discounts and deals has been to promote the following day as “Small Business Saturday.” The idea is to encourage people to shop at their local stores rather than at national chains or big-box stores, or perhaps on the Internet. Doing so, argue its proponents, is both moral and good for the local economy, as it keeps jobs and money in “our communities” rather than, presumably, in the hands of faceless and distant corporate masters.

Let’s ignore the irony that the sponsor of this movement is the international corporation known as American Express. Is there a moral or economic case for shopping local, whether on the Saturday after Thanksgiving or in general?

There is not. Many of the same arguments made by progressives in favor of shopping local are the same as those made by Trump and his supporters in favor of what they call “economic nationalism.” For the same reasons that shopping local isn’t morally or economically superior to buying from chains and big boxes, neither is buying “Made in the USA.” The most moral and economic choice is to buy from whomever you want based on your preferences about price, service, or any other number of factors.

Big Boxes Employ Locally
If we only shopped from locally-owned businesses, we would be paying higher prices and overall employment and incomes would be lower.  The moral and economic cases against buying local are intertwined. Consider the argument that buying local is better because buying from Walmart or Target doesn’t keep money and jobs in the local community. This argument ignores that the average Walmart Supercenter employs around 400 people and the numbers are similar for Target. Those jobs continue to exist because people shop at those stores. The hundreds employed at any given big box store are just as much members of the local community as are the owners of the small business that compete with the big boxes. 

To the extent that the prices at the big box stores are cheaper, they enable those who shop there to have income left over to spend on other goods and services, including things from locally-owned businesses, creating jobs that would not exist otherwise. If we only shopped from locally-owned businesses, we would be paying higher prices and overall employment and incomes would be lower. Plus, consumers would not have access to the variety of goods available at chain and big box stores, forcing them to not only spend more but get less value for it.

Buy National?
The same logic applies to international trade. Those imploring us to “buy local” are falling for the same sorts of fallacies that Trump, and many who voted for him, implicitly accept when they argue for raising barriers to international trade. “Economic localism” is nothing more than a smaller scale version of the “economic nationalism” of Steve Bannon and other Trump advisors.

Increasing duties on imports, thereby forcing more Americans to buy “local” in terms of the global economy, does nothing to create jobs or improve the economic standing of Americans. “Keeping the money in the USA,” like “keeping the money in the community,” harms those it is intended to help, and does so for the same reasons.

Forcing Americans to buy only, or predominantly, American-made products means we will spend more to get less, and the net effect on jobs will be zero at best. Globalized trade certainly shifts the mix of jobs in the US economy, as we have shifted in relative terms from manufacturing to hi-tech or services for example, but does not reduce the total number of jobs. One need only look at the data on overall job growth, and the increased variety of cheaper and better goods available to even the poorest Americans, over the last 30 years to see this.

The moral case for buying local is similarly weak. It’s best seen by making the moral case for buying globally.

The promoters of buying local often argue that buying from international corporations is problematic because so many of their products are bought from China or other parts of the world where wages are low and working conditions are bad. The belief is that by buying from those firms, consumers are supporting the exploitation of workers in those countries, making such purchases morally questionable.

Here is where the economics entangles with the morality: large firms are morally suspect because of the supposed negative economic effects they create. But are those negative economic effects real? Without an extended discussion of so-called “sweatshops” (but do see Ben Powell’s excellent book), two quick points are in order.

How Wages Rise
That Chinese workers have factory jobs that pay as well as they do, compared to the other options available to them, is a result of firms like Walmart buying the products those factories create. Wages depend on the productivity of workers (and the capital they use) along with the value of what they create. When the demand for those Chinese products goes up, thanks to us buying at Walmart, wages for the workers in those factories rise. And the evidence is clear that rising wages and the pressure of large Western firms are key drivers of improved working conditions.

Buying Chinese made products at Walmart not only doesn’t further exploit Chinese workers; it is of positive help to them.

Geography and Morality

It is not clear why people more near to us geographically should have moral weight than those further away. Given the choice between helping a middle-class small businesswoman in our neighborhood or increasing the chances of better employment at a higher wage for much poorer men and women in China, why should we believe that the former is necessarily morally superior? 

If human beings deserve our moral consideration by virtue of their humanity, and if those who are worse off economically are deserving of more such consideration, then it would seem that if there is a moral case for anything, it’s for buying in ways that help the least well-off, regardless of their nationality or ethnicity.

Certainly most of the progressive proponents of shopping local do not imagine themselves to be guilty of the same prejudices as Steve Bannon and other partisans of Trump’s economic nationalism, but the underlying logic is the same. The best path toward enriching everyone is allowing everyone to trade with everyone else.

Buy Wherever
To be clear, my argument is not that buying local is somehow wrong. It’s not. But it’s also not morally or economically superior to buying from Walmart or Target or even Amazon. Many local businesses offer better products or superior service, or perhaps fill a unique niche that large stores cannot. They also provide better opportunities to socialize with friends and neighbors. Those are all good reasons to buy from local businesses.

But don’t fool yourself into thinking that you are somehow benefiting your local economy or doing something that’s morally superior. You’re just doing what globalized markets with a range of alternatives allow you to do: deciding what elements of your economic activity matter to you and choosing accordingly. Restricting those alternatives, whether through well-intentioned progressive “economic localism” or the darker, reactionary forces of “economic nationalism,” harms people, and often those who can ill-afford worsening poverty.

Steven Horwitz is the Schnatter Distinguished Professor of Free Enterprise in the Department of Economics at Ball State University, where he also is a Fellow at the John H. Schnatter Institute for Entrepreneurship and Free Enterprise. He is the author of Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions. and is a Distinguished Fellow at FEE and a member of the FEE Faculty Network.

This article was originally published on FEE.org. Read the original article.

From the Archives: Two views on breaking the free-trade policy logjam

Publisher's note: This article was originally published on Examiner.com on April 22, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Two views on breaking the free-trade policy logjam
April 22, 2010 6:35 PM MST

There are three major free-trade agreements pending in Congress: one each with Colombia, Panama, and South Korea.

Congressional approval is necessary to implement the agreements, which are intended to reduce tariffs and quotas and smooth the way for the United States to increase its exports to those countries while also allowing the three trading partners to export more products to the United States.

Brink Lindsey, now vice president for research at the Cato Institute in Washington, formerly served as director of that organization’s Center for Trade Policy Studies. He is the author of The Age of Abundance: How Prosperity Transformed America’s Politics and Culture and, with Daniel Ikenson, Antidumping Exposed: The Devilish Details of Unfair Trade Law.

Trade Policy in the Mud
Lindsey spoke about the prospect of ratification for the three free-trade agreements when he was in Charlottesville on April 15. He told the Charlottesville Libertarian Examiner that “they are all stuck in the mud for the foreseeable future.”

In order to get them out of the mud, Lindsey said, “we would need President Obama to see that his credentials as a multilateralist would be burnished by getting these bills through Congress.” At the moment, he continued, Obama is “not putting pressure on Congress.”

Moreover, Democratic control of Congress “means they are very sensitive to the interests of organized labor, it doesn’t want to move on them. That logjam has to be broken.”

Breaking the Logjam
Lindsey went on to say that “it’s possible now that [since] Obama is well to the left of public opinion and is suffering in the polls as a result,” the president will be “looking for things to make him seem more moderate, make him seem more pro-business, more pro-market”

In other words, Lindsey suggests that “this is one possibility for him to buck the interest groups in his party and push sound trade policy. It’s possible, [but] I’m not holding my breath.”

Would any one of the agreements be more likely than the others to be approved first? Lindsey thinks not. “They’ll all rise or fall together,” he said.

A Candidate’s View
GOP congressional candidate Matthew Berry explained the importance of free trade policy during an interview on April 17.

“We need free trade agreements for two reasons,” Berry said. First, “more American exports mean more American jobs… a billion dollars worth of exports creates about 15,000 American jobs.”

Second, he said, “Trade increases competition, which means lower prices for American consumers, so your dollar goes farther.”

Obama’s Willing Partners
To break the logjam that Lindsey identified, Berry argued that if Republican candidates do well in 2010, President Obama will have “more willing partners in Congress” because even though the President says that he favors ratification, “he hasn’t been willing to expend any political capital to get them ratified.”

Berry concluded that, “if the Republicans could retake Congress, it will be easier for President Obama to put these on the table and [get them] passed.”

From the Archives: Virginia Senate hopeful Robert Sarvis talks about U.S. policy toward Africa

Publisher's note: This article was originally published on Examiner.com on November 1, 2014. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site was scheduled to go dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Virginia Senate hopeful Robert Sarvis talks about U.S. policy toward Africa

The United States should “engage more with Africa,” says U.S. Senate candidate Robert Sarvis, because “there's a lot of human potential there.”

Sarvis is the Libertarian Party of Virginia's nominee challenging incumbent Democrat Mark Warner and Republican Party nominee Ed Gillespie in the election that takes place on Tuesday, November 4.

An economist and lawyer, Sarvis is the author of various policy papers, including "Understanding Public Pension Debt: A State-by-State Comparison" (Competitive Enterprise Institute, 2014) and "The Fiscal Health of the States" (Mercatus Center at George Mason University, coauthored with Jeffrey Miron, 2012).

Wealth creation and prosperity
The LP Senate candidate spoke about U.S. policy toward Africa in an exclusive, one-on-one interview with the Charlottesville Libertarian Examiner.

Africa, he said, “needs to move towards a policy that is going to enable wealth creation and prospering societies. [Americans] know how to do that. We know how to have growing economies through property rights and the rule of law, contract rights and things like that.”

He added that, however, there is currently “too much corruption over there, there's too much violence.” To counterbalance those conditions, “everything we can do to help public policy there is a good thing.”

Sarvis emphasized that he does not think “propping up governments through foreign aid is the right way to do it.” Instead, “free trade is the best thing that we can do to help Africa and to help countries around the world,” where workers “just want to compete on the global marketplace through wages and through working hard. Our trade barriers,” he said, “are one of the contributors to global poverty.”

Reauthorizing AGOA
His support for free trade, Sarvis said, inclines him to support the reauthorization of the Africa Growth and Opportunity Act (AGOA) when it comes up for a vote in Congress in 2015.

“I would certainly prefer a broader policy of just reducing or removing tariffs, period, full stop. I think that's the right thing to do,” he stated.

“All people around the world should have the ability to compete on the global marketplace, and our consumers -- the American people – benefit from reducing tariffs. That's my ideal policy,” he explained, adding that “we'll see how amenable the Senate and the House of Representatives are to that kind of proposal.”

Asked about the expanding military presence of the United States in Africa through AFRICOM and the growing threats of terrorist groups like Boko Haram and al-Shabaab, Sarvis suggested that U.S. policy should be more circumspect.

Governments in Africa “know what they're dealing with and they don't want the terrorist groups to metastasize” any more than the United States does.

“But the problem,” he pointed out, “is that we have created a security umbrella and made implicit promises that mean that [those governments] are not doing enough to maintain their own security.”

What that means, he explained, is that “we're always, generation after generation, having to go in and provide for the security for them. This is something that has to end unless we want to be paying trillions of dollars over the next generation.”

Drugs in Africa
The role of African countries as transit ports in the international illicit drug trade is something that also concerns Sarvis, and he has a solution for it.

“Our drug war has undermined the rule of law and civil society in Latin America,” he noted. “That's also happening in Africa. It's also undermined our efforts in Afghanistan over the past decade.”

Whether in Africa or elsewhere, he explained, “the problem is our war on drugs and anything that we can do to move away from our prohibitionist mentality is going to undermine the violent gangs and organized criminal enterprises that we created” through current drug policy dating back several decades.

Sarvis said that legalizing marijuana in just two states, Colorado and Washington, has already had an adverse effect on drug cartels operating in Mexico.

“We can have beneficial effects around the world by changing our policy at home on drugs,” he asserted.

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Original URL:  http://www.examiner.com/article/virginia-senate-hopeful-robert-sarvis-talks-about-u-s-policy-toward-africa

From the Archives: Poultry industry is trade-talk pawn of South African government, says analyst

Publisher's note: This article was originally published on Examiner.com on May 5, 2015. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site was scheduled to go dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Poultry industry is trade-talk pawn of South African government, says analyst

In the run-up to the recent introduction of bills in the U.S. Congress to reauthorize the African Growth and Opportunity Act (AGOA), which has broad bipartisan support because of the benefits gained by both African and American economies, there was a minor glitch owing to objections in South Africa to potential sales of U.S. poultry products in that country.

According to Kevin Lovell, CEO of the South African Poultry Association, the dispute stems from the United States “not selling chicken at the right price. They’re trading unfairly by dumping their chicken in our market. And that makes competition impossible for us to compete fairly.”

Senators Chris Coons (D-Delaware) and Johnny Isakson (R-Georgia), who represent major poultry-producing states, disagreed with Lovell and obtained a provision in the AGOA renewal bill (sponsored by Senate Finance Committee chairman Orrin Hatch) that requires a 30-day review of poultry policy in South Africa.

"It's not fair for them to continue to get” AGOA benefits, said Coons, ranking member of the Senate Africa subcommittee, “when they aren't playing fair with American exports.”

In a press release, Isakson stated that he and his colleagues “believe passionately in AGOA’s value and support its long-term renewal, but believe it unfair and inappropriate that the country that benefits from the law the most — South Africa — continues to maintain unreasonable tariffs on American poultry.”

Playing Chicken
One South African analyst sees something bigger at stake in the dispute.

After a presentation about South Africa's economy at the Cato Institute in Washington on May 4, the CEO of the South African Institute of Race Relations, Frans Cronje, suggested that this “playing chicken (literally)” represents a significant and troubling trend within South Africa's policy making circles.

In an interview with the Charlottesville Libertarian Examiner, Cronje -- author of A Time Traveller's Guide to Our Next Ten Years (2014) -- explained that “South Africa is recording a trade deficit with every major region and country in the world except the United States and non-energy Africa, and that's only because of the generosity of AGOA.”

In the AGOA negotiations, he said, what we saw “was the chicken producers being used as a pawn by South Africa's Department of Trade and Industry.”

That is because, Cronje explained, “within the Communist left that has such influence over policy formulation in South Africa now, there is a drive to limit the influence and exposure of Western countries in the South African economy, even if that comes at the price of growth.”

From his point of view, “the chicken producers have been used as a pawn in this respect, to create stumbling blocks” that work to the advantage of left-wing factions within the South African government.

“Should South Africa see the benefits it draws from AGOA being limited, the chicken farmers can always be blamed by government as having caused this,” he said.

At the same time, “the government will accept that situation because it gives them one thing they don't have at the moment, which is a high-level excuse to explain our weak economic performance. They can say, 'Well, look at how the West is starting to treat us.'”

'Carcass' of economy
The attitude showed toward the United States in the AGOA negotiations has precedents, he noted.

The hostility that South Africa has “displayed on AGOA,” Cronje said, “is the same hostility we showed eighteen months ago in unilaterally canceling bilateral investment treaties with fifteen European countries.”

The result of that decision, he explained, is that “if that investment continues, South Africa will welcome it, but it's going to be on the terms and conditions set by the left of the South African government. Should the investment leave, to put it quite directly, the leftists will prefer to have absolute control over the carcass of the South African economy than to progressively lose control over a high-growth economy.”

The House Ways and Means Committee has approved H.R. 1891, the AGOA Extension and Enhancement Act of 2015, and the Senate Finance Committee has approved a companion bill, S. 1009. Both bills are expected to come to a vote on the floor of the House and Senate in June.

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Original URL: http://www.examiner.com/article/poultry-industry-is-trade-talk-pawn-of-south-african-government-says-analyst

From the Archives: Presidential candidate Bernie Sanders stumps for support in Charlottesville

Publisher's note: This article was originally published on Examiner.com on May 13, 2015. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site was scheduled to go dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Presidential candidate Bernie Sanders stumps for support in Charlottesville

White House hopeful Bernie Sanders spoke to an enthusiastic audience in Charlottesville, Virginia, on Monday, May 11, laying out his policy vision and contrasting it directly with that of the Republican Congress and indirectly to that of his opponent for the Democratic presidential nomination, former Secretary of State Hillary Rodham Clinton.

Sanders delivered his remarks to an overflow crowd at Trinity Episcopal Church, whose sanctuary has chairs for just 100 people. Another 175 or so squeezed into a basement room and the narthex.

The event, which was billed as a town hall meeting on the federal budget, had been announced in April, before Sanders, an independent senator from Vermont who caucuses with Democrats on Capitol Hill, had declared his intention to seek the Democratic party's nomination for president.

In what is likely to become his standard stump speech, self-defined Socialist Sanders addressed a range of issues that were only related to the budget in the sense that they are items the government spends money on, such as free college tuition for students in public institutions and a multi-trillion dollar program to improve transportation infrastructure. He decried the Supreme Court's decision in the Citizens United case and proposed public financing for federal election campaigns.

Health care and free trade
Sanders proposed raising the federal minimum wage to $15 per hour and creating a single-payer health care insurance program to replace the Affordable Care Act (so-called Obamacare), or what he called “universal Medicare.”

Sanders also took aim at the Obama administration's support for free trade agreements in the Pacific Rim, pointing out that the minimum wage in Vietnam is about 50 cents an hour.

“All of us, I know, want to see poor people around the world do better. We all do, but there are ways that we can do that without engaging in a race to the bottom in this country,” he said. “Our job is to uplift the poor people around the world, not sink the working people of this country.”

Sanders said he voted against NAFTA (the North American Free Trade Agreement), CAFTA (Central American Free Trade Agreement), and permanent normal trade relations with China, “because these were all trade agreements that were pushed by corporate America, the big monied interest, and I intend to play an active role in defeating the Trans-Pacific Partnership.”

Asked later by the Charlottesville Libertarian Examiner whether he supports renewal of the African Growth and Opportunity Act (AGOA), which expires in September 2015, Sanders offered no position, saying: “You know what? To be very honest, I've been focusing more on the TPP than that.”

'Perpetual warfare'
In a question and answer session following his prepared remarks, Sanders contrasted himself most explicitly with Clinton (without ever mentioning her name) in his discussion of foreign policy.

On foreign policy, he noted that when he was first elected to Congress back in 1991, one of his first votes was against the first Gulf War. His wife predicted that vote would earn him a short congressional career, a remark met with laughter from the audience.

With regard to the war in Iraq that started in 2003, “I had serious doubts about what [President George W.] Bush and [Vice President Dick] Cheney were saying and I had serious concerns about the kind of destabilization that would take place and, sadly, much of what I feared has in fact taken place. I not only voted against that war, I helped lead the opposition to it and, unfortunately, we were not successful.” (Hillary Clinton, then a senator from New York, voted in favor of the Iraq War.)

“Where we are right now is in a very difficult world and I wish I could tell you otherwise but as all of you know, there are terrorists out there who want to do us harm,” he said, adding “we've got to be vigilant in protecting this country against them.”

Sanders continued: “What I would also tell you is that, while some of my colleagues apparently have no idea of what the war in Afghanistan has meant, what the war in Iraq has meant. Some of these guys seem to be itching for another war. I fear very much that, if we don't stand up, we could be in perpetual warfare in the Middle East.”

Referring to the so-called Islamic State (sometimes called ISIS or ISIL), the Vermont senator said that group should be opposed. “Here, I think, is the main point: the United States and Western countries should be very, very supportive but at the end of the day, the only way, in my view, that the war against ISIS is won, is when the Muslim countries stand up themselves and lead that fight.”

Senator Sanders' budget town hall in Charlottesville was the third and last in a series. The other two took place in Maryland and Washington, D.C.

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Original URL:  http://www.examiner.com/article/presidential-candidate-bernie-sanders-stumps-for-support-charlottesville

From the Archives: Virginia Congressman Robert Hurt speaks out for free trade in Charlottesville

Publisher's note: This article was originally published on Examiner.com on June 13, 2015. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site was scheduled to go dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Virginia Congressman Robert Hurt speaks out for free trade in Charlottesville

Appearing at the monthly Albemarle County Republican breakfast on June 13, Congressman Robert Hurt (R-VA5) vigorously defended his vote in favor of the Trade Promotion Authority (TPA) in the House of Representatives on June 12.

Noting that opposition to the TPA and related bills (Trade Adjustment Assistance, or TAA, and the Trans-Pacific Partnership, or TPP) comes largely from labor unions and left-leaning liberals like Senators Bernie Sanders (I-VT) and Elizabeth Warren (D-MA), Hurt said that support for free trade is a conservative principle that “would make Ronald Reagan proud.”

In an interview with the Charlottesville Libertarian Examiner immediately after his breakfast remarks, Hurt explained what the TPA does and what it does not do, and emphasized that there is not yet an agreement for the Trans Pacific Partnership – that the TPP is still being negotiated.

“What we voted on yesterday was the Trade Promotion Authority, also known as TPA,” Hurt said. The bill “passed with a large Republican majority in support.”

Framework and authorization
He explained that TPA sets up a framework and gives authorization to the President “to finish negotiating trade agreements” that have been under consideration for years. The Trans-Pacific Partnership, he noted, “was begun under George Bush, so this is not like this is Obama's idea. This was initiated under a previous president.”

Hurt pointed out that “in order for us to even consider a free trade agreement – which was not on the floor – in order for us just to consider it, we had to pass a Trade Promotion Authority to give the president the ability to finalize the negotiations with the other 11 countries (in the case of TPP) and, not only that, but it gives Congress and the American people a tremendous amount of transparency” that would not be available without the TPA in place.

The congressman said that “as it is now [the President] doesn't have to share anything with Congress. That's why the negotiating text of a free trade agreement that does not exist is classified. That's because the Administration has the power to control that negotiating text and doesn't have to do anything with Congress.”

Under TPA, he said, “the President not only has to give us access to it currently and in the future, [he] also has to make it publicly available before anybody votes on anything for at least two months prior to it is even considered by Congress so that our constituents can hear and can look at every single word and see what the agreement does and what it doesn't do.”

Hurt explained that since he has been in Congress, he has voted for two free trade agreements (with Colombia and Panama) and voted against another (with South Korea).

“The devil's always in the details,” he said. “For people who are getting so upset about this bill, I think there's some misunderstanding that somehow what we voted on Friday was a free trade agreement. It was not a free trade agreement.”

Asked whether a trade agreement like this would get pushback from conservatives if it were promoted by President Romney rather than President Obama, Hurt demurred.

“Great question,” he said, adding “I don't know. It's hard to say. It's hard to attribute motive.”

That question makes the point, he suggested, that “this President has so soured any reasonable relationship with Congress and he is so distrusted among so many of the American people because of his abuse of the rule of law in this country that people push back for that reason – but this vote yesterday had nothing to do with President Obama.”

Hurt stated that he does not “trust President Obama to follow the rule of law. He's demonstrated again and again that he cannot.”

Setting that aside, he said, the TPA does not give the President “any authority to do anything that he cannot already do. It gives him restrictions in negotiating objectives that are in TPA but it doesn't give him any additional power to make any law.”

'Hogwash'
Hurt cited Internet rumors like “'this means we're going to give the president the authority to change immigration law!'” Those, he said, are “just totally, 100 percent false. It does not.”

He explained that, contrary to those rumors, “in order for any law of the United States to change, it has to come through Congress.”

Moreover, he said, “if it's pursuant to a free trade agreement, it has to come through Congress twice, because it has to be adopted as a free trade agreement and, secondly, the actual change of the law has to be adopted through implementing legislation, which would be a second shot at the apple.”

Taking aim at the Internet rumor mill, Hurt asserted that “the idea that this President can affect any of our laws unilaterally or that we're going to submit to some international tribunal is just hogwash.”

Hurt also emphasized how free trade will benefit his constituents in Virginia's Fifth Congressional District.

As a legislator, he said, “I have to look at the economy of the Fifth District the way it is in 2015, not the way it was in 1980 or 1990 or 2000. Our economy has changed a tremendous amount” over the past thirty years.

He pointed out that “agriculture is huge,” the largest sector in Virginia's economy, with $75 billion in output each year. The Fifth District has 23 counties and cities and “with the exception of Charlottesville and Danville, it is mostly rural, mostly agricultural.”

'Opportunities for growth'
“There are huge opportunities” in agriculture, he said, “but let me tell you this: There are opportunities for growth. There are opportunities for our manufacturers to access these foreign markets and sell our products that we make here there and we get their cash.”

If the Trans-Pacific Partnership is finalized – a prospect that Hurt says is a year or more in the future “I will look very carefully and make my best judgment as to whether or not this is good on balance for the people I represent.”

If, by his consideration, the agreement is not good on balance for the Fifth District, “I'll vote against it and work for its defeat. If it is good, on balance, for the people I represent, [if it] creates jobs and opportunity and growth and it projects American strength in a very sensitive area geopolitically, in the shadow of China,” he said, he will vote for it.

As to free trade in general, Hurt concluded, “I think it's consistent with Republican principles, consistent with conservative principles. It would make Ronald Reagan proud.”

Note: the full audio of this interview with Congressman Robert Hurt is available as a podcast from Bearing Drift.

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Original URL:  http://www.examiner.com/article/virginia-congressman-robert-hurt-speaks-out-for-free-trade-charlottesville

Canadian Content

"What's good for the goose is good for the gander," goes the proverb.

Yet when it comes to economic protectionism, neither goose nor gander gets what's good. No matter who plays the protectionism game, everybody loses. (See Smoot/Hawley.)

Now Canadian municipal officials are biting back at the protectionism provisions of the Obama administration's economic stimulus package. Their argument is, if Canadian businesses are excluded from providing services to American states and cities under the stimulus rules, then American firms should be excluded from providing services to Canadian cities.

Thus the downward spiral begins.

Here's the beginning of the report from the CBC:

In response to the 'Buy American' provisions of the U.S. stimulus package, Canada's mayors narrowly passed a resolution Saturday that could potentially block U.S. companies from bidding on city contracts.

The resolution was passed at the Federation of Canadian Municipalities conference in Whistler, B.C., by a vote of 189-175.

The resolution says the federation should support cities that adopt policies that allow them to buy only from companies whose home countries do not impose trade restrictions against Canadian goods.

The Whistler Question (isn't that a great name for a newspaper?) noted how the vote was nearly split down the middle, and asked politicians who voted each way for their reasons:

Dianne Watts, the mayor of B.C.'s second-largest city, Surrey, voted in favour of the resolution because she said Canada needs to have a level playing field with its neighbour.

"We support free trade. We support open markets. But we've seen our local companies having to lay off workers because they've been hit directly by American policies," said Watts. "One company, their materials were on the site in the States and they sent them back."

But almost as many voted against it, fearing that it would just provoke Americans more and, worse, that it's un-Canadian.

"By lashing back, we're becoming more American," said Claude Elliott, the mayor of Gander, Nfld. "We need to take the high road and rise above that. We're negotiating with a U.S. company right now to set up in Gander and we don't need to put up any barriers."

In southeast Saskatchewan, where a booming oil industry attracts all kinds of American interests, Weyburn city councillor Bill Rudachyk didn't see anything to be gained by introducing protectionist policies or even threatening to.

"Two wrongs don't make a right," said Rudachyk, whose town recently hosted the second-biggest oil show in Canada, which attracted U.S. companies. "And we don't want retaliation."

An editorial in the Edmonton Journal is worth a read:

... other local leaders and organizations such as the Ottawa Chamber of Commerce are clamouring for our own "Buy Canadian" policy to combat the American move. After all, they contend, much of our stimulus package cash is designed for local projects, so why not mandate it that we look out for our own?

The answer is simple enough. While buying locally, regionally and nationally often makes a good deal of sense, enshrining that practice by law is ultimately self-defeating to the interests of a nation so dependent on other markets. Provinces, and especially municipalities, which have long drawn the short stick among the levels of government in Canada, must be free to make the most intelligent buying decisions for their citizens available. Tempting though it is to give our neighbours a taste of their own medicine and reward firms contacts simply because they are Canadian, it's a bad idea that will backfire. Like it or not, we must depend on our leaders to convince our customers to remember who their real friends are, and how grave the dangers are of backsliding into darkness.

Fortunately for Canada, its chief trade spokesman understands the basic economic principles that militate against protectionist policies. He argued against the mayors' resolution, although his views did not prevail in the final vote. Reports the Ottawa Citizen:

Trade Minister Stockwell Day is concerned about the second part of this motion and is urging delegates not to adopt it, as it could set off a retaliatory round of protectionist moves that experts say would ultimately damage the Canadian economy.

He said the federal government is aware that Canadian companies are being discriminated against by U.S. state and municipal governments on some water and sewage treatment projects funded by the stimulus bills, and they are working to correct the situation.

“If one country starts to build protectionist barriers that hurt businesses in another country, there will be an impulse to retaliate, and I would like to see this resolved at the executive level in the United States,” Day said.

Canada and the United States are each others' greatest trading partners. The commerce that crosses the U.S.-Canadian border keeps both economies vital. A trade war between the two North American giants would be devastating for both, and would have horrendous consequences for the rest of the global economy, as well.

The fact is, "Buy American" or "Buy Canadian" legal mandates are misguided and harmful. Let individuals and businesses choose what products and services they want to buy (and sell) regardless of source. That is what "free trade" and "free markets" really means. That is what "freedom" means.

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Mr. Smoot, Meet Mr. Hawley

The Washington Post reports that the threat of trade protectionism is rising again as governments -- even industrial democracies -- retrench in the face of shrinking GDPs.

Egged on by fremescence around the globe, decisions aimed at reducing international trade will have, as they did in the 1930s, counterproductive results. The damage done by policies that restrict or deter trade among businesses and consumers across national boundaries will prolong the current recession.

Annys Shin wrote in the business section of Friday's Post:

In the latest WTO report, Director-General Pascal Lamy said that in just the past two months there has been "significant slippage" among the world's industrialized and developing nations toward protectionism. The report includes a lengthy list of examples.

"The danger today is of an incremental build-up of restrictions that could slowly strangle international trade and undercut the effectiveness of policies to boost aggregate demand and restore sustained growth globally," Lamy said.

A growing number of countries have raised tariffs, imposed import restrictions or reinstated subsidies. They have also been quick to defend home industries by filing complaints with the WTO over dumping -- the practice of flooding another country with goods at below-market prices. The WTO report also portrayed bailouts as potentially bad for trade because propping up operations of uncompetitive or insolvent firms "denies market share to more efficient producers including foreign suppliers."

A news release from the World Trade Organization that was supposed to be issued on March 25 but was prematurely published by a Dutch media outlet on March 23, addressed the issue of how economic decline follows protectionist trade measures:

“For the last 30 years trade has been an ever increasing part of economic activity, with trade growth often outpacing gains in output. Production for many products is sourced around the world so there is a multiplier effect — as demand falls sharply overall, trade will fall even further. The depleted pool of funds available for trade finance has contributed to the significant decline in trade flows, in particular in developing countries,” said Director-General Pascal Lamy.

“As a consequence, many thousands of trade related jobs are being lost. Governments must avoid making this bad situation worse by reverting to protectionist measures which in reality protect no nation and threaten the loss of more jobs. We are carefully monitoring trade policy developments. The use of protectionist measures is on the rise. The risk is increasing of such measures choking off trade as an engine of recovery. We must be vigilant because we know that restricting imports only leads your trade partner to follow suit and hit your exports. Trade can be a potent tool in lifting the world from these economic doldrums. In London G20 leaders will have a unique opportunity to unite in moving from pledges to action and refrain from any further protectionist measure which will render global recovery efforts less effective,” Mr. Lamy said.

Fortunately, some are fighting back against this incipient trend. In an online petition being circulated by the International Policy Network, the Atlas Economic Research Foundation and its Global Initiative for Free Trade, Peace and Prosperity, concerned citizens are speaking out and calling attention to the economic facts.

The petition says, in part:

... the fact that protectionism destroys wealth is not its worst consequence. Protectionism destroys peace. That is justification enough for all people of good will, all friends of civilization, to speak out loudly and forcefully against economic nationalism, an ideology of conflict, based on ignorance and carried into practice by protectionism.

Two hundred and fifty years ago, Montesquieu observed that “Peace is the natural effect of trade. Two nations who differ with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and thus their union is founded on their mutual necessities.”

Trade’s most valuable product is peace. Trade promotes peace, in part, by uniting different peoples in a common culture of commerce – a daily process of learning others’ languages, social norms, laws, expectations, wants, and talents.

The petition looks to the lessons of history:

Perhaps the most tragic example of what happens when that insight is ignored is World War II.

International trade collapsed by 70 percent between 1929 and 1932, in no small part because of America’s 1930 Smoot-Hawley tariff and the retaliatory tariffs of other nations. Economist Martin Wolf notes that “this collapse in trade was a huge spur to the search for autarky and Lebensraum, most of all for Germany and Japan.”

The most ghastly and deadly wars in human history soon followed.

By reducing war, trade saves lives.

Trade saves lives also by increasing prosperity and extending it to more and more people. The evidence that freer trade promotes prosperity is simply overwhelming. Prosperity enables ordinary men and women to lead longer and healthier lives.

There is more there to read and support, expressed more eloquently and completely than I can do. To sign the petition, go here: http://tinyurl.com/c5vb2l. Do it now.

Peace and prosperity depend on the ability of free people to trade among themselves without interference.

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Helen Suzman - Heroine of Liberty

Helen Suzman, who for thirteen years was the only opposition member of the South African parliament and for her entire career was a tireless advocate for individual liberty and personal responsibility, passed away on New Year's Day at the age of 91.

Best known as a fierce opponent of apartheid, the system of state socialism and racial separatism that characterized South Africa from 1949 until 1994, Suzman was a humane, intelligent, and courageous political activist.

Although I worked closely on South African issues for almost 20 years beginning in the late 1970s, my only personal encounter with Mrs. Suzman came at a 1989 lecture she delivered for the Cato Institute in Washington. (A photograph from that occasion is printed on page 55 of this 2001 annual report of the Cato Institute; I wish I had one of my own of the two of us together.) That lecture is included in Toward Liberty: The Idea That Is Changing the World, published by Cato in 2002.

Suzman's Cato lecture took place in October 1989, mere months before President F.W. De Klerk freed Nelson Mandela from Robben Island and began the process of deracializing South African law and government.

She spoke, in part, about the counterproductive effects of economic sanctions against South Africa, a topic of special interest to me since I had written a book about it just a few years earlier. In her lecture, Suzman noted that some (but not all) of the more onerous laws that undergirded apartheid had begun to be repealed in the 1980s, often as the result of internal upward economic forces rather than because of external political or economic pressures:

I should mention that the laws that have been changed have been changed because of both economic factors and the steady escalation of black resistance within South Africa. The changes in the laws were not the consequences of sanctions, as some people claim. The changes took place between 1979 and June 1986. The U.S. Comprehensive Antiapartheid Act was enacted in November 1986, after those laws had been abolished. I'm not trying to say that international pressures do not play a part. Of course they do. They have an effect on the thinking of white politicians, and certainly they've had an effect on the integration of sports and in other areas where the political power structure itself is not affected.

Nevertheless, I must emphasize that economic factors within South Africa have been the main forces behind the changes that have already taken place. Job reservation disappeared because there just were not enough whites to do the skilled work. The pass laws and influx control disappeared because they could no longer be implemented, given the massive urbanization that resulted from poverty in rural areas and job opportunities in urban areas.

De facto residential integration, despite the Group Areas Act, has taken place in some white suburbs because of the acute shortage of housing in the black urban areas, and the passage of the Free Settlement Areas Act in 1988 gave de jure recognition to some of the racially mixed areas. The shortage of housing has also given rise to vast squatter camps at the outskirts of metropolitan areas all over the country.

Later in her remarks, Suzman tried to predict what might happen in the near future (that is, the early 1990s). While not precisely on target, the hopes she expressed were nearer to what would become fact than perhaps even she would suggest at the time:

The government has said that it may introduce a bill of rights -- something desperately needed in South Africa -- and that it favors holding a conference, a great indaba at which representatives of all the racial groups would be present, to negotiate the political accommodation of black people within the parliamentary structure. Such an assembly is absolutely essential if we are to have a new South Africa with a new goal and without oppression or domination. But whether de Klerk will include the African National Congress and other banned organizations in the indaba, whether he will soon release Nelson Mandela and the other political prisoners, whether he will lift the state of emergency -- all of which black leaders have cited as preconditions for their coming to the negotiating table -- we do not yet know. My crystal ball is cloudy, but I think it's obvious that both sides will have to make concessions if negotiations are to have any hope of success; otherwise the indaba is going to be stillborn.

I think de Klerk intends to try to restore South Africa's credibility in the Western world. I hope he'll get a move on, for I have no doubt that the patience of the Western nations is wearing thin. But I am convinced that sanctions and the threat of further punitive actions notwithstanding, de Klerk will not hand over power to the black majority. He was not elected to do so. However, he will explore every means of bringing blacks into the parliamentary system that falls short of threatening white domination, and he will make incremental changes. I believe he will allow many laws simply to erode by nonprosecution; possibly the Group Areas Act will go that way. Certainly the Separate Amenities Act is already going, and the Johannesburg City Council, which is controlled by the National party, has desegregated all public facilities.

Another important postelection development is that the government is now negotiating with the people's representatives in the urban townships, the leaders of civic associations, whom it had always refused to recognize. It is no longer insisting on negotiating with the people elected under local government ordinances.

I firmly believe that sanctions and disinvestment are ultimately counter-productive. They may result in different political thinking and changes in the political structure, but if they also wreck the economy of South Africa, every South African, white or black, will be hurt. There is no point in inheriting a wasteland. If disinvestment continues and comprehensive sanctions are imposed, South Africa will lose its export markets, and there will be widespread unemployment, mainly among the black population.

The political revolution that followed was much broader than what Suzman imagined, but her attribution of its stimulus to domestic political and economic factors rather than to foreign sanctions and disinvestment was largely correct.

In his blog on Cato@Liberty, David Boaz (editor of Toward Liberty) offers his own impressions of Helen Suzman:

In South Africa they knew the difference between liberals and leftists. Plenty of leftists and communists opposed the National Party and its apartheid system. But so did liberals like Suzman, people committed to human rights, freedom of thought, and a market economy. She did not forget her liberalism when apartheid finally fell and the African National Congress came to power. She continued to speak out against repressive policies and the Thabo Mbeki government’s continuing support for Robert Mugabe.

I loved reading about her quick wit in parliamentary debates. She sent the minister of law and order a postcard from the Soviet Union, saying, “You would like it here. Lots of law and order.” Once she told a government minister to go into the black townships and see their appalling conditions for himself. He would be quite safe, she said, if he went “heavily disguised as a human being.” In a famous exchange a certain minister shouted: “You put these questions just to embarrass South Africa overseas.” To which she coolly replied: “It is not my questions that embarrass South Africa – it is your answers.” When an Afrikaner in Parliament sneered at her Jewish roots and asked what her ancestors were doing when his were bringing the Bible to the “savages,” she snapped, ”They were writing the Bible.”

It took someone of exceptional fortitude to live Helen Suzman's life. Lesser individuals would have given up -- perhaps even emigrated -- when faced by the sort of challenges she endured.

The fact that she was the lone opposition MP for so many years is remarkable enough; that she was able to persuade others to join her and engage in politics for the purpose of liberalizing South Africa's laws and regulations, despite little evidence of potential success, is inspirational. She may have been "one voice" but it was her voice, not that of her opponents, that prevailed.

Free Trade, the Trade Deficit, and Economic Growth

A couple of letters in the Washington Times over the past several days caught my eye. Both address the topic of international trade from widely different points of view.

The first letter appeared last Friday above the signature of Howard Richman, who identified himself as co-author of a book called Trading Away Our Future. (The book is published by a non-profit group called the Ideal Taxes Association, which seems to be a think-tank staffed by Mr. Richman and people sharing his surname.) His letter to the editor says, in part:

In his Tuesday Commentary column, "Economic Reality Check," Michael Barone cites many trees but misses the forest. He points out that the economy is not suffering from much unemployment (true), nor is there much inflation (true). Nor is the economy shrinking (true). He also points out that the growth rate is mighty slow, but he doesn't stop to analyze why. His conclusion: Barack Obama's "protectionism" would not help the United States economy.

What he misses is the reason U.S. growth is so slow despite the lack of unemployment. It is slow because businesses have not been investing in American production. They have not been investing because they know that if they do, the mercantilist countries that control our level of trade deficits through currency and other trade manipulations will simply drive them out of business. The key to fixing the problem is for the United States to insist on balanced trade.

Richman's letter prompted a response from Don Boudreaux, chairman of the economics department at George Mason University in Fairfax. Boudreaux's letter, which appeared in Monday's editions, deserves to be reproduced in full:

Howard Richman argues "Balanced trade is the key" (Letters, Friday/Saturday) to America's prosperity. He's confused, as evidenced by his claim that America's recent economic slowdown is linked to its trade deficit. The United States has run a trade deficit for each of the past 31 years, some of which (like the present) were periods of slow growth, but many of which were periods of high growth. Indeed, the evidence suggests that higher trade deficits are associated with higher, rather than lower, rates of economic growth.

This last point highlights another of Mr. Richman's confusions. He thinks trade deficits mean less domestic investment. Not so. Every trade deficit (more accurately, current-account deficit) is offset exactly by a capital-account surplus - meaning net inflows of capital into the domestic economy. More capital generally means more growth.

Boudreaux -- who has a knack for writing letters to the editor that he characterizes as "one-minute economics lessons -- has the better of this argument. His letter in the Times reminded me of an article I wrote on the same topic in the last century. It appears, below, as one of an irregular series of archival pieces that I think of as "history lessons."

The earliest version of this article appeared in the Chicago Tribune in August 1991. This revised version appeared in The Metro Herald in October 1993:

Free Trade and the Trade Deficit
Richard E. Sincere, Jr.

Virginia Governor L. Douglas Wilder's round-the-world trip to drum up business and investment for Virginia is a colorful reminder of how the globe is interconnected through commerce, finance, and industry. Virginia can only benefit when the Governor finds new markets for our agricultural and manufactured products. At the same time, the heated debate over the North American Free Trade Agreement (NAFTA) reminds us how international trade can be a political ping-pong ball.

One aspect of the trade issue is the so-called trade deficit. According to conventional wisdom, a trade deficit is bad while a trade surplus is good. In fact, the terms "trade deficit" and "trade surplus" are so much hot air—they are empty and meaningless. To focus on the trade deficit distracts us from more important economic tasks.

National trade figures are meaningless because nations are not economic units and therefore do not trade. The numbers gathered and released by the government merely summarize countless sales and purchases made by individuals and corporations. The "nation" does not trade; only units within it do.

Canadian economist Richard Grant, writing for the Johannesburg-based Financial Mail, explains: "The implication is that exports and trade surpluses are good is totally unfounded. They are simply numerical aggregates that emerge from the summation of millions of unrelated transactions by individuals. No one is responsible for it. To say that a surplus is ‘sound' or that the balance of payments is ‘in good shape' is meaningless babble."

Grant goes on to note this example: "When a miner sells gold, he doesn't care who buys it so long as it gets sold. And he should be under no illusion that he is in any way serving the ‘national interest' by selling it to foreigners instead of local buyers. If local buyers are the highest bidders, they will—and should—get the gold."

Put another way, it doesn't really matter whether an Arlington software company sells $1 million worth of its product within Virginia or if it "exports" the software to Hyattsville, Maryland, or Accra, Ghana. What matters is that the company earned $1 million, which can then be used to employ more workers and buy more raw materials or be invested in stocks, bonds, or bank accounts.

What has happened is that persistent trade deficits have embedded themselves in the national consciousness as bad things.

"Our balance of payments is sick," cry the economists who believe the balance of payments needs medicine from the Federal Reserve Board. They argue that a balance-of-payments deficit indicates that American business—particularly manufacturing industry—is in decline. This is not necessarily true; in fact, the opposite may be the case.

At a seminar sponsored by Hillsdale College, economists Marshall Loeb and George Gilder made precisely this point. Loeb, managing editor of Fortune magazine, noted that structural change is occurring in the U.S. economy.

"After years of stagnation," he said, "U.S. manufacturing productivity is rising sharply. In 1987, it went up about 3.5 percent, more than double the rate of the middle to late 1970s and faster than Japan's or Germany's." Despite a general slowdown in the economy, this trend has continued through the early 1990s.

Far from declining as a portion of the national economy, Loeb pointed out that U.S. manufacturing currently accounts for about one-fifth of the gross national product (GNP), "almost exactly the figure that existed 10 or 15 years ago."

How this affects international trade figures was explained by Gilder, a prolific author on economic themes. He suggested that the trade deficit is beneficial to the U.S. economy, not the threat that many perceive it to be, because a substantial amount of money earned by foreign exporters is reinvested in U.S. businesses, industries, and real estate.

"The other side of a trade gap is necessarily a capital surplus," Gilder said. "That's what it means when they say the United States is becoming a net debtor. People want to lend us money. During this period when our debts were increasing, our assets were increasing much more rapidly." Between 1980 and 1988, for instance, the value of assets owned by American companies grew from 180 percent of GNP to 240 percent.

How can importing be advantageous over exporting? Gilder thinks it signifies improving competitiveness. "What happened in the early 1980s is that the United States began growing much faster than it had in the '70s, and much faster, in fact, than its trading partners were growing."

What this means to American business is that "if you're an exporter from the United States, and you're exporting to a stagnant global market, clearly you won't be able to expand your exports as fast as an exporter from a country that faces a booming American market."

Richard Grant made much the same point in the Financial Mail: "It is not exporting that makes businessmen happy, but rather selling to a wider market. How much business sells—and where—will be determined in the marketplace." And the marketplace, we know—the "invisible hand" exposed by Adam Smith—is a remarkable instrument for creating wealth.

Let's remember that the next time politicians start calling for a "national industrial policy" (that is, more central planning), or propose subsidies, quotas, and tariffs to "protect" American industries (that is, to keep obsolescent factories going despite their uselessness) or simply bash Japanese or Mexican workers to please their more bigoted constituents. The "trade deficit" is nonsense. All that matters is expanding wealth and wider opportunities for buying and selling. That's why Governor Wilder deserves our applause for traveling to Africa, Asia, and Europe to open up more markets for Virginia.

While the specific numbers for the first decade of the 21st century may be different from the last two decades of the 20th century, the principles remain the same. A trade deficit does not portend bad economic news; in fact, the opposite is often the case, since it means that Americans have money to spend on goods and services from whatever source they choose, whether here or abroad.