Global Trade Means More Prosperity

June 8, 2024 by Dan Mitchell @ International Liberty

Editor's Note:  I love much of what Dan produces when it comes to taxes, regulations, free speech, education, and a host of conservative issues.  In this article there's much here that's true, but there's much here I disagree with, but I'm running it in conjunction with my article,  Libertarians and Groucho Marx.  Libertarians live in a dream world where free trade is ....welllll.... free.  It isn't!  Here's my analysis of Libertarianism as a whole.  After reading this article and my analysis ask yourself:  Do you really believe Dan's going to vote for the Libertarian candidate? 

In 2019, the Center for Freedom and Prosperity released this video documenting the benefits of free trade.

The case for free trade between nations is the same as the case for free trade between states. Or between cities. Or between households.

Economists from the right and left agree that we all become richer when there’s more competition and more specialization.

Sadly, this common-sense understanding of trade is not very popular in Washington. Both Biden and Trump are protectionists, either because they don’t understand economics or because they want to get votes and money from special interests.

To understand the cost of Biden-Trump protectionism, let’s look at a recent study by the Peterson Institute for International Economics.

The authors, Gary Clyde Hufbauer and Megan Hogan, calculated what global trade has meant for American prosperity. Here are just a few of the highlights.

This Policy Brief updates previous estimates of the payoff from globalization to the American economy… The bottom line, argued here, is that post-World War II engagement with the world economy by the United States generated cumulative gains over several decades that, in the year 2022, lifted annual US GDP by 10 percent in that year, about $2.6 trillion… The $2.6 trillion in gains in 2022 work out, on average, to about $7,800 per person and $19,500 per household.18 Average gains in 2022 would have been considerably larger but for political headwinds that have slowed trade expansion.

For wonky readers, here’s Table 1 from the report.

As you can see, every bit of economic analysis concludes that free trade leads to a bigger economic pie, while protectionism produces the opposite result.

Sadly, there are big headwinds against pro-growth global trade today.

It’s not just Biden and Trump. The European Union wants to use global warming as an excuse to impose huge trade taxes.

Backsliding on trade is bad news for rich people and rich countries. Even worse, it’s bad news for poor people and poor countries. Simply stated, copying Herbert Hoover (or copying North Korea!) is not a good idea.

P.S. Makes me miss Reagan even more than usual.

P.P.S. I sometimes disagree with the Peterson Institute.