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Protectionism is Destruction-ism March 16, 2016 11:59 AM | Tagged as Reagan

WSJ 16 March 2016 “Making the Case for Trade” by Morton Kondracke and Matthew Slaughter

The current leading candidates for president are all for protectionism, at least as their rhetoric indicates. Cruz, Trump, Sanders, and Clinton are pontificating about the way trade hurts America. They are wrong. Kondracke and Slaughter, no slouches they, made that clear in the referenced op-ed. Kondracke is the retired executive editor of Roll Call, the capitol-hill newspaper. Slaughter is Dean of the Tuck Business School at Dartmouth.

Like Kondracke and Slaughter, The Biz Bucks Guy is awaiting an adult in the room to speak up, or better said, a leader. That would be someone who speaks truth to populist pandering.

Mr. Trump has a clothing line. His name-brand goods are largely produced in Mexico and China. He saves labor costs because Mexico and China have the comparative advantage over the US in textiles. What is forgotten about this arrangement is the American consumer benefits from lower prices of Trump shirts, et al.  With lower costs to American consumers, Americans can afford other products that are made in the USA. The net is an advantage to US citizens.

Yes, some Americans lose their jobs to trade. We gained 5.4 million jobs in December. What is not known is we also lost 5.1 jobs, for a net increase of 300,000 jobs in one month. The churning of jobs happens all the time. No government program will fix that. It is too bad that people lose their jobs, some to trade, some to products not making it in the marketplace. It is the nature of a free society.

But to erect trade barriers – to protect people from losing jobs -- will slow our economy. Such protectionism was to blame for the deepening and the lengthening of the Great Depression of the 1930’s. The Smoot-Hawley Act protected our jobs and initiated a decade of problems. Other countries were forced to do the same, and trade slowed to a trickle.

Here’s a parlor question: In what decade did we have a trade surplus? The answer is the 1930’s. How did that trade surplus work out for America?  Of course, not well.

As quoted in this op-ed, President Ronald Reagan made it clear, Protectionism is Destruction-ism. Many American jobs are destroyed by this fallacious populist goal of bringing our jobs back to America. The only government response to job loss might be an initiative to provide training programs to adjust American skills to the marketplace. 


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