Tuesday, November 25, 2008

Developing Countries Need Free Trade and So Do We

I am tired of the hypocrisy. I'm tired of the pleas by bleeding heart liberals about the need to send aid to developing countries on the one hand, but have vehement opposition to providing free trade, which is by far the most effective means of creating worldwide prosperity. The great thing about free trade, is that it also benefits our consumers too.

International aid often cripples developing countries by providing cheap agriculture products that makes it impossible for poorer countries to develop agriculture of their own. Often such aid never gets past the hands of corrupt governments who oversee the distribution of goods. The bottom line, traditional aid in its best implementation and intention always fosters long term dependence.

Free trade, on the other hand, fosters interdependence. The United States, which is the most prosperous country on the face of the earth, desires affordable goods. We want every economic group to be able to afford items that in the past was only afforded the most wealthy. This is achieved through "cheap labor." Meanwhile, poor countries want to improve their economic situation and see the jobs Americans won't do as a means towards that end.

Fundamentally, everything comes back to supply and demand. Developing countries have the supply of people, we have a demand for goods. Our disdain for "exporting jobs" to these developing companies goes back decades. I recall the song by Paul Revere and the Raiders, Cherokee Nation, which states:

"They took away our native tongue
And taught their English to our young
And all the beads we made by hand
Are nowadays made in Japan"

Cheap goods made in Japan? Not anymore and it is no longer a developing country, but one of the richest in the world that has to export jobs to Malaysia in order to satisfy Japan's consumer demand. We pulled Japan out of Post World War II poverty and devastation voluntarily while enjoying an improvement in our own quality of life. It is difficult to find the down side.

The jobs we are discussing as "exported" through cheap labor are largely mythical. I guess if we lived in a pure free market and applied the "quick as hell" employment theory (if we got rid of every government program, people would get a job....I think you get it), these jobs would be filled by fellow Americans. That is certainly a noble goal and one I could support, but don't see happening. So in the interim, Americans are able to enjoy a higher quality of life at a lower cost and foreign countries are becoming more prosperous, advanced, and free without a single taxpayer dollar. In essence, we can have our cake and eat it too.

The myth of trade deficits being damaging continues to persist in the context of this discussion. We are told that the silver lining to our declining economy is the fact the trade deficit is shrinking. That is because the US can't afford to buy as many goods as it did in the past. Where is the upside to that? Free trade benefits everyone by making rich countries richer and poor countries richer too.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

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