Lou Dobbs will be on my FBN show (8pm tonight) to debate free trade. Dobbs argues that “imbalanced trade” hurts America. When we taped the show, he got into a heated debate with one of my other guests: Economist Don Boudreaux.
Boudreaux sent Dobbs a letter after the interview:
During our recent debate on John Stossel’s show… you insisted that free trade exists only – and trade is mutually beneficial only – when both parties to a trade are equally willing to purchase each other’s outputs.
A few years ago I bought your book Exporting America. Have you bought my book, Globalization? If not (and the evidence is that you, indeed, haven’t bought my book), was I made worse off by my purchase? Were you the only party to gain from that trade? Should I be concerned about the trade deficit that I now have with you? Were you practicing “unfair” trade? Was I “exporting” a part of myself – a part never to be regained unless and until you buy my book?
Judging from your analysis of Americans’ trade with the Chinese – and believing you to be a man whose intellect despises inconsistencies – I’m sure that you’ll answer ‘yes’ to each of the above questions.
Boudreaux’s response illustrates how silly it is to obsess about the trade deficit. Imagine if Mississippi worried about its trade deficit with Michigan (think about all those cars Mississippi imports.) America ran a trade surplus during the Depression. Was that good?
And consider some other worries people have about the trade deficit. I hear that foreigners could “buy out America”. After all, the city of Abu Dhabi recently bought an American landmark -- the Chrysler building. But why worry? Do we fear that they will repossess it and take it back to the Middle East?
I also hear that we need American-made steel for national defense. But the most important thing for security is economic prosperity, which comes from trade.
Protectionists point out that, since NAFTA was passed, America lost more than 5 million manufacturing jobs. True. But during the same period, we added 19 million jobs in other sectors. Mostly better jobs. Some mock “service” jobs, but most are better jobs. Parents today want their kids to be doctors, software developers, etc., rather than factory workers.
So I say, lift all the trade barriers. We should do it even if other countries don’t. As Boudreaux notes: because another country “throws rocks in its harbor” doesn’t mean we should.