Two leading presidential candidates, Bernie Sanders and Donald Trump are running against trade expansion because they say it costs American jobs. I pointed out in my last post, that there is a strong correlation between international trade and global GDP growth.
Today I will focus on the direct benefits to the American economy of expanded international trade. First of all, I refer to a recent article in the Wall Street Journal by Frederick Smith, the CEO of FedEx Corp. Says Mr. Smith:
- From less than $50 billion in total trade in 1966, the U.S. now imports and exports over $4 trillion annually in goods and services, out of a global trade market which exceeds $15 trillion annually.
- NAFTA has clearly been an economic success. U.S. trade with Mexico and Canada has risen to $1.2 trillion in 2014 from $737 billion twenty years ago.
- History shows that trade made easy, affordable and fast always begets more trade, more jobs and more prosperity.
The U.S. typically runs a trade deficit of about $500 billion per year. The New York Times journalist, Neil Irwin, explains what this means. Says Mr. Irwin:
- The dollar is a global reserve currency, meaning that it is used around the world in transactions which have nothing to do with the U.S.
- This creates upward pressure on the dollar for reasons unrelated to trade flows between the U.S. and its partners. That, in turn, makes the dollar stronger and American exporters less competitive.
- In other words, trade deficits with other countries serve as their reserve dollars.
- Maintaining this global reserve currency creates lots of advantages for the U.S., including lower interest rates and higher stock prices.
- The centrality of the dollar to global finance gives the U.S. power on the global stage which no other country can match.
There certainly are workers who lose their jobs because of trade competition. We can and should do more to help these workers get back on their feet. This will increase popular support for free trade and allow its growth to continue unimpeded.