Thursday, April 24, 2008

Free Trade

I do not like the protectionism rhetoric spewed out by Mr. Obama and Mrs. Clinton. It is an archaic way of thinking, and would be destructive to many "emerging" world countries and would be further destructive to the image of the United States.

It is free trade that have allowed so many people to gain middle class status in South America, Eastern Europe, and "Chindia" (China and India). The more stable countries around the world become, the more stable the world is geopolitically, and its also the humane thing to do. People in these countries depend on exporting their goods to the other countries so that they can make a living. Shutting down free trade would be akin to intentionally starving poor people around the world.

Check out this article from Nick Kristoff, a much more intelligent and effective writer than me, and his thoughts on the topic, with a poignant story on Columbia workers.

Remember what a decrease in free trade will do to you individually as well. Prices for goods and products will only go UP, because of a lack of competition from here and abroad.

Also, in a related sense, I am tired about hearing that we (the U.S.) is losing too many jobs to outsourcing. We actually INSOURCE more jobs than we outsource. The National Center for Policy Analysis estimates that insourcing led to the creation of 6.4 million new jobs within the United States over the past 5 years, compared to only 3.3 million outsourced jobs. Insourced jobs pay 16.5 percent more than the average domestic job, and one-third of them are in the manufacturing sector. These include plants that assemble German and Japanese automobiles and produce pharmaceuticals.

New York and California are two of the states that benefit most from insourcing:

Who doesn't like shopping at a place like Ikea (and eating their Swedish meatballs)? Well, it wouldn't be possible if it wasn't for insourcing.

Economist Martin N. Baily, chairman of the Council of Economic Advisers under President Clinton, looked at who benefits from outsourcing. He found that for every $1 spent by a U.S. corporation on outsourcing to India, only 33 cents stayed in India. The other 67 cents came back to the United States in the form of cost savings, new exports and repatriated profits. However, productivity gains add another 45 cents to 47 cents of value to the U.S. economy. Thus, on balance, the U.S. economy gains $1.12 to $1.14 for every $1 invested in outsourcing.

I think I do think we should fix is the loopholes for companies going offshore. Make it a level playing field. Taxes must be paid by U.S. companies even if they move most operations "offshore" to escape Uncle Sam. That simply is not fair.

In conclusion, don't believe the hype. We don't need to shut down free trade. No protectionist strategies. Free and fair trade for the world, for peace and prosperity.

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