Common Myths and Facts about Trade


There are a lot of confusions on both sides of the trade debate. A short CEI WebMemo, published today, seeks to clear up three of them. Here’s the gist:

Trade barriers cause short-term job losses but have little long-term employment impact. Higher trade barriers do not improve other countries’ behavior. Finally, lowering trade barriers benefits a country’s economy, regardless of what other countries do.

Free traders have the better arguments in this policy debate, and it is not a close contest. But on employment, some free trade advocates overstate or misstate trade’s benefits. Some foreign policy analysts with little economics background believe a tough stance on trade will improve other countries’ bad behavior. We are finding out, especially with China, that this is not at all the case. Reform is possible, but tariffs actively harm such efforts. Finally, instead of negotiating for trade concessions, we might as well stop harming our own economy with trade barriers, even if other countries continue to harm their own. Trade is win-win cooperation; viewing it as adversarial is a lose-lose mistake.

Read the whole WebMemo here; it’s a quick two-page read. For a more detailed analysis of trade policy, see Iain Murray’s and my “Traders of the Lost Ark” paper.