Why Free Trade is Hard to Sell

In response to a student's observation that: "I would not be able to purchase nearly as many items without the existence of international trade policies, but I think many do not even realize how this difference in price for products happens".

This is an extremely important point, which that is hard to explain. There are real losers in free trade. After all, free markets are dynamic things, which constantly change. Some businesses are on the way up and others on the way down. It is critical that resources be constantly reallocated for the dying businesses to the rising businesses.

But, that means that there will always be people who are losing their jobs. When a factory or other enterprise shuts down as a part of this process, laid-off workers are likely to be on the news. If their job losses even remotely relate to international trade, you can count on the fact such a connection will be mentioned on the news.

On the other hand, people do not notice when they pay $20 for a shirt instead of $60. I went to a department store the other day and purchased some dress shirts. It hit me that I was paying about the same nominal price for dress shirts that I paid in 1978, before I went to Japan. Twenty dollars in 1978, when adjusted for inflation equals $60 today. (http://www.bls.gov/) However, as shirt manufacturing has shifted for one country to the next, in real terms I pay only one third the price I paid in 1978.

This means that I have more money to buy other things. I will spend this extra money on other things that will help create additional jobs. However, notice that all these benefits are very indirect and not as obvious to the public as the sad and crying workers on the news, who have just lost their jobs. However, even the plight of these workers is normally a temporary. Most of them quickly find other jobs. Often the jobs they find are made possible because of the extra money people have as a result of free trade.

Since Adam Smith published "The Wealth of Nations" in 1776, the argument for free trade has been strong. But, the visibility of losers and the invisibility of benefits continues to make trade a politically difficult sale.

		July 19, 2005 *Why Free Trade is Hard to Sell*
	In response to a student's observation that: "I would not be able to purchase nearly as many items without the existence of international trade policies, but I think many do not even realize how this difference in price for products happens". This is an extremely important point, which that is hard to explain. There are real losers in free trade. After all, free markets are dynamic things, which constantly change. Some businesses are on the way up and others on the way down. It is critical that resources be constantly reallocated for the dying businesses to the rising businesses. But, that means that there will always be people who are losing their jobs. When a factory or other enterprise shuts down as a part of this process, laid-off workers are likely to be on the news. If their job losses even remotely relate to international trade, you can count on the fact such a connection will be mentioned on the news. On the other hand, people do not notice when they pay $20 for a shirt instead of $60. I went to a department store the other day and purchased some dress shirts. It hit me that I was paying about the same nominal price for dress shirts that I paid in 1978, before I went to Japan. Twenty dollars in 1978, when adjusted for inflation equals $60 today. (http://www.bls.gov/) However, as shirt manufacturing has shifted for one country to the next, in real terms I pay only one third the price I paid in 1978. This means that I have more money to buy other things. I will spend this extra money on other things that will help create additional jobs. However, notice that all these benefits are very indirect and not as obvious to the public as the sad and crying workers on the news, who have just lost their jobs. However, even the plight of these workers is normally a temporary. Most of them quickly find other jobs. Often the jobs they find are made possible because of the extra money people have as a result of free trade. Since Adam Smith published "The Wealth of Nations" in 1776, the argument for free trade has been strong. But, the visibility of losers and the invisibility of benefits continues to make trade a politically difficult sale.