Mad About Trade

I just finished reading Daniel Griswold’s new book, Mad About Trade: Why Main Street America Should Embrace Globalization. For those of us who find reasons to be angry about U.S. trade policy, it’s refreshing to have someone declare he is over-the-top in favor of trade.

President Barack Obama and Mexico President Felipe Calderón’s joint announcement of progress on the issue of cross-border long-haul truck access signaled a possible end to one of the most bitterly debated provisions of the North American Free Trade Agreement (NAFTA). But the matter is not resolved, and there could still be some hurdles to jump before trucks move freely across the border.

The language of the White House announcement offers a clue that the debate may not be over: “This path will allow for the establishment of a reciprocal, phased-in program built on the highest safety standards that will authorize both Mexican and U.S. long-haul carriers to engage in cross-border operations under NAFTA.” So, we’re only on a path to establishment of a program. We aren’t there yet.

Further proof comes from the fact that Mexico is holding on to the retaliatory tariffs it put in place when the issue escalated a few years ago. “Once a final agreement is reached, Mexico will suspend its retaliatory tariffs in stages,” according to the White House. Clearly, Mexico doesn’t trust the United States to put an agreement in place, then stick to it. History supports that view. An even-more-partisan Congress could create obstacles to cross-border flows.

Truck volumes moving across the border have been improving, according to the Bureau of Transportation Statistics. January 2011 saw a 20.5-percent increase in imports hauled by truck, and a 23.4-percent increase in exports, when compared with January 2010. Total trade for the month amounted to $27.5 billion. At nearly $800 billion in 2010, U.S.-Mexico bilateral surface trade was up 24.3 percent and shows early signs of continuing to rise in 2011.

That’s only one indicator. As Daniel Griswold, director of trade policy studies at the Cato Institute, points out, “We have never exported more than we do now.” Exports, as a share of the economy, have tripled since the 1960s. During that same time, the landscape of the global economy has changed dramatically, and 75 percent of purchasing power now falls outside the United States. That certainly makes the current focus on increasing U.S. exports welcome news. Improving relations with one of the United States’ largest trading partners is also a step in the right direction.

Griswold also defends imports as valuable, noting that most U.S. imports are not consumer goods but raw materials, intermediates, and components. Imports are at least as important as exports in bringing lower-cost, higher-quality products to lower earners, he says, adding “Protectionism is the enemy of the poor.”

A dynamic economy creates and destroys jobs every year, says Griswold, but only about three percent of that is due to trade. The fact is, we are making more and better products with fewer workers. “We need to design policies that help people address transitions,” he says, “but if you hold onto high trade barriers, you pay for it.”

One vital transition we need is a shift in attitude from being angry about trade to being excited about the value it creates. Enthusiastic supporters can help apply the appropriate pressures to encourage free trade, with the stipulation that it is also fair trade. Like the Mexico truck crossings, it’s a two-way flow.