The following is the third in a series of lectures given by Professor Lucius Flatley in his popular course, Coffee Shop Economics (CSE 101):

Good morning, scholars. Today’s topic concerns a subject near and dear to both labor and capital – no less than to the politicians blown hither and thither by public opinion. It is Free Trade.

Unhampered world trade can open the door for massive improvement of the human condition. It can offer the best chance in history for long-term world peace. It can lower prices for the American consumers. Rising economies in developing countries, which are made possible by Free Trade, are the best antidote to environmental and human exploitation. Life is better in South Korea than in North Korea.

If there ever has been a lesson taught by history, it is that protectionism damages a national economy. The harm caused by the Hawley-Smoot Act – our wrong-headed dash into isolation behind high tariff walls in the 1920s – should be taught in grade school. During this period, the manufacturing interests of our country were wallowing in profits, while agriculture, through tariffs on the goods they needed to buy, was being driven into bankruptcy on a scale that eventually produced the Great Depression. Unregulated financial shenanigans triggered the Crash of ’29, but it was the tariff and its death hold on international trade (together with a fixation on balanced budgets) that magnified and prolonged the years of bread lines that followed.

In fairness to the Congress of the time, the idea of protecting domestic profits with tariffs had been perceived wisdom from John Adams to Herbert Hoover – living proof of how, in spite of clear and compelling evidence to the contrary, a wrong idea can remain fixed. Like “trickle-down” economics or the Laffer curve, general tariffs are not only wrong in theory, but damaging in action.

A tariff is a tax to protect a specific industry. It takes from the whole and gives to a part. It means that every American mother must pay an extra $2 for her children’s sweatshirts to ensure that the textile factories in South Carolina make a profit. It forces shoppers to pay $2 a pound for Florida tomatoes when Mexican tomatoes are only a dollar. Given the choice on the sales counter, there is no doubt as to which would be chosen. But, at the same time, the shoppers (and we) should not ignore American textile workers and farmers who lose their livelihoods. To base a tariff decision solely on buyer’s benefits is wrong.

The reality is that free trade, at least in the initial stages, never comes about without pain. People are put out of work. Cities can be damaged and states depressed when industries are lost to foreign competition. Therefore, when free trade treaties are planned, this pain must be considered. Like surgery that removes a damaged leg in order that the body may be healthier, the operation should not be performed without anesthesia. A principle of American government is that basic rights of the individual should not be harmed by a simple majority. Any free trade agreement must first consider the minority of people and industries who will be injured by any trade agreement.

NAFTA and similar agreements should include funding to ease domestic pain and disruption. Government should join capital and labor to retrain workers, improve and support new skills, to create new markets for those displaced. Assistance in education, retraining, relocation, investment and tax credits should be part of any free trade agreement. Compensation – even financial assistance – for the wounded workers and industries is justified during a transition period.

Then we should look abroad. It is our responsibility to ensure that human rights and environmental concerns are observed in the countries with whom we sign agreements. Procedures for foreign inspection and enforcement should be built into every treaty.

Finally, we should turn our attention to new skills, new sciences, new processes, new ideas. We can continue to lead the world – in fact, are more apt to do so – if we devote our imagination, inventiveness, energy and capital to creating new wealth, new markets.

Please, let’s do what we do best.

Class dismissed.

Rodney Quinn, who lives in Gorham, is a former Maine secretary of state. He can be reached at [email protected]


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