The Benefits of Free Trade: How Globalization Has Enhanced American Prosperity

The Misplaced Nostalgia for a Less Globalized Past

Many critics of free trade argue that American workers and families were better off in the less globalized past, particularly in the 1970s or earlier decades. However, this nostalgia for a pre-globalization era is largely misplaced. While there may be some intangible measures of wellbeing that are debatable, by most concrete economic and quality of life metrics, Americans are significantly better off today than they were 50 years ago.

Some key ways Americans have benefited from globalization over the past several decades include:

• A wider choice of products at lower prices for consumers
• More job opportunities in technology and services sectors that play to America's strengths
• Greater freedom to engage in international commerce and investment
• Millions of well-paying jobs at foreign-owned companies in the U.S.
• Rising real wages and total compensation when measured properly
• Declining poverty rates, especially when accounting for non-cash benefits
• Lower prices for necessities like food, clothing, and energy as a share of income
• Dramatic reductions in the time needed to work to afford common household goods

The Decline in Manufacturing Jobs

One common criticism of globalization is that it has led to a decline in U.S. manufacturing jobs. However, the data shows that the main driver of manufacturing job losses has actually been rising productivity, not imports. The share of manufacturing jobs in the U.S. workforce has been steadily declining since the 1950s, long before the era of globalization. This trend has occurred in virtually all developed countries.

Meanwhile, U.S. manufacturing output continues to grow and is now around $2.6 trillion annually. We are simply producing more with fewer workers due to automation and productivity gains. The manufacturing jobs that remain tend to be higher-skilled and better compensated than in the past.

Gains in Workplace Safety

Another important benefit of the shift away from traditional manufacturing has been dramatic improvements in workplace safety. Government data shows the rates of workplace deaths and injuries have dropped by 30-50% over the past 50 years. Office jobs tend to be inherently safer than factory work.

Declining Poverty and Discrimination

Contrary to claims that globalization has exacerbated inequality, poverty rates have actually fallen for historically disadvantaged groups when measured properly. Accounting for non-cash benefits and using more accurate inflation measures shows the real poverty rate has declined significantly. Lower-income Americans have especially benefited from cheaper imported necessities.

How Trade Agreements Have Enhanced American Prosperity

While unilateral trade liberalization is ideal from an economic perspective, trade agreements have played an important role in America's postwar economic growth. Some key benefits of U.S. trade agreements include:

• Locking in trade liberalization gains and preventing backsliding during economic downturns
• Providing export opportunities for U.S. companies in growing foreign markets
• Attracting foreign investment to the United States
• Fostering closer ties with allies and trading partners
• Resolving trade disputes through formal mechanisms rather than destructive trade wars

Currently, the U.S. has free trade agreements in force with 20 countries. These agreements cover 47% of U.S. exports and 38% of imports. However, the U.S. has not signed a new trade agreement in over 10 years, while the rest of the world has continued to forge new trade pacts.

The Effects of Trade Wars

Engaging in trade wars and imposing tariffs tends to have negative effects on living standards:

• Higher consumer prices on imported goods
• Increased costs for U.S. manufacturers that rely on imported inputs
• Reduced competitiveness for U.S. exporters facing retaliatory tariffs
• Overall economic inefficiency and deadweight losses

Trade agreements help prevent these destructive trade wars by committing countries to maintain open trade policies.

Addressing Concerns About Trade

While the overall effects of trade are positive, it's true that some communities have been negatively impacted by changing trade patterns and technology. However, protectionist trade policies are not the answer to helping these areas. Instead, the focus should be on:

• Improving education and skills training to prepare workers for higher-tech jobs
• Targeted assistance for displaced workers and struggling communities
• Promoting geographic mobility so workers can move to areas with more opportunities

It's also worth noting that technology and automation have had a far greater impact on job displacement than trade. We should view trade similarly to how we view technological progress - as something that creates tremendous opportunities and benefits overall, even if there are some downsides that need to be addressed.

Public Opinion on Trade

Despite some of the heated political rhetoric around trade, polls consistently show that a majority of Americans view trade positively:

• Over 60% see foreign trade as an opportunity for economic growth rather than a threat
• Trade rarely ranks as a top issue for voters compared to topics like jobs and inflation
• Support for specific protectionist policies tends to drop when costs to consumers are highlighted

This suggests there is still an opportunity for policymakers to pursue trade liberalization, as long as they also address valid concerns about displaced workers and struggling communities.

Conclusion

While globalization and free trade have created some challenges, the data clearly shows that Americans overall are far better off economically than they were 50 years ago. Freer trade has delivered lower prices, more choices, better jobs, and higher living standards for the vast majority of Americans. Rather than pursuing protectionist policies that would turn back the clock, policymakers should focus on helping all Americans develop the skills to thrive in a globalized, high-tech economy. By embracing the opportunities of international trade while providing targeted assistance to those negatively impacted, we can continue to enhance prosperity and economic freedom for Americans in the decades to come.

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