"Change you'll have to pay for"


[Jon Henke]

Free trade is a difficult concept for politicians to advocate, in large part because of the concentrated costs/dispersed benefits problem. While comparative advantage and competition can be exlained, there's a long-standing maxim in politics: if you're explaining, you're losing. But today's Wall Street Journal - in a story with the great title, "Change You'll Have to Pay For" - makes a point that should be emphasized much more often in the trade debate.

Here's one "change" presidential candidate Barack Obama apparently believes in: higher prices. Witness his letter last week urging President George W. Bush not to submit the U.S.-South Korea free-trade agreement to Congress for ratification. Mr. Obama's objection, as stated in his letter, is that the deal "would give Korean exports essentially unfettered access to the U.S. market and would eliminate our best opportunity for obtaining genuinely reciprocal market access in one of the world's largest economies." In other words, ordinary American consumers would get too good a deal.

For an idea of how good, look at automobiles, about which Mr. Obama professes particular concern. The free-trade agreement would eliminate America's 2.5% tariff on most Korean car imports. Even better, it would phase out the 25% tariff on pick-ups and light trucks. Overall, the Korean trade deal would boost the U.S. economy by $10 billion to $12 billion. Mr. Obama thinks this benefit to U.S. consumers isn't worth the risk that South Korea might not live up to its promise to eliminate its own 8% tariff on U.S. autos and cut its bewildering array of nontariff barriers, such as arcane safety standards. This despite the fact that the deal includes enforcement provisions if Korea backtracks.

Obama is offering a subsidy to Unions, paid for by higher consumer prices. Needless to say, Obama is supported by quite a few powerful Unions...whose election-year financial and mobilization support is essentially crucial to Democratic Party success. Incidentally, as the WSJ points out, Obama "inserted a statement opposing the Korean trade deal into the Congressional record only days before securing the endorsement of the powerful Teamsters union."

But only a small percentage of the US labor force is unionized - meanwhile, 100% of the US labor force are also consumers. That Obama endorsement was awfully expensive for you and me.

That's a point we should make more often. As McQ once wrote, Unions are opposed to free trade because their "priority isn't the consumer." Their priority is maintaining their own advantage, and "if the consumers suffer because of that, well, you know - tough."

It's difficult for politicians to make that case because it requires a bit of explanation, but pro-trade advocates and politicians should do more to emphasize these two points:

(1) Opposition to free trade is opposition to consumers.

(2) Opposition to free trade is opposition to freedom.

(3) Free trade is the world's greatest anti-poverty program - both abroad (where it lifts people out of desperate, wretched poverty) and at home (where benefits mostly accrue to average Americans) - and some of its greatest foes are the relatively wealthy benefactors of the Democratic Party....which purports to be deeply concerned with poverty and consumers. Until it jeopardizes their own wealthy contributors.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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