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A nation must think before it acts.
FPRI takes no positions on the presidential candidates; naturally, our individual scholars do, and we anticipate those positions will vary.
During their presidential campaigns both Donald Trump and Hillary Clinton advocate limiting foreign trade in order to help American firms and workers. While “managing” trade to America’s benefit is popular among voters, restricting trade is not only bad economics but also degrades America’s political culture.
Clinton, in her rejection of the Trans-Pacific Partnership, and Trump, in his attacks on Mexico and China “stealing” U.S. jobs, make the same argument, namely that limiting imports helps U.S. businesses and preserves jobs in protected industries. Like many bad arguments in economics, these statements are not wrong as much as too limited. They focus on the immediate – visible – effects on the protected industries and disregard the eventual –invisible – adverse effects on the rest of the economy and political system.
For example, among the many industries that have sought limits on imports is the American steel industry. Tariffs, taxes on imported steel, or quotas, limits on the quantity of steel imports would reduce imports of foreign steel. U.S. firms that use steel such as those in the automobile and construction industries would have to “buy American” which would preserve U.S. steel jobs.
These immediate visible effects seem to be as far as Clinton and Trump consider the issue – limiting imports hurts foreigners and helps American workers. However, even if we assume that foreign countries will not retaliate by blocking our exports; there are further effects, invisible to Trump and Clinton, which will end up hurting American workers…
Continue reading “Clinton and Trump want to beggar thy neighbor…and you”