Friday, August 26, 2011

Free Trade Is Foreign Aid

Many politicians and members of the public say they oppose foreign aid. Yet many of the same people support free trade agreements, by far the largest source of American foreign aid. Free trade agreements have caused many of our companies to build factories overseas and hire foreign workers to whom they pay wages higher than those workers had been earning in their countries. Hence these new factories constitute massive foreign aid to those countries and those workers.

Low tariffs, the result of free trade agreements, didn't cause the current recession/depression, but low tariffs along with technology are keeping unemployment high. Because of technology, companies can hire fewer workers in this country to do the same amount of work that more workers previously did. Ironically free trade will ultimately be the solution for a smoother economy and fuller employment. Technology will help. But not for a while.

As more and more goods are made overseas and standards of living rise overseas, foreign workers earn higher compensation. This has been true in Japan, Korea, Indonesia, and now is beginning to be true in China. Eventually rising labor costs overseas added to the cost of shipping goods back to the U.S. will make American labor costs competitive. Companies making products overseas will eventually find it profitable to build or rehab factories in the U.S. and hire U.S. employees. This will take a while.

In the meantime, people here who have jobs have the benefit not only of employment but also cheaper products made overseas. Even though unemployment is high, most of us are doing ok. Because we are doing ok, I believe we have a moral obligation to help workers who are out of work. These workers took jobs that our system made available, devoted their lives to their jobs and employers, and now are down and out because the politicians changed the trade rules.

The same politicians should quit complaining about foreign aid that they have made possible and continue to support.

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