NJ Business Matters: The Blog of the CIANJ

The Global Economy: Love It or It'll Leave You

Robert Samuelson gets it right again in today's edition of the Washington Post where his column defends free trade and encourages its promotion. Despite being whipped by protectionists as a device to benefit the wealthy at the expense of everyone else, trade is a two-way street.

While American consumers have absolutely benefited the rest of the world, the rest of the world has also helped the US create jobs as overseas markets become available. In fact global economic growth is now out-pacing America's, meaning that the rest of the world is helping the US get through a housing slump. The International Monetary Fund expects global economic growth to more than double the US in 2008.

But if we embrace a protectionist stance, such as what Congress has done by thus far refusing to approve free trace pacts with Peru, Panama, Columbia and South Korea?

All the ritualistic denunciations of globalization are not harmless. Psychology matters. If global investors fear that the United States might make its economy less open to foreign trade and investment, the result might be the very dollar panic that everyone fears. The dollar's status as the world's central international currency depends on its usefulness in buying and selling. The more we restrict, the less useful it becomes. Globalization's casual bashers should remember that. They think they're playing only to a domestic audience, but the world is listening, and it may not like what it hears.

Same Old Protectionism

The lead editorial in today's Washington Post blasts House leadership for their refusal to enhance American prosperity through free trade agreements with Peru and South Korea. The South Korea deal would have meant American automakers could see their cars sold without the current 8% tariff and with 50% less in sales taxes. As the Post adequately closes,

It would be nice if South Korea and other trading partners accepted every item on every U.S. industry's wish list. But that is not the nature of trade negotiations. In the real world, officials must weigh the costs and benefits to the country as a whole -- not to mention the legitimate interests of the other side. One union and the two smaller U.S. automakers should not be allowed to sink a deal that would improve relations with a strategic ally in Northeast Asia and deliver real gains to U.S. agriculture and industry -- not to mention American consumers. The Democrats' partisan embrace of rationalizations served up by labor and (part of) the auto lobby is not "a new day in trade policy." It's protectionism as usual.