Thursday, November 09, 2006

If anyone should support free trade it’s Charley Rangel:

Out of all the post election articles I have read, the best one so far is in today’s FT. The article titled, “Free trade is the real election casualty”, points out how most of the Democrats that gained seats at the expense of Republicans did so running on a protectionist campaign or what the author calls “economic nationalism".

It is no longer a secret that in the long run free trade creates more jobs then it costs. Mercantilism as an economic theory has long been discarded and thrown away as a viable economic plan but that doesn’t mean governments still don’t attempt to use its populist attraction as a means to gain support. The results for the governments that use it though are always the same, low growth and high unemployment. Simply comparing the high unemployment of your average protectionist European nation of 8-10% to America’s free trade model of 4.4% shows free trade creates more jobs. Further when protectionist policies like Schumer’s proposed 27.5% tariff on goods from China are passed, the result is higher prices, which then leads to inflation. Inflation then brings in the Federal Reserve who is forced to raise interest rates, starting the cycle of economic decline and higher unemployment.

One thing I always admired about Bill Clinton was his decision, despite his party’s opposition, to support NAFTA and free trade as a positive economic theory. Clinton understood free trade makes economies grow and creates more jobs. As stated in the FT article, Clinton’s “argument was always that government should address the negative consequences of open trade through worker retraining programs and by ensuring benefits not tied to employers, like healthcare and portable pensions”.

This finally brings me to Rangel and his recent comments that once in charge he will make trade a top issue. Considering Rangel represents the inner city of New York, he should be falling over people in Congress to pass free trade not prevent it. It’s not like any protectionist policy is going to lead to the opening of a t-shirt or sock factory in Harlem. What it will do though is raise the price of those items that Rangel’s constituents purchase regularly. Comes the new session Rangel should follow Bill Clinton and keep prices down for his district by beating back the protectionist wave that is about to occur

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