RALEIGH – There’s a lot of misunderstanding about the economics of free trade and the implications of NAFTA and other trade agreements for North Carolina. Various special-interest groups, ranging from labor unions to big businesses, have always feared competition and have cooked up spurious reasons to erect barriers against imports. Now, with North Carolina’s economy faltering, these groups are opportunistically blaming free trade – ignoring the boost that NAFTA gave the state’s economy through increased exports during most of the 1990s.
An informative web site from the U.S. Department of Agriculture explains the impact of these increased exports just on North Carolina’s farm sector (see here). We are talking hundreds of millions of dollars a year in increased sales of North Carolina farm products to overseas markets in Latin America, Europe, and Asia.
One of the frustrations of economic policy debates is how difficult it is to get people to understand what might not have happened in the absence of economic freedom. For example, we don’t know how many jobs would have been lost in export-oriented businesses in North Carolina had the free-trade agreements of the 1990s not been negotiated and enacted. All we have are estimates, and these are actually a bit flimsy (see here), of the impact of increased competition on existing industries. To run a cost-benefit analysis, you must have data for both sides of the equation.
Economists who have gathered such information and crunched the numbers have concluded, virtually to a man (or woman), that free trade generates more jobs and economic benefits for participating countries than it costs. This is not to deny that dislocations result, as industries subjected to competitive pressure are forced to adjust, to find a new and unique niche, or to downsize.
One final point about free trade. According to a few of my correspondents, I am no longer a conservative because of my support of economic freedom here. Sorry, but you have it precisely backwards. Anyone who calls himself a conservative but who is willing to brandish firearms to prevent me from buying Mexican-made socks or Malaysian-made Hot Wheels cars for my son is profoundly confused about the nature and proper scope of government.
As one of my mentors, the prominent conservative journalist M. Stanton Evans, once put it, the way to understand the very-diverse movement we call “conservative” is that “its theme is freedom.” Protective tariffs are the antithesis of freedom.