Free trade matters – for every American

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EDITOR’S NOTE: The following opinion piece was written by Vance Ginn, director of the Center for Economic Prosperity and a senior economist at the Texas Public Policy Foundation

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These are tough times for newspapers, particularly local papers that are still an integral part of their communities. They serve many vital functions, because no 24-hour news channel and no national political website will likely keep track of the varsity boys’ basketball scores or the proposed teachers’ raise that the school board is discussing.

What’s more, most local papers continue to shine as beacons of civility and reliability in an increasingly politicized media environment. And that’s why we should wish them well instead of forcing additional costs on them that their budgets can’t bear.

Yet that’s what a new trade dispute at the Canadian border is doing. New tariffs on newsprint – which are typically a newspaper’s second biggest expense, after personnel – have caused the commodity to spike in price by about 30 percent, according to CNN.

That has already meant layoffs, and will mean many more.

But isn’t the whole point of tariffs to protect American jobs? Well, yes – but there are always unintended consequences.

The newsprint tariffs were because one small company in the state of Washington – Northern Pacific Paper, or NORPAC – with about 300 workers complained that Canada is dumping “uncoated ground wood paper,” or newsprint, on American markets.

The truth is that low demand for newsprint in the age of the internet has resulted in many American manufacturers closing down or changing their operations (demand for cardboard boxes for Amazon and other online retailers is booming, for example).

And local newspapers are caught in the middle.

The Beaumont Enterprise expressed it well in a recent editorial: “There simply aren’t enough mills on this side of the border to meet the demand for newsprint in the U.S., and no company is going to invest tens of millions of dollars for new mills in a shaky market. Even if they did, it would take years for them to ramp up production… We’re not asking for a handout or a free ride, just the opportunity to compete as best we can. If these tariffs are removed, we’ll have a better chance.”

Which brings us to the real point here – free trade matters. As the Texas Public Policy Foundation’s new paper explains, people prosper from free trade, and the North American Free Trade Agreement, which is being renegotiated now.

NAFTA has always been controversial, but its positive effects have become evident in the decades since it was passed. The U.S. economy expanded and millions of jobs were created after NAFTA.

The U.S. Chamber of Commerce estimates trade among people in the agreement – the U.S., Mexico and Canada – supports 14 million U.S. jobs with 5 million of those jobs related to the boost in trade since NAFTA.

What’s often missing from the discussions about NAFTA is the fact that countries don’t trade, people do. In this case, Americans, Canadians, and Mexicans trade with each other.

Americans trade with the rest of the world for the same reasons that they trade with each other. They trade because it allows them to satisfy their desires while focusing their efforts on what they do best, which in turn raises productivity, incomes, and standards of living.

On the other hand, trade barriers mean higher prices for consumers, fewer jobs for workers, and less prosperity for all.

Opponents of free trade – who often call for subjectively determined “fair trade” – cite trade deficits as a reason to oppose NAFTA. But that’s a misunderstanding of a basic economic principle: comparative advantage.

Take the auto industry.

Yes, the U.S. saw economic declines in the auto manufacturing sector (declines that would largely have occurred anyway, due to automation and costly domestic policy), as some production moved to Mexico because of lower costs for capital and labor.

But at the same time, the U.S. energy sector boomed, due to American innovation and expertise. The result is that Mexico sells us car parts and some cars – but we sell Mexico (and the world) gasoline and other petroleum products.

That is comparative advantage -- both industries produce more of their respective products that they’re relatively more productive in and make both products more accessible to domestic and international populations, growing the economic pie and creating more net jobs over time.

Newspapers have it tough already. If this trade dispute over newsprint continues, the losers will be the local communities that see their newspapers decline in size and substance, or fold altogether.

We’ll still have our 24-hour cable news channels, but we probably won’t have the box scores from last night’s high school playoff game – or the kind of governmental accountability that only comes from having a reporter at a city council meeting.

That would be a real loss.

In the same way, if NAFTA isn’t renegotiated with an eye for fewer – not more – barriers to trade, the losers will be Americans. That, too, would be a real loss.

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