31 January 2009

Protectionism anyone?

On Monday, I have a debate in my Political Economy class addressing the question, "Is regional integration in the best interests of its adherents?" To no surprise, I'm on the affirmative side essentially arguing whether or not free trade is a good thing. The answer seems so obvious to me that admittedly, I'm having a very tough time coming up with counter-arguments to free trade. The benefits seem obvious: free trade utilizes Ricardo's wonderful theory of comparative advantage, thus maximizing a given state's total wealth. Sure there are winners and losers, as Stolper-Samuelson and Heckscher-Olin suggest, but overall the effects net positive, and in many cases, way positive. Given proper compensation (yes, I said it), Pareto optimal outcomes are possible. It doesn't take a Utilitarian to see the benefits of free trade. Clearly, certain domestic groups have reasons to oppose free trade. But protectionism makes actual sense in few hypothetical situations and even fewer real life situations. No rational economic thinker should oppose, at the very least, the concept of free trade.

But as recent evidence suggests, this is not the case. As The Ennobler has mentioned before, our president does not have a pro-trade voting record and, despite claims that he supports free trade, has given little reason to suggest otherwise. On the other hand, his economic team is comprised of some of the best in the business, almost all of whom do support free trade. Unfortunately, many of his fellow politicians in the Legislative Branch hold some particularly protectionist beliefs. This is worrisome for many reasons, but especially the fact that protectionism typically increases during economic downturns. Following recent provisions, Bill Lane said:

Any student of history will tell you that one of the most significant mistakes of the 1930s is when the U.S. embraced protectionism. It had a cascading effect that ground world trade almost to a halt, and turned a one-year recession into the Great Depression.
Hopefully, the leaders of our country and, in particular, our President are students of history.

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