The theory of free trade is based on the theory of comparative advantage. Comparative advantage means that countries will produce that which they are best at producing, and they will import goods that other countries are comparatively better at producing.
This theory was established long before the movement of information, capital and people around the world became as easy and inexpensive as it is today. Proponents that tout comparative advantage as a reason for free trade cite the fact that the United States has vast capital resources, and should be able to produce capital-intensive products from a relatively advantageous position. But when borders are open to not just goods, but money and knowledge as well, there is little incentive to produce here when that money and knowledge can be sent overseas to locations where labor is cheaper.
When the majority of companies take this course of action, it can have devastating effects on our economy. For example, NAFTA sent nearly 700,000 American jobs to Mexico, and our membership in the World Trade Organization (WTO) has only added more job losses. The longer we participate in free trade, the more we lose the things we are best at. America was once the manufacturing capital of the world, but the manufacturing jobs have been leaving us in droves, and our other jobs aren’t far behind.
As other countries build up their manufacturing bases at the expense of our own, our research and development are beginning to follow. Many companies now outsource not just the manual portion of their production to low wage countries, but they outsource the engineering of products to countries where engineers will work for $10 per hour instead of $50 per hour. As these high paying jobs leave, we also lose the ability to support the service sector that our leaders say will substitute for the manufacturing jobs that have left.
If we continue to operate under the assumption that free trade will allow us to improve on the areas we are good at, while we let other jobs head overseas, soon we will have no jobs at all. We need to rethink what our national priorities are and focus on keeping the jobs that build strong communities here.