I have long been a believer in Free Trade. I understand the classic comparative advantage – and in fact I personally have benefited greatly from Free Trade. Essentially my job – technical project manager spanning out-sourced supply chains – wouldn’t exist without international free trade.
|Imports & Exports: simply explained|
And, undeniably, free trade has lifted billions out of poverty. That is nothing to scoff at.
The problem is that the United States’ comparative advantage lies with an increasingly smaller slice of the population – the educated and lucky. You must be pretty highly educated to compete nowadays and pretty lucky to get a chance to prove yourself.
This wasn’t always the case. My parents (and grandparents) succeeded by hard work and hustle. Of course, I still think there is the possibility of succeeding this way, but it is harder to do and almost impossible to get the chance. In “olden days”, and in other countries, manufacturing – making things, was a viable job for people. You could make cars, or sprockets, or steel, or rubber bands, or furniture, or clothes, or toys and earn enough to live.
Manufacturing – and increasingly large parts of the service sector – are now outsourced to foreign workers because they have a comparative advantage in wages (i.e. It is cheaper to employ them). As transportation costs shrink, computing costs fall significantly and communication cost fall to nearly zero, manufacturing chases the lowest cost of human capital.
The only time corporations don’t follow the lowest wage is only where governments erect barriers. Either direct (like huge tariffs on imported cars or rice or finished goods) or indirect (like China’s policy of ordering planes from Boeing ONLY after Boeing agreed to make major parts in China).