Fair is not free

In his column “Big Three drive on E”, Jack Lessenberry points to unfair competition and currency manipulation, among other reasons, for hurting GM and Ford. Subsequent quotes from automotive journalist Jerry Flint imply that the U.S. government should do something about it. This would be the wrong approach.

Frequently, international trade is wrongly demonized as a source of our economic woes. Populist politicians call for fair trade rather than free trade because “fair” sounds appealing. After all, who wants to be opposed to something fair? Unfortunately, the word lacks an objective definition. Is it fair that the U.S. imposes its labor and environmental standards on foreign countries whose economies lag ours? Is it fair, or even proper, for the U.S. to involve itself in the internal policies of other countries? Fair trade is spin for protectionist policies that favor narrow interest groups. On the other hand free trade, meaning trade without barriers, benefits all consumers.

For example Flint points out that currency manipulation hurts Ford and GM, but fails to emphasize how it benefits consumers. In order to manipulate the exchange rate, Japan must purchase excess dollars (with tax revenue from its citizens) and hold them in reserve. This results in lower prices for all Americans purchasing their goods. Although Ford and GM are adversely affected, this is outweighed by the overall benefit to everyone else. If Japan wants to subsidize my next car purchase, that sounds like a fairly good deal to me.

[Letter to the Editor - Metro Times. Published 12/06/2006.]