Ignorance Makes Us Poorer | Richard W. Rahn | Cato Institute: Commentary

Ignorance Makes Us Poorer | Richard W. Rahn | Cato Institute: Commentary: "Should we have protective tariffs on pencils? As simple as a pencil is, it contains materials from all over the world (special woods, paint, graphite, metal for the band and rubber for the eraser) and requires specialized machinery. How much would it cost you to make your own pencils or even grow your own food? Trade means lower costs and better products, and the more of it the better.

Adam Smith explained that trade, by increasing the size of the market for any good or service, allows the efficiencies of mass production, thus lowering the cost and the ultimate price to consumers. The economist David Ricardo in 1817, building on Smith's work, popularized the understanding of the concept of 'comparative advantage,' which shows that trade is beneficial, even when one person or country can produce everything less expensively."

"It is easy to see the loss of 200 jobs in a U.S. textile mill that produces men's T-shirts, but it is not as obvious to see the benefit from the fact that everyone can buy T-shirts for $2 less when they come from China, even though the cotton in the shirts was most likely grown in the United States."

"A loss of 200 jobs in one industry can easily translate to the imperceptible gain of 2,000 jobs in 100 other domestic industries as a result of the cost reductions from free trade."

"It is possible to grow high-cost and inferior coffee in South Florida and not buy it from Colombia. A free-trade agreement with Colombia means that nation will buy more U.S.-built Caterpillar tractors and wheat grown in the American Midwest and U.S. consumers will buy more Colombian coffee, fruit and textiles. The consumers in both countries will benefit from lower prices and better products, and more workers will be employed in each country, doing the things that they can each do best."

"If free trade really causes most jobs to move to low-wage countries, why do countries such as Mexico and Bangladesh have huge unemployment rates and very high-wage places such as Virginia and Switzerland have almost full employment?"