Due to the factor of competition, many Americans argue that it is impossible for companies in the United States to perfectly compete with foreign companies. Many stereotypical arguments stem from examples of production costs being shipped to Asia and other third world countries where labor force laws are either less restrictive or non-existent. Instead, men, women and children receive unfair wages and are forced to endure punishing work environments just to receive a small amount of money to eat everyday. Meanwhile, legislators in the United States continue to argue that by increasing barriers to international trade, it will not only help relieve these circumstances from the American conscience, but it will also help to decrease unemployment by keeping the workforce here at home. The mainstream view of trade economists on the unemployment issue is clearly expressed by Krugman: “It should be possible to emphasize to students that the level of unemployment is a macroeconomic issue . . . with microeconomic policies like tariffs having little net effect” (Krugman 25). Many individuals, including economists, make the mistake of believing that tariffs and restrictive policies will have a great impact on unemployment. While these policies may directly alter consumer behavior and corporate business practices in more ways than one, it is clear that much more information is to be analyzed in association with this issue that simply increasing legislative restrictions on international trade.
Much of this further analysis can result from the existence of an economic tool known as the short run aggregate supply (SRAS) curve. This curve shows “total planned output when prices in the economy can change but the prices and productivity of all factor inputs, for example wage rates and the state of technology, are assumed to be held constant” (Tutor2u.net). The curve is upward sloping and helps explain in economic terms a graphical representation of the relationship between inflation and real national income earned through business practices, including international trade efforts. “The short run aggregate supply curve is upward sloping because higher prices for goods and services make output more profitable and enable businesses to expand their production by hiring less productive labor and other resources” (Tutor2u.net). The short run aggregate supply curve is shifted due to many different economical and social factors that each has a large impact on the placement of the curve. For instance, the SRAS curve can be shifted due to increasing or decreasing wage rates, prices of non-labor inputs, productivity, and supply shocks. It can also be shifted due to commodity prices and governmental subsidies and taxation (Tutor2u.net). While this economic tool is often utilized by economics and few business professionals, it is rarely seen as concrete evidence utilized by politicians.
Should politicians actually utilize this information, they would understand that the forces of international trade, and more importantly the effects of international trade, help factor into a shift for the SRAS curve and help produce planned results of future and present actions. Unemployment is one of the areas where this curve can effectively be utilized, especially given the fallacious statement that international trade, or restrictions on the trade, will help decrease unemployment rate and keep jobs here in the United States. Still, results show that “given their [politicians] concerns for American workers, a majority of Americans support having some trade barriers as a means of protecting workers from sudden job losses, even when this is weighed against the potential benefit of lower prices” (“International Trade”). However, the American public is “not convinced that trade increases the quality of new jobs and, even if it does, a majority does not feel that this offsets the disruption caused by losing jobs” (“International Trade”). Due to the fact that the American public elects politicians as political representatives of the majority opinion, these views should be present in policymaking. Nonetheless, politicians continue to try to sway public opinion in order to influence the citizens to believe that efforts to restrict international trade would actually improve the unemployment situation. The main concern is no longer on providing competition in the marketplace and helping to improve efficiency; instead, policymakers wish to take efforts to decrease unemployment to help put more resources back into the American economy.
One proponent of international trade comes from Congressman David Dreiter from the state of California. He argues on his website for increased trade, especially in the California economy. “Trade has made California a global powerhouse. With a gross state product of nearly $1.5 trillion, and more than 1 in 12 Californians employed in export supported jobs, California is an example of free trade at work” (“Congressman”). While the Congressman, and many other politicians, continue to support trade because of the benefits of exporting goods to other countries for domestic revenue, they fail to consider the negative effects that importing can take on domestic economic circumstances.
Strategically located astride the Asian Pacific-American trade route and linked to Latin America through regional free trade agreements, over the past decade California businesses and workers have led the nation in trade-related growth. Whether it be California high-tech products, films or agriculture, the state competes and wins when free trade provides new markets. Expanding global trade means economic growth for California and America.
Trade is more than an economic boon. Reaffirming our role as a global leader, American support for trade is support for freedom. Creating opportunity for entrepreneurs and encouraging the free flow of information, free trade is distinctly democratic and does much to further the creation of free and open societies.
“Congressman David Dreier — The 21st Century Economy: International Trade.” Congressman David Dreier. Web. 25 Nov. 2009.
“International Trade – Helping American Workers.” American attitudes: Americans & the World. Web. 25 Nov. 2009.
Kruger, P. R. “What Do Undergrads Need to Know About Trade?” American Economic Review 83.2 (1993): 23-26. Print.
Riley, Geoff. “Macroeconomics – Aggregate Supply.” Tutor2u | Economics | Business Studies | Politics | Sociology | History | Law | Marketing | Accounting | Business Strategy. 2006. Web. 25 Nov. 2009.