Marching Backward on Trade
On economic grounds, there's no reason to reject the Colombia free trade agreement. Colombia's exports already enter the U.S. market duty-free under the 1991 Andean Trade Preference Act. Meanwhile, many U.S. exports to Colombia face stiff tariffs -- up to 35% on autos, 15% on tractors and 10% on computers -- most of which would ultimately go to zero under the agreement.
The tariffs dampen demand for U.S. exports by raising their price and putting them at a competitive disadvantage. Whirlpool annually exports about $50 million worth of refrigerators, washer-dryers and dishwashers to Colombia from plants in Ohio, Arkansas and Iowa. On a $1,000 refrigerator, a 20% tariff raises the retail price $200 in a fiercely competitive market with appliances also supplied by local firms and imports from Korea and elsewhere.
MP: That seems like a real no-brainer. The U.S. has everything to gain (eliminating tariffs on U.S. exports to Colombia), and nothing to lose.
Yet, it's politically convenient to oppose the free trade agreement with Colombia because the popular imagery is that trade destroys U.S. jobs. The loss of almost 4 million U.S. manufacturing jobs since 1998 seems easy to explain by cheap imports or the flight of plants to Mexico, China and other poorer countries. The truth is murkier: Although this has occurred, job losses also stem from greater efficiency (fewer workers producing more goods, see chart above using these data) and slumping domestic demand (for communications equipment and computers after the dot-com bust and for housing materials and vehicles now). Nor has falling factory employment crippled overall U.S. job creation.