April 12, 2017
The Washington Post and other major news outlets are strong supporters of the trade policy pursued by administrations of both political parties. They routinely allow their position on this issue to spill over into their news reporting, touting the policy as “free trade.” We got yet another example of this in the Washington Post today.
Of course the policy is very far from free trade. We have largely left in place the protectionist barriers that keep doctors and dentists from other countries from competing with our own doctors. (Doctors have to complete a U.S. residency program before they can practice in the United States and dentists must graduate from a U.S. dental school. The lone exception is for Canadian doctors and dentists, although even here we have left unnecessary barriers in place.)
As a result of this protectionism, average pay for doctors is over $250,000 a year and more than $200,000 a year for dentists, putting the vast majority of both groups in the top 2.0 percent of wage earners. Their pay is roughly twice the average received by their counterparts in other wealthy countries, adding close to $100 billion a year ($700 per family per year) to our medical bill.
While trade negotiators may feel this protectionism is justified, since these professionals lack the skills to compete in the global economy, it is nonetheless protectionism, not free trade.
We also have actively been pushing for longer and stronger patent and copyright protections. While these protections, like all forms of protectionism, serve a purpose, they are 180 degrees at odds with free trade. And, they are very costly. Patent protection in prescription drugs will lead to us pay more than $440 billion this year for drugs that would likely sell for less than $80 billion in a free market. The difference of $360 billion comes to almost $3,000 a year for every family in the country.
It is also worth noting patent protection results in exactly the sort of corruption that would be expected from a huge government imposed tariff. (When patents raise the price of a drug by a factor of 100 or more, as is often the case, it is equivalent to a tariff of 10,000 percent.) The result is that pharmaceutical companies often make payoffs to doctors to promote their drugs or conceal evidence that their drugs are less effective than claimed or even harmful.
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