Trade Agreements that Increase Protectionism are not "Free-Trade" Agreements

04/16/2012 12:00am

The Washington Post did the obligatory waste-a-word to increase inaccuracy routine when it referred to a “free-trade” agreement with Colombia in a front page news story. The agreement includes a number of provisions that increase the strength of patent and copyright protection in Colombia which will raise the price of drugs and other products above their free market level. This will have the effect of dampening growth, in addition to making health care more costly for people in Colombia.

There is no reason that the Post should call this pact a “free-trade” agreement. Its proponents like to embrace this term because it gives the pact a more favorable image, however it would be more accurate to simply call it a “trade” agreement.

In discussing this agreement, Morning Edition referred to the $1 billion in additional exports that the United States is projected to get as a result of the agreement. The number of jobs in the economy depends on net exports (exports minus imports). If jobs just depended only on exports, then we could increase employment by having car parts in the United States exported to Mexico to be assembled there, and then imported back as a finished car into the United States.

The history has been that the trade deficits have increased with countries with whom we have signed trade agreements. If that pattern holds with Colombia, the trade deal will be a net job loser, even if our exports increase. It would have been helpful if Morning Edition had clarified this arithmetic for listeners who might have been deceived by the way in which the Obama administration has sold the agreement.

It is also worth pointing out that an increase in exports of $1 billion would correspond to just 10,000 jobs, even if there is no increase in imports. If the economy is generating 200,000 jobs a month, this is equivalent to a day and half of job creation.


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