The dance that’s taking place on Capitol Hill among U.S. auto industry executives, the United Auto Workers, and Senate/House Finance Committee members is fascinating.  For the uninitiated, it can be disconcerting to see how the sausage is made.  Neither party has distinguished itself.  Beyond the normal pontificating and grandstanding, one of the more troubling aspects to emerge has been the exposure of a rising protectionist tide.  It’s pretty clear that many of our representatives don’t have a particularly high regard for free trade.  One would expect this from the UAW, after all, they are primarily charged with protecting their membership’s interests.  It is worrisome, though, that our elected officials don’t fully appreciate the benefits associated with free trade.  Nevertheless, it’s not especially surprising given how successfully some, including the anti-globalists, have made free trade a metaphor for the exportation of American jobs.

The hearings have been rich with irony.  Wagoner, Mulally, and Nardelli were routinely condemned with righteous indignation over the inefficiencies in their businesses, but simultaneously warned against remediating some of those very inefficiencies, namely when seeking lower cost labor outside the U.S. is concerned.  A Senator bellowed that he would be extremely angry if one of the Detroit Three, after having been the recipient of a government loan, were to locate a plant in Mexico.  It’s not too difficult to see how government, once in the door, can quickly become the house guest from hell.

Admittedly, government is in a tough spot.  It does have an obligation to create/maintain an environment in which industry can compete, and in which U.S. workers can get a fair shake.  It absolutely should endeavor to defend U.S. jobs.  Ideally, that is best accomplished by fostering a level playing field among all trading partners (e.g. reciprocal agreements; support/sponsorship of worker retraining initiatives; etc.).  When government steps beyond that realm and into the sphere of direct market intervention, things get much dicier, and a lot less predictable.

Why should we even care about free trade?  Well, for one, it lifts all boats.  It raises the standard of living across the globe, and by doing so, contributes to the establishment of a virtuous cycle.  Trade opens markets, which leads to bilateral wealth creation, which begets middle class formation/growth, which begets bigger markets, which begets more trade.  It is the very engine for capitalism, and capitalism’s two key catalysts—innovation and creative destruction.  Early 20^th century economist, Joseph Schumpeter, used the term “creative destruction” to describe the transformational power of innovation and how it results in sustainable, long-term economic growth.  Schumpeter recognized that even as the value of established companies and/or products is destroyed, they are systematically replaced with ones that are better, more productive, efficient, and desirable.  Economic Darwinism in action.   

There is no doubt that creative destruction can be painful for some.  In the short run, it obsoletes skill sets; it results in worker/company dislocation; it disrupts.  But, for its adherents, it breeds new opportunities; it stimulates creativity; and leads to more appealing work and industrious, competitive companies.  To not participate is to decide to stagnate; to become insular; to be left in the dust.  The world is moving on.  We can get on the train or be left at the station.

It’s understandable why some of our politicians turn away from free trade.  In many respects, it is a leap of faith, particularly for a wealthy, powerful country like the United States.  On the surface, it seems much easier to exert our considerable influence to strong arm trading partners and justify the erection of protectionist barriers.  In the short run, that can save jobs, and/or prop up markets, but over the long haul, particularly in a progressively global economy, we only weaken our competitive position and set the stage for our eventual marginalization and deterioration as an economic power.    

The conclusions of economic experts as well as the empirical evidence in support of free trade are overwhelming.  A 2006 survey of American economists found that roughly 90% believe that barriers to trade should be eliminated and employers should not be restricted from outsourcing work to foreign countries.  Harvard economics professor Gregory Mankiw states, “Few  propositions command as much consensus among professional economists as that open world trade increases economic growth and raises living standards.”

U.S. workers will ultimately be advantaged by the advancement of policies directed at making them more nimble participants in a dynamic global economy, not those that reduce company competitiveness, and concomitantly, the ability of said companies to generate new jobs.

The U.S. needs a vibrant manufacturing base for a variety of economic and national security reasons.  As such, it's in our interests for the government to make extraordinary efforts to help secure its future.  But, in government's zeal to assist, it should be very careful not to lessen our commitment to free trade.  The long-term ramifications would be disastrous for U.S. competitiveness, our standard of living, and continued worldwide growth.