Naked Economics: Undressing the Dismal Science pdfdrive com

Trade lowers the cost of goods for consumers, which is the same as raising
their incomes. Forget about shoe workers for a moment and think about shoes.
Why does Nike make shoes in Vietnam? Because it is cheaper than making them
in the United States, and that means less expensive shoes for the rest of us. One
paradox of the trade debate is that individuals who claim to have the

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downtrodden at heart neglect the fact that cheap imports are good for low-
income consumers (and for the rest of us). Cheaper goods have the same impact
on our lives as higher incomes. We can afford to buy more. The same thing is
true, obviously, in other countries.
Trade barriers are a tax—albeit a hidden tax. Suppose the U.S. government
tacked a 30-cent tax on every gallon of orange juice sold in America. The
conservative antigovernment forces would be up in arms. So would liberals, who
generally take issue with taxes on food and clothing, since such taxes are
regressive, meaning that they are most costly (as a percentage of income) for the
disadvantaged. Well, the government does add 30 cents to the cost of every
gallon of orange juice, though not in a way that is nearly as transparent as a tax.
The American government slaps tariffs on Brazilian oranges and orange juice
that can be as high as 63 percent. Parts of Brazil are nearly ideal for growing
citrus, which is exactly what has American growers concerned. So the
government protects them. Economists reckon that the tariffs on Brazilian
oranges and juice limit the supply of imports and therefore add about 30 cents to
the price of a gallon of orange juice. Most consumers have no idea that the
government is taking money out of their pockets and sending it to orange
growers in Florida.
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That does not show up on the receipt.
Lowering trade barriers has the same impact on consumers as cutting taxes.
The precursor to the World Trade Organization was the General Agreement on
Tariffs and Trade (GATT). Following World War II, GATT was the mechanism
by which countries negotiated to bring down global tariffs and open the way for
more trade. In the eight rounds of GATT negotiations between 1948 and 1995,
average tariffs in industrial countries fell from 40 percent to 4 percent. That is a
massive reduction in the “tax” paid on all imported goods. It has also forced
domestic producers to make their goods cheaper and better in order to stay
competitive. If you walk into a car dealership today, you are better off than you
were in 1970 for two reasons. First, there is a wider choice of excellent imports.
Second, Detroit has responded (slowly, belatedly, and incompletely) by making
better cars, too. The Honda Accord makes you better off, and so does the Ford
Taurus, which is better than it would have been without the competition.