And when it comes to South Korea, we’ve got a trade agreement up right now, they are sending hundreds of thousands of South Korean cars into the US. That’s all good. We can only get 4,000 to 5,000 into South Korea. That is not free trade.

President Obama was quoted as saying this 15 months after a trade agreement was reached between the United States and South Korea that essentially eliminated any major barriers to trade between the two countries, specifically with regard to automobiles.  Despite Obama’s apparent ignorance to major current affairs in the United States and his outdated, deceptive statistics, the quote is still a great example of how bureaucrats view trade with other countries.

Bureaucrats seem, in my experience, to put no value on goods.  If goods are imported it is somehow seen as a bad thing because Americans had to pay cold hard cash for those goods.  Conversely, when American companies export goods and are paid cold hard cash for those goods it is seen as some glorious event, as though those companies were given something for nothing.  In reality, since the United States uses fiat currency (currency that has no real backing such as gold), we are, in fact, trading paper for goods.  Not a bad deal.

All we hear about is our trade deficits, that we import so much more than we export.  It is true that the United States is operating at a trade deficit; it has done so since 1971.  In the 37 years since then we have not gone broke as a result of our trade, rather our lives have become richer.

The fact that Americans purchase goods from overseas is not a bad thing; they are purchasing those goods because they are somehow better or cheaper than similar goods that are produced domestically.  Again, no trade will take place in a free market that does not benefit both parties.  Americans are not forced into purchasing imported goods – they want to.  Similarly, American companies make the choice not to export many of their goods, likely because they will not receive a high enough price.

A common phenomena among trade deficit nations, such as our own, is that the citizens of those nations are typically far more affluent and, as such, have more opportunity to buy goods produced in other corners of the world.  Equally, citizens in trade surplus nations tend to be more destitute, not even able to afford the goods produced in their own country, much less from abroad.  Additionally, the labor in trade surplus nations is typically far cheaper than in trade deficit nations, another testament to the lower quality of life in trade surplus nations.  The fact that a nation’s citizens are poor makes it far more likely to have a trade surplus because companies will move to those nations to enjoy the benefits of the cheaper labor to be found there.

There is no doubt that exporting goods is good for companies in the United States that can profit from doing so.  The problem arises when bureaucrats only look at the trade deficit and do not dig into why there is a trade deficit.  To limit the importation of goods as a reaction to another country doing so is harmful to both countries (as explained in Part 1).  Imports are good in that we get to enjoy the little luxuries of the world for a lower price than we would otherwise be able to.

Free trade is an easy scapegoat at times.  It allows politicians to blame an outside force for something that is far from blameworthy.  It allows bureaucrats to increase their union’s power in Washington or increase the price they receive for the good they are selling.  Free trade is a good thing.  It makes many goods and services more readily available for a much lower price than would ever otherwise be possible.  Don’t be fooled by politicians and bureaucrats that have something to gain personally by limiting your right to free trade.  The computer you are reading this on, the chair you are sitting on, part of your dinner this evening, and so many other goods we consume come from other nations outside of our own.  You purchased the computer you are reading from now because it was likely better and cheaper than an option that would have been exclusively manufactured and designed in the United States.  Likewise, many people abroad are enjoying American made products that would otherwise not be enjoyed.  Trade is one of the most valuable part of human life in that it allows people to have access to a much wider variety of goods and services and improves the lives of every person that takes part in trade.

Trade can be confusing as a concept and that is why there is so much deception.  However, the more you understand about trade the less ammunition bureaucrats will have when they try to pass laws that inhibit your right to freedom.

The most important single central fact about a free market is that no exchange takes place unless both parties benefit.
-Milton Friedman