NCPA - National Center for Policy Analysis


June 19, 2007

Almost all economists agree that free trade is good. Yet on an almost monthly basis, the release of the trade deficit data becomes yet another occasion for hand-wringing and general economic anxiety among pundits and reporters alike, says Investor's Business Daily (IBD).

But it's an inconvenient truth, to coin a phrase, that free trade is one of the surest drivers of economic growth known to man, says IBD.  This isn't merely opinion: It's backed up by ample statistical evidence, unlike the anecdotal tales of free-trade woes usually told.


  • Total trade -- exports plus imports -- as a share of gross domestic product (GDP) has surged from 11 percent in 1970 to 28 percent.
  • Real GDP over this time has risen 203 percent to just over $11 trillion; it's not an exaggeration to say we largely owe our extraordinary wealth to trade.
  • In addition, per capita GDP adjusted for inflation is $38,087, a gain of 162 percent since 1962.

We're not alone in benefiting from trade, says IBD.  So has the world economy, which has boomed:

  • On a per-person basis, real average incomes have more than tripled since 1950 worldwide.
  • Once-poor areas with the greatest trade liberalization -- like East Asia -- growth has been even greater, soaring 5,675 percent from 1950 to 2003.

Yet there are those who worry solely about the deficit, and forget that U.S. exports are in fact soaring right now.  It's just that, because we're growing faster than most of our counterparts, we're buying more goods than we're selling.  It should also be pointed out that since 1970 we've had 34 trade deficits out of 37 years.  The three surpluses, by the way, all came in recession years, says IBD.

Source: Editorial, "Free Trade Fraud," Investor's Business Daily, June 19, 2007.


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