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Trade with other nations allows American consumers to enjoy a wider range of

goods and services at lower cost than if we produced everything for ourselves. American

exporters gain through access to a much larger world market. The increased sales in a

global market can lead to lower costs through economies of scale, leading to lower prices,

yet more sales, and further efficiency gains, in what economists call a "virtuous cycle."

Increased competition from imports spurs innovation among domestic firms while

protecting consumers from potential monopolies. For these reasons, nations that pursue

free trade policies tend to prosper while those that hide behind protectionist barriers

stagnate.3

The American economy has become increasingly intertwined with the rest of the

world. Since 1970, America's total imports and exports in the broadest measure--goods,

services, and investment income--have increased from 13 percent of our gross domestic

product to nearly 30 percent.4 Today the United States is both the world's largest exporter

and its largest importer.

Exports provide a livelihood for a growing share of American workers. During

the last decade, the number of jobs supported by exports rose four times faster than the

overall number of private-industry jobs, to more than 12 million. And export jobs, on

average, pay about 14 percent more than jobs in nonexport industries.5 While expanding

trade does not significantly affect the total number of jobs in an economy, it does tend to

raise the quality and pay of the jobs available.

Benefits of free trade spill beyond our own borders, creating a more peaceful and

prosperous world. Nations with strong commercial ties tend not to fight wars with each

other. As nations become more economically integrated with each other, the economic

cost of disrupting those ties through war rises dramatically. Free trade also has allowed

millions of people in less developed countries to rise out of poverty, proving itself far

more effective than failed and costly U.S. foreign aid programs.

Protectionism, in contrast, makes people poorer by raising prices and diverting

resources away from more efficient industries. When the U.S. government protects the

steel, automobile, textile, and sugar beet industries, it raises profits in those industries at

the expense of consumers. In the typical case where an industry gains protection, the

losses in efficiency and consumer welfare far outweigh the gains to the protected industry

and to the government--leaving the nation as a whole poorer.

Protection acts as a kind of tax, robbing from the mass of consumers for the

benefit of a narrow slice of producers. By concentrating power in the hands of

government officials, it breeds rent seeking by special interests. This is why protectionist

measures that were supposed to be temporary, such as the textile import-quota agreement

of 1962, tend to remain in force for years and decades after they were originally set to

expire. Protection becomes just another government subsidy, with consumers paying the

3