A Free Trade Valentine

Today millions of Americans will celebrate Valentine’s Day by purchasing roses for their loved ones and, in so doing, will participate in one of the everyday miracles of capitalism which too often escape our notice. As a recent Washington Post article points out, these roses will most likely have been grown thousands of miles away in Colombia, flown to the United States aboard cargo jets, and then delivered to florists and other retailers at the cost of a mere $1.50 per stem. That this is possible is not only a tribute to the magical powers of capitalism, but—as the newspaper notes—free trade and a 2012 agreement between the United States and Colombia which permanently lifted U.S. import tariffs on Colombian flowers. Indeed, a close reading of the piece reveals some of the many advantages of free trade and the benefits it confers.

Among them: 

Imports save consumers money: One of the most straightforward benefits of free trade is the reduced cost to consumers for the goods they purchase as a result of reduced tariffs and the ability of businesses to develop more cost-effective supply chains. By importing flowers from Colombia, according to the article, the price of roses has been kept almost unchanged for decades with a dozen red roses often available this week for less than $20.

Imports create jobs: Unsurprisingly, the growth of Colombia’s flower industry has helped provide jobs in that country—to the tune of 130,000 according to The Washington Post (including, it seems, for thousands of Venezuelans fleeing from that country’s experiment in socialism). Often overlooked, however, is that imports also create new employment opportunities for Americans, both through the actual process of importation and as an intermediate good. The numerous planes full of flowers, for example, require logistics personnel to offload, store, and transport them to their final destination. Cheaper flowers, meanwhile, mean increased sales and more workers at the distributors and retailers which carry them. Indeed, the article cites the example of the USA Bouquet Company in Doral, Florida which employs 75 workers to put “imported red roses into vases and then carefully [pack] them in boxes for a Valentine’s shipment to Walgreens.”

Gains from specialization and comparative advantage: Free trade between countries allows for specialization and an increased focus on those areas in which each country enjoys a comparative advantage. In this example, Colombia enjoys a comparative advantage in the growing of roses and other flowers which, as the article points out, is a major factor behind the decline of U.S. rose production. Unmentioned, however, is that increased trade between the United States and Colombia—up 95 percent since 2006—has led to billions of dollars in exports in sectors where Americans enjoy a comparative advantage, such as agriculture, machinery, and computer software. In addition, competition from Colombian growers has forced American businesses to adapt and move higher up the value chain to areas where they might have a comparative advantage within the flower sector. As a result, the article notes that the price of U.S.-grown roses has “ticked up in recent years because U.S. growers have focused primarily on higher-end roses that are designed for weddings and special events.”

If heartache is to be found in this free trade valentine it is that the trade agreement signed with Colombia is the last to have been approved by Congress (along with free trade agreements with Panama and South Korea, all of which were passed on October 12, 2011). While President Trump has promised the conclusion of additional bilateral agreements, new negotiations have yet to be initiated. That’s unfortunate, and we should hope that 2018 will see a new push on this front. Colombian roses are but one beautiful example of the gains to be had from tariff-free access to the world’s offerings, and Americans deserve access to all of them.

Topics: