Hearing Washington officials speak sense on international trade has become a rare event these days. So a speech today by U.S. Treasury Secretary Henry Paulson was like a fresh spring breeze after a long dreary winter.
Speaking to the Economic Club of Washington, Secretary Paulson delivered an important address on the huge benefits Americans realize every day from our growing trade and investment ties with the rest of the world.
The secretary touted America’s booming exports, including a 32 percent jump in exports to China in 2006. More importantly, he focused on the benefits of imports, the real payoff from trade:
Trade fosters the environment of competition, innovation, research, and investment that leads to better goods and services at lower prices. Some people speak about trade as if its benefits come only from exports, ignoring the positive contributions of imports. Data show that internationally trade products tend to experience lower inflation rates—even real price declines—while non‐traded goods tend to rise in price. Trade thus helps Americans provide for their families. When special interests seek protection in the name of low‐wage workers, we should acknowledge that limitations on imports do not benefit the vast majority of Americas. They deny people the freedom to choose from a broader array of goods and services, and impose a cruel tax on people who rely on low prices to stretch their family budgets. The cost of protectionism falls most heavily on those who are least able to afford it—the poor and the elderly.
The speech is packed with other sound thinking and useful numbers on the hot trade topics of the day, including China, the trade deficit, manufacturing, foreign investment and adjustment‐assistance programs.
Secretary Paulson’s speech is an antidote to the economic snake oil that is being hawked on what seems to be every street corner of Washington these days.