Observations on Free Trade

I am firmly convinced that, based on economic theory and history, free trade makes all participating countries economically stronger and healthier.

At the Federal Reserve Bank of Dallas, we have devoted substantial research efforts to the issue of free trade precisely because of the positive impact it will have on our economy. The central bank's top priority is to protect the purchasing power of the nation's money. Through price stability, the Fed also endeavors to promote the maximum sustainable growth in the U.S. standard of living. By opening new markets to our goods and services and by making the United States more competitive, freer trade will be the catalyst for increased investment, saving and productivity, resulting in a healthier economy.

Free trade benefits all consumers in all countries by making more goods available at lower prices.
Consumer advocacy groups should have free trade as a top priority, along with price stability. But decisions on trade agreements often turn on the question of jobs. Specifically, will the agreement cause a loss of U.S. jobs to another country? The answer is that, even in the short run, more jobs will be gained than lost. Over the long run, the total number of jobs in each country will remain unchanged, but the composition of jobs will change as each country concentrates more on its strengths. The United States will see growth in the industries in which it is most competitive—those employing high technology and utilizing a skilled labor force.

If international trade is a bad idea, so is interstate trade.
International trade simply extends the benefits of free enterprise beyond national borders. By allowing the market system to operate among countries, free trade enhances the division of labor between the United States and other countries, fostering more efficient use of our resources, the most valuable of which are our workers. Unimpeded by artificial restraints, the United States can do more of what it does best and take advantage of trade with other nations to meet the rest of our needs.

The simple truth is that we cannot have the better jobs in export industries without giving up jobs in declining industries.
Thus, the role of public policy should be to assist and enhance this movement of jobs to new industries through a commitment to free trade and the implementation of programs such as worker retraining to provide new opportunities for those who have been displaced. The enhanced prosperity resulting from freer trade will provide jobs beyond those created in export industries.