There has been plenty of hostile talk about the North American Free Trade Agreement (NAFTA), and about possible U.S. tariffs on Chinese steel. But when it comes to trade, top sports teams can teach the Trump Administration and politicians on both sides of the aisle an important lesson: Competition is good. It improves the players and the team.
While often painful, competitive pressure has kept the United States a world leader. Yet when times are tough, many on both sides blame our competitors in international trade. If we try to prosper by shutting off trade, we will not only forfeit the country's future economic prosperity. We will forfeit the country's standing as a leader on the world stage.
There are two key reasons why engaging in open, competitive trade matters to America's well being.
First, if we allow our firms to "win" by being second or third in class, protected behind tariff barriers, we will not be world leaders. Products and services that can pass only if graded on a curve at home will not succeed abroad. Other nations will control world markets, and will provide greater value to all other consumers around the world. When it is time to write the trade rules, other nations will hold the pen. When the world looks for leadership, measured by commercial success or even military technology, the United States will not have a seat in the front row.
And second, the new technologically advancing world has created more efficient and complex cooperative production relationships. Today, about half of all U.S. imports are used as inputs by U.S. producers who then sell the resulting product. Generally speaking, the U.S. share of these supply chains includes the most demanding and best-paying jobs. Slapping those imported intermediate goods with tariffs or other trade protections would make the participating U.S. producers uncompetitive and would threaten the existing high-value U.S. jobs.
It is easy to celebrate when a few workers seem to keep their jobs because foreign competition is shut out. But what will happen when new, high-wage jobs are not even created because U.S. firms don't have access to foreign lower-value components for their higher-value end products?