Comparative advantage only works when the playing field is level

Shannon Fiecke’s Monday column, “Steel tariffs are U.S. protectionism at its worst,” misapplies basic principles of economics.

Although Fiecke is correct that the tariffs imposed by the Bush administration on foreign steel are ill-advised, her larger conclusions about globalization and protectionism are wrong. She says moving jobs in manufacturing and textiles out of this country is good for the United States because it reflects a sound economic principle, comparative advantage, in action.

Fiecke misunderstands comparative advantage. It only operates correctly when those in competition are similarly situated to begin with. So, if I fix tires for $10, but Mike down the street fixes tires for $5 because he is more skilled and can do it in less time and with less effort, then the principle of comparative advantage works. Mike gets the job by virtue of his efficiency and skill.

Comparative advantage also works in the steel industry, where the playing field is somewhat level. Most of the foreign steel producers threatening U.S. steelmakers are in nations where workers are treated reasonably well and the costs of doing business are not much lower than they are here.

In many industries, however, comparative advantage is not a principle that can be used to justify exporting U.S. jobs. The workers with whom Americans are forced to compete in many industries live in Third-World countries and are denied even the most basic benefits of full-time employment. They work 12 or more hours for only a few dollars per day and six or seven days per week. This is unfair, both to U.S. workers who rightfully demand living wages, decent benefits and humane conditions, and to citizens of third-world countries who work in horrid conditions for tiny sums of money just to survive. This type of “competition” benefits nobody.

As Americans import more goods from countries such as China, India, Indonesia and Thailand, the rest of the world imports less from the United States. And as more Americans are laid off from well-paid manufacturing jobs – 2.7 million since 2001 – and forced to take low-paying jobs in the service sector, reducing U.S. prosperity, the privileged few at the helm of massive U.S. companies such as Nike grow fat off of profits made on the backs of third-world workers.

A simple analysis of Fiecke’s point about the benefits of such so-called competition reveals its fatal flaw. A society, and ultimately an individual, can only consume to the extent that it can earn, can only earn to the extent that it can produce and sell, can only sell to the extent that someone else will buy. And yet Fiecke insists it is good for the United States that our jobs are being exported to third-world companies.

Consumers might gain access to cheaper products, but the cost to the U.S. economy of good jobs lost outweighs this negligible benefit.

This economic model is neither fancy nor unrealistic. All over our country, factories are closing and good jobs are

going to impoverished nations where people work for next to nothing.

Americans are losing their livelihoods. The poor grow poorer as the rich grow richer. U.S. goods, unable to compete with goods produced in Third-World countries, are selling less and less abroad. The demand for Third-World goods is increasing, and yet more U.S. jobs are being swallowed.

High-tech jobs are also leaving. In India, for example, highly educated engineers will work for as little as $5,000 per year, just 10 percent of the $50,000 U.S. engineers start at. Some estimates place the number of high-tech U.S. jobs lost to Third-World nations as high as 500,000 in the last several years, a figure expected to increase dramatically.

Globalization has brought many controversies, none of which have simple answers. But one thing is certain. The exportation of U.S. jobs to Third-World countries is not an example of comparative advantage at work and benefits neither Americans nor the wretchedly poor of other countries to whom their jobs are given.

Our economy in this new world is unsustainable. The United States cannot prosper on the strength of its consumption alone. Throughout our history, it is our power as a producer that has brought us prosperity. What good is U.S. innovation, still head and shoulders above the rest of the world, if the jobs it creates are not in this country?

Perhaps protectionism is not the answer, but the playing field must be leveled. Workers in other nations should be paid a living wage and treated fairly. U.S. companies must be penalized for exporting jobs instead of being rewarded by unfair tax policies. And people like Fiecke must realize that, in the end, unfair competition and the exportation of U.S. jobs isn’t good for anybody.

Max Rawn is a second-year law student. He welcomes comments at [email protected]