On the face of it, the numbers look grim. We have a $40 billion foreign trade gap (the difference between the mutual values of a country's imports and exports). Manufacturing jobs have crumbled, with 20 million lost since the 1970's. In China, one of our chief economic partners, average incomes have tripled over the past ten years, while at home median incomes have largely stagnated over that same period.
To see those figures it's easy to sympathize with the millions of Americans who argue that deals such as the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP) hurt domestic job prospects. Yet at the same time, economists are virtually united in their position that foreign trade is good for America and Americans.
In fact, as explained by J. Bradford Jensen, McCrane/Shaker Chair in International Business at Georgetown's business school, "I think most economists would argue for something very close to wide-open free trade."
Here are five of the biggest reasons why:
International trade theory is dominated by what's called comparative advantage, the ability of one country to produce certain skills or resources more efficiently than another. For example, a country with lots of natural gas or geothermal power has a comparative advantage in the electricity-heavy production of aluminum compared with someplace that has to import its energy sources.
Globally, the U.S. has a huge advantage in skilled and service-sector labor, thanks in part to its historic investment in education. By contrast, however, a strong economy and expensive currency makes domestic labor far more expensive than it is in most other parts of the world.