Teaching About the Benefits of Trade
Editor's Note: International trade has always been a controversial issue, and recently, it has been dominating the headlines. Bill Lane, Executive Director, Trade For America, discusses the benefits of free trade and provides resources for teaching about it.
By guest blogger Bill Lane
Since its inception, America has relied on trade to grow, whether that trade was conducted with native tribes, between colonies, or even with other countries. What's amazing is these early Americans did so without studying the writings of Adam Smith or the models of supply and demand. Now, this intuitive sense for the importance of trade carries on in our modern economy, evident even in our nation's youngest learners.
From an early age, elementary school students instinctually grasp the importance of trade as the key to a good deal. From baseball cards to Pokémon, or crackers and chips at lunch, students understand they can achieve better outcomes through trade. So, despite this intuitive sense that trade is important, why has the issue become such an emotionally charged subject for adults? After all, one in five—or 36 million—American jobs depend on trade. Isn't it better to trade with the world than with consumers only within one country, state, or community? In fact, today 95 percent of the world's consumers live outside the United States.
Resistance to trade is partly a result of not all companies being created equally. Some companies produce goods or services that are globally competitive. These enterprises and their workers generally want to sell their wares to the world, provided there is a level playing field. This includes goods from American farmers, ranchers, manufacturers and service providers.
However, government policies, such as subsidies and market barriers, can distort open competition, prompting some industries to seek remedies to ensure fairer competition. The United States has targeted processes to review and address such trade policies from other countries. Yet, broad-based market barriers such as tariffs, quotas, preferential treatment, or even subsidies are market-distorting. These trade remedies, while useful in certain cases, require a thoughtful, strategic approach, and they must be planned and executed with precision. If they aren't, workers and consumers are the ones who will be left holding the bag with fewer jobs and higher prices.
The more effective and longer-lasting approach is to have policies that improve everyone's competitiveness through better infrastructure, smarter regulations, and higher-quality education.
Below are examples of classroom discussion prompts, lesson plans, and resources to help you teach these complex concepts.
Benefits of Trade by the Numbers
Last year, the U.S. exported more than $2 trillion in goods and services to more than 235 countries and territories. For the nearly 300,000 American businesses that export, free trade is vital for access to these foreign markets. Many customers in these markets would not be able to access U.S. produced goods without free trade agreements. For small- and medium-sized businesses, which make up 98 percent of these exporters, their success depends on access to these markets.
Trade benefits extend to U.S. workers in a variety of sectors, but specifically those in export-intensive industries. These export-oriented jobs often pay higher wages than jobs not supported by trade; research shows jobs in these industries pay roughly 16 percent more, on average, than jobs in less export-intensive industries.
How to Teach It
Have students investigate U.S. trading partners and local companies that participate in international trade. Students can complete the "Who Do We Trade With and Why?" activity on Asia Society's Mapping the Nation website (Activity #3 in the Toolkit). As part of the activity, students discuss whether trade is beneficial to their local community and the nation. Students can use websites provided in the activity or find others on their own.
Benefits of Trade to Consumers
By far, the biggest group that benefits from free trade are all of us—the consumers—who experience lower prices and more product choices.
In 2014, American families saved as much as $13 billion on goods like clothes, computers, and refrigerators through lower tariffs created by trade agreements. In fact, imports increase purchasing power and real wages, effectively allowing families to spend $10,000 more each year.
Perhaps the most important benefit of trade is that it promotes peace and understanding. The European continent, which for centuries was continually in conflict, has experienced peace for three consecutive generations due in part to more commerce made possible by fewer trade barriers. From 1995 to 2011, the number of EU jobs supported by exports of goods and services rose by 67 percent to reach around 31 million. In short, trade is the key ingredient that makes the often-stated goal of peace and prosperity attainable.
Trade remains vital to the prosperity and success of businesses, farmers, ranchers, workers, and families—virtually the entire American and global economies.
How to Teach It
Students can think about the products they own, including clothing, where they were produced, and how much they cost, which may well lead to a discussion on sweatshops. The Foundation for Teaching Economics has created a lesson plan called, "Standing Up for Sweatshops?," which asks students to think about how income is affected by the market value of the items being produced. Additionally, students will learn that, "investment in factories, machinery, new technology, and the health, education, and training of people can raise future standards of living."
Tariffs and Free Trade Agreements
Today, the threat and reality of tariffs and retaliation have become front page news. Recent headlines have featured tariffs on solar panels, washing machines, steel, aluminum, and all things made in China. Most recently, potential tariffs have been threatened on imported autos.
While trade absolutely requires the enforcement of rules to ensure that participants are acting fairly, there are wrong ways to do that. Beyond renegotiating certain agreements, the U.S. approach to date has been to impose or threaten tariffs on foreign imports as a tool when conducting trade negotiations. Tariffs ultimately hit U.S. consumers, reducing choice and making goods more expensive while decreasing broader U.S. business competitiveness on the global stage.
Here are a couple of examples of what's at stake with tariffs and ongoing trade negotiations:
China and the U.S. are the world's two largest economies. However, escalating tensions between the two economic powerhouses are being fueled by tariffs on $300 billion of goods exchanged between the two economies.
While the Chinese government has long engaged in discriminatory trade practice—like intellectual property theft and forced technology transfers, which injure U.S. businesses—tit-for-tat unilateral tariffs will also result in significant harm for U.S. businesses and workers. In fact, tariffs and retaliatory tariffs are expected to damage U.S. businesses and farmers and result in a net loss of nearly 134,000 jobs.
To effectively achieve meaningful reforms in China's trade practices and achieve our policy objectives, it's important for the current administration to engage with U.S. allies. Additionally, reaching a bilateral agreement can reduce trade tensions and protect U.S. businesses and workers that are being harmed from tariffs.
For over two decades, the U.S.'s trading relationship with its neighbors, Canada and Mexico, has been governed by the North American Free Trade Agreement (NAFTA). NAFTA, an agreement for reduced trade barriers between the U.S., Canada, and Mexico, went into effect in 1994 and has since resulted in a win-win-win for all three participants. In the U.S., trade with Canada and Mexico, facilitated by NAFTA, supports nearly 12 million jobs.
However, the U.S. has embarked on an effort to renegotiate the agreement, something that hasn't been done since the agreement went into effect in 1994. As long as these efforts strengthen and modernize the trilateral agreement and allow U.S. businesses to continue accessing their two largest export markets, renegotiating the agreement is fine. After all, when NAFTA went into effect, the internet was merely another tech fad, while now it facilitates commerce in North America and across the world.
Leaving NAFTA cannot be an option. Withdrawing from the agreement would result in the loss of nearly 2 million U.S. jobs, reduced access to foreign markets, and higher tariffs on goods crossing the border.
How to Teach It
The Stanford History Education Group's "History of NAFTA" asks students to think about the different opinions surrounding the adoption of NAFTA.
The Bottom Line
Around the world, export-oriented industries often have a different view of trade than import-oriented industries. This is an area where the middle ground works to make trade fair. However, the real tie breaker in these contentious debates is the consumer, who wins from free and fair trade. And, despite some bad actors, the benefits of trade remain clear to these consumers. By lowering costs for businesses, trade results in increased choice and affordability of goods for consumers.
How to Teach It
The San Diego Deputy Sector Navigator has a Global Trade and Logistics Curriculum for high school students. One lesson plan, "Import Tariffs and the Bottom Line," helps students understand tariffs through a case study about Ella, who wants to sell her Etsy product internationally.
Importance of Trade Education
It's easy for critics of trade and supporters of tariffs to make their argument because the benefits of trade, at first glance, aren't felt in an immediately acute way. This difficulty in messaging highlights the importance of ensuring people are educated about trade. That's why we put together Trade for America, an effort between businesses, manufacturers, and farmers with a mission to highlight the value of trade agreements both in the abstract, and in terms of specific deals.
Educators can help continue this process by showing that trade's effects on the U.S. and global economy are both broad and deep. With your help, we'll not only educate people participating in current trade debates, but also lay the foundation of trade knowledge for future generations. After all, the future experts on trade may be your students.
If you're interested in learning more, visit the Trade For America website.
- IMF Center: Thinking Globally: Effective Lessons for Teaching about the Interdependent World Economy are eight classroom-tested lessons on globalization, comparative advantage, economic growth, exchange rates, and other international topics.
- National Geographic: The Trading Game a simulation of global trade.
Image created on Pablo.