Mad About Trade: Why Main Street America should Embrace Globalization

by Daniel T. Griswold

Mad about Trade is the much-needed antidote to a rising tide of protectionist sentiment in the United States. The book explains the benefits of free trade and globalization for middle-class, Main Street Americans exposed to a barrage of negative claims from politicians and commentators such as Lou Dobbs. It offers a spirited defense of free trade and globalization that engages the populists on their own turf. In eight timely and provocative chapters, the book shows how middle- and low-income families benefit from import competition, and how a more globalized U.S. economy has created better jobs and higher living standards for American workers through the ups and downs of the business cycle.

Genres: Economics, Politics

208 pages, Hardcover

First published November 1, 2009

About the author

Daniel Griswold is the former director of the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute in Washington, D.C, and the author of the new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization. Since joining Cato in 1997, Mr. Griswold has authored major studies on globalization, trade, and immigration. He’s written articles for major newspapers, appeared on CNBC, C-SPAN, CNN, PBS, and Fox News, and testified before House and Senate committees. Earlier in his career, Mr. Griswold was editorial page editor of a daily newspaper, the Colorado Springs Gazette, and a congressional press secretary. He holds a bachelor’s degree in journalism from the University of Wisconsin at Madison and a diploma in economics and a master’s degree in the Politics of the World Economy from the London School of Economics.

Reviews

[Cameron]

Interesting to see the arguments and promises of free traders in the early Obama years. In 2020, with an even more competitive and aggressive China, many of the promises and examples of the free traders ring hollow.

It's a worthy read to see the arguments that got us to the current state we are in, and also to look at the shifting political landscape surrounding trade with the rise of DJT. There are also many valid pro-trade arguments that demonstrate pie expansion and would apply especially advantageous for partner countries such as in the EU and Japan.

Politically, however, Griswold's bragging about his wardrobe of imported goods holds up even less today than it would in 2009. Geopolitically, the mutually-beneficial nature of free trade and global stability may not apply between geopolitical rivals as well.

If tree trade was working well for Americans in 2009, 2020 according to Griswold's own metrics of relative industrial output and high-value industrial competitiveness seem to have crashed or are being proven wrong with the Chinese case. His reliance on historical records for relatively recent developments (trade relations with China normalized in 2000, while this book was published in 2009), demonstrates that Griswold only evaluated a brief point in time and was unable to identify larger trends, either due to a lack of data or a reluctance to project changes into the future. While in 2009, trade and relative economic power may have seemed to be less threatening, it seems from the present vantage point that 2009 was just a point in a larger relative decline in U.S. economic competitiveness and a rise in Chinese economic power. Just because something seems okay in the near present, doesn't mean it will be at a later date. It's worth noting that just a year after this book's publishing, China overtook the U.S. in manufacturing output by value and despite strengthening trade ties, aggressiveness from China's "Wolf Warrior Diplomacy" has grown radical.

A couple observations:

At one point, Griswold unintentionally makes a pro-protectionist argument for why tariffs are good and do not stifle trade (using the U.S. auto industry's international affiliates, as well as foreign automakers' domestic production facilities to demonstrate the benefits of international business for both foreign target markets and domestic parent companies).

Glaring issue not addressed are issues about innovation and geopolitical competition. Innovation in the U.S. has been less rewarding economically despite the large investments the U.S. government makes, in part due to the offshoring of manufacturers. This prohibits industrial experimentation for products, the implementation of new concepts, and cost-cutting manufacturing techniques. The ability to improvise and improve basic designs while in the process of creating or manufacturing have been instrumental for many critical feats of human ingenuity in the past, such as the Apollo Moon mission's rocket technology. The stifling of industrial improvisation hampers the transfer of basic research, which the U.S. government programs and Universities excel at, and their translation into marketable and competitive products. In order to compensate, R&D is often offshore to be closer to manufacturers and industry. The geopolitical issue speaks for itself today as a resurgent China is becoming more willing to coerce and threaten others on the global stage.

3/5

[Barb]

I've always felt that free trade was a good thing. This book made me understand how important it is in so many ways I never considered and how misunderstood it is by politicians, consumers, workers, everyone. Also, our government has made it all so very complex and, in the end, that hurts everyone.

[Josh]

In celebration of today's SCOTUS ruling, the block quote below comes from a book review I posted in April 2013:

Probably the one thing I found most annoying about the last presidential election (and most election cycles in general) is the constant bashing of globalization. One of President Obama’s campaign talking points involved ending tax “incentives for companies that are shipping jobs overseas.” Mitt Romney wasn’t much better, claiming he was ready to declare China a “currency manipulator” had he assumed the White House, which would’ve likely resulted in protectionist trade policies.

This epitomizes what I hate most about politics: crass emotional appeals without explaining the truth.

For anyone who wants the truth on trade and globalization, read Daniel Griswold’s 2009 book Mad About Trade: Why Main Street America Should Embrace Globalization.

Trade is not about a jobs program; it’s about a providing us with a higher standard of living, enabling us to peacefully engage in the world through mutually beneficial transactions. Not only does it raise our living standards, it brings the world out of poverty, democratizes nations, and expands basic civil rights.

The evidence Griswold provides is overwhelming:

-Greater variety from imports boosts American incomes by $400 billion per year, or $1300 per person or $5000 for a family of four.

-Global integration add $1 trillion to US GDP. Achieving global free trade would add $450 billion, or $4000 to a family’s annual income.

-600 million are no longer in poverty in China since market reforms and expanded trade policies were implemented.

-The “shipping jobs overseas” rant may score politically, but it doesn’t bear reality. According to economists Mihir Desai, C. Fritz Foley, and James Hines Jr., a 10% increase in capital investment to existing foreign affiliates was associated with a 2.2% increase in domestic investment and a 4% increase in domestic workforce compensation.

-The net loss of manufacturing jobs has been dwarfed by the gain in higher-paying service sector jobs.

-Among the top 28 countries which contain the most economic freedom (including the freedom to engage in international transactions), 22 have a “free” rating by Freedom House, a think tank that ranks countries based on freedom of speech, religious freedom, and freedom to participate in open elections. Among the 28 countries with the least economic freedom, only 5 receive the “free” rating by Freedom House. As Griswold explains, “People in a free and open market tend to see people outside their ethnic and religious group not as threats but as potential customers and business partners.” This breeds “tolerance and compromise in their everyday lives, essential public traits for a democracy.”

Griswold explains how the US corporate tax code provides disincentives for US companies to repatriate their foreign earnings into the US. Far from being a “tax break for shipping jobs overseas,” the tax code creates a penalty for investing in the US economy. By extending the US corporate tax rate to the deferred international earnings of US multinationals as some have suggested, the results would be (in Griswold’s words) “lost sales, lower profits, and fewer employment opportunities in the parent company back on American soil.”

Another important discussion in the book relates to our trade with China. Chinese imports haven’t so much replaced domestic production as much as they’ve replaced imports from other Asian regions. Nor does the trade deficit with China factor that approximately two-thirds of the value of imports from come from other countries, with the US claiming much of that value with technology imports.

My only critique: I think Griswold possibly undersells the “jobs” argument in favor of trade. While trade is not about jobs, there is evidence that trade lowers unemployment thanks to increased productivity and efficiency.

If there’s only one book you read on trade and globalization, make it this one (although I’d also recommend Johan Norberg’s In Defense of Global Capitalism to learn about globalization’s international benefits). Highest recommendation.

[Michelle]

Too bad I can't give this one more stars. Very well done and thorough effort showing clearly WHY international trade is so vital. Can we make it required reading for all politicians, union leaders and journalists???
Calmly and competently demolishes the protectionist myths, one by one, then clearly shows the benefits to U.S. consumers AND the poor around the world of lowering barriers to trade, and then, as frosting on the cake, points out exactly how much our stupid, nonsensical tariff and quota and import restrictions cost the American consumer. My favorite line in the book is when Griswold says our current tariff system looks like it had been randomly generated by a computer, or typed up by a room full of protectionist monkeys. LOL Good policy recommendations in the last chapter. Readable, vital information.

[Jay Brand]

Fabulous rejoinder to the many myths that circulate among pundits & politicians surrounding globalization and free trade; some of the common myths addressed and corrected include "globalization drives down wages for American workers;" "globalization moves manufacturing jobs offshore;" "globalization reduces the quality of working conditions for employees in the developing world;" "some American industries and jobs require government protection in the form of tariffs, import quotas and/or other policies;" "globalization reduces the standard of living for American workers and consumers" many others.
Thoughtful citizens from any part of the political spectrum would benefit from the careful analyses that Griswold provides.

[Ralph Orr]

Outstanding defense of free trade and the follies of protectionism. Argues from an economic, political and moral perspective. Castigates policitians and media demagogues of all persuasions. A must read for those interested in the subject. My only concerns is that he seems calously unconcerned about finding solutions for those displaced by competition. I also began to think he thought that free trade would usher in Utopia. Perhaps a little too enthusiastic. Nonetheless, an excellent presentation.

[DrewB]

It can be dry at times, but overall there is a lot of great information here. Obviously, this book leans more libertarian, but that is because of the strong evidence (numbers) that are provided. It helped a lot to inform me on big debates that are happening in our country right now, and led me to think that a lot of it is (unfortunately) run by emotion more than reason. Very informative - a good read for being actually about trade.

[Jason]

Weak premise and full of right wing blather. The basic point is that who cares where the job is as long as we can have cheap products here. Work a crummy job at some burger joint so you can afford the disposable products imported from Mexico, east Asia, or other low market areas.

Be happy that their standard of living is higher.

Be happy that someone beside you is getting rich.

[Billy]

Very good argument for trade. Dispels many of the oft quoted negative "facts" about trade and globalization and gives arguments why trade is good for the middle and lower class. Book is written is such a way that anyone can read it.

[Joe]

Great writing on the importance of free trade & low tarrifs. Can't wait to see what he writes next!

[Max]

decent

[Kyle]

Katie B.

[Craig Adamson]

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