I spent most of my time this week on the Central American Free Trade Agreement, which passed the House last night by a two-vote margin. As this close margin indicates, there was significant opposition-- my favorite was a T-shirt I saw on the Metro that said "Stop CAFTA, Son of NAFTA." Anyhow, the fact that there was even a substantive debate on the bill got me to thinking--are politicians, journalists, and the public really that ignorant about economics?

Anti-CAFTA arguments usually fell into one of two categories. The first was that allowing tariff-free imports from Central America would cost Americans jobs (80% of exports from the region already enter the U.S. sans tariffs thank to the Caribbean Basin Initiative, but, never mind; I've already said CAFTA's opponent don't understand economics). The reason being, of course, that many products can be made in Central America and shipped here (by both American and Central American companies) cheaper than they can be in the U.S.

Now, people some people will lose their jobs, and I guess, given the fact that they represent a district that isn't representative of the country as a whole, it makes sense that some Congressmen from textile and sugar districts voted 'no.' But, the key point is that those jobs lost are lost because those in them aren't using their labor most efficiently. Thus, they will be replaced by BETTER jobs--arranging a company's Central American operations, for instance.

Moreover, most Americans are consumers as well as workers, so consider it from the consumer point of view. What happens when things are cheaper? Americans have more money. And what will they do with that money? Given our negative savings rate, spend it. And, what happens when money is spent? Those who produce whatever it is spent on have more money. And what does those who produce spend money on? Their biggest expense is often labor. Which means? That's right, jobs.

Furthermore, why shouldn't Central Americans who can do the job cheaper than Americans get the jobs? This ties into the second objection: it's somehow not fair to Central Americans than their wages and labor standards are lower than ours. This is the argument most often advanced by lefty activists, and it's both ignorant and patronizing. To see why, consider the counter-factual: what would these Central Americans do WITHOUT companies lured by CAFTA? Work somewhere else with the same (or worse) wages and labor standards. And, if someone leaves another job to work at a CAFTA-created job, it's because something is better about it--likely wages and perhaps quality of life. In other words, free trade opponents really want to deny opportunities to the very people they're claiming to help. They do make good T-shirts, though.