Theoretically, free trade sounds like a great idea. Consumers get the benefit of increased competition for their buying dollars, manufacturers get to locate or source from the lowest cost labor pool and exporters have the opportunity to sell into new markets with no tariffs. Unfortunately, there are fundamental real-world flaws that exist with free trade that have led to the most massive wealth transfer in the history of the world. The United States has not witnessed a trade surplus since 1975, and since then $4 Trillion has been lost through trade deficits caused by elimination of tariffs.

The most significant flaw with free trade agreements is that they are impossible to enforce, making competition impossible. Free trade depends on the premise that all countries will play by the same rules. However, in the real world assuring that this occurs is incredibly expensive, time consuming, and inefficient to contest. The reality is, tariffs are not the only barrier to fair trade. Trade is impacted by much more intangible state-sponsored “trade weapons” such as currency manipulation, technology transfer requirements, joint-venture policies, selective customs policies, underhanded government subsidies and countless other tools. Under free trade agreements, the U.S. essentially relies on faith-based economic policy with other countries.

Without the presence of tariffs, a free trade agreement places the country with lower overall wage rates in a superior position. When two countries with huge differences in labor costs engage in “free trade” eventually all the production that benefits the country with higher wage rates will be transferred to the country with lower wage rates. The transfer is supposed to be offset with lower prices being enjoyed by the outsourcing country, but in the long run it leads to the destruction of the manufacturing capabilities of the more developed country and a wider spread in income among its citizens. This is exactly what has happened to the United States.

A logical question is why the lack of attention to this issue. There has actually been a great deal of attention paid to this issue despite persistent free-trade mantras. In the 1980s there was tremendous concern among Reagan administration officials that the U.S. was losing its competitive position in the world. Reagan enacted numerous protectionist policies in an effort to stem the hemorrhaging trade deficit. Media attention was centered on a doomsday scenario whereby Japanese and Arab interests would come to own and control everything in this country. Now, a frightening amount of formerly owned U.S. companies are in the hands of foreign companies and interests.

The dangers and horrible consequences of free trade agreements have not gone unnoticed. A plethora of notable politicians, economists, journalists, and industrialists have stepped up and spoken against this 30-year period of tail-spinning. Names such as Warren Buffet, George Soros, Pat Buchanan, Sen. Hollings, Sen. Lieberman, Ross Perot, Pat Choate, Eamonn Fingleton, Paul Craig Roberts, and Lou Dobbs have all voiced their concerns.

John Kerry had announced that if elected he promised an immediate review of all trade agreements affecting America. George W. Bush even conceded for a time that U.S. steel tariffs were necessary to protect that critical industry (before eventually bowing to free-trade lobbyist pressure). Now we see that through a lack of innovation and adaptation, the U.S. steel industry is all but irrelevant in the global market.

The department of defense has recently commissioned a U.S.-China review board to identify our dangerous dependence on the communist trading partner. The findings of this board are truly shocking and fly in the face of every proponent of free trade.

So given all this insurmountable evidence to the contrary, why is it that free-traders continue to sell out the country at the expense of national security and our future generations? The answer is that every person, corporation, and politician tends to do what is in its own short-term best interest, be they motivated by pure profit or reelection.

At an individual level, our economy is driven by consumption (70 percent of GDP is consumer spending). Since most of this consumption is on foreign goods, to restrict that flow would have a devastating effect on many industries. Industries that would suffer include retailing, as most textiles are produced over seas, as well as electronics equipment and components; freight and shipping industries would suffer as trillions of dollars flow over transportation routes each year; and finally, marketing, advertising, law, and banking, are all tied directly to American consumption of foreign goods.

On the other side of free trade, encouraging foreign manufacturers to produce in the U.S. creates a big defeat for us. For example, Ohio and Indiana competed to get a new Honda auto factory. Indiana succeeded. They gave Honda an $81 million enticement gift and other intangibles. Honda said they would put up a $500 million facility to produce 200,000 cars per year. They did put up a facility, cost unknown. And 23,000 Americans applied for 2,000 jobs. Two thousand Americans are now turning out 200,000 Honda cars per year in Indiana which translates to one American supplying the labor to turn out 100 cars per year. One American can earn on average about $50,000 per year to turn out $2,000,000 worth of cars (Average car sale $20,000 x 100 cars = $2,000,000). This may be a simplification, but the American labor cost is approximately 3 percent. Almost nothing is made in that factory.

The sell-off of American companies is greatly rewarded by those doing the selling. Given record low capital gains taxes and other incentives, CEO’s and shareholders of major companies stand to gain more from the one-time bonus of selling their company at a massive premium to a foreign purchaser than from continuing to run them on salary basis.

Countries like Japan, Germany and China take great pride in protecting their industries from foreign purchasers. They have government agencies devoted entirely to doing just that. In the U.S., we seemingly do everything to encourage foreign takeovers. Of course, no politician likes being the bearer of bad news. Most politicians are not willing to risk their political careers by saying we must take drastic action to the short-term detriment of many Americans, even though that is precisely what they are charged with doing.

Free trade is a convenient, well-packaged ideology that resonates well with consumers, and lines the pockets and ambitions of CEO’s and politicians. The result is that nearly 50 percent of all new cars now sold in this country are foreign. Our domestic auto manufacturers are consistently losing market share and teetering perpetually on default.

There exists in America, now, a stigma that buying American is cheap, undesirable, of poor quality, and in poor taste. Clearly, the group unquestionably damaged by free trade is American industry in general. As a result the American middle-class that relies on American industry for employment and opportunity is being destroyed and falling further and further into debt.

No rational argument exists to continue policy that leads to free trade agreements. FTA’s are damaging America’s ability as a country to compete, even as the results of free trade continue to provide cheap goods to American consumers. If we do not reverse this path of selling our assets and borrowing from foreign sources to finance our lifestyle of imports, we will eventually receive a call on our debt and will find our cheap goods cost much more than we had ever imagined.

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