In reality, trade seldom free or fair

In his letter ("Free trade does not kill jobs," Aug. 30), Thomas Jandl responded to my recent opinion piece in The Sun ("What's killing jobs?" Aug. 27) by questioning my analysis of our trade practices. He misunderstood the basis for the piece. His basic assumption is that all nations proscribe to free trade policies when, in fact, we are the only nation that naively prompts free trade.

Economic success stories in Japan, South Korea, Singapore, Taiwan and Hong Kong are because of their practice of mercantilism. They do not engage in free trade. They have few natural resources; import raw materials; restrict imports of finished goods; limit foreign investments in local markets; obtain whatever foreign technology is necessary by any means; produce finished goods; and sell those goods to the U.S. All of these economies were built over the last 40 years on the backs of unemployed, highly skilled U.S. citizens. The entire wealth of these nations was simply the difference between raw material costs and finished product sales to the U.S. adjusted for freight costs.

Wolfgang Stolper and Paul Samuelson, Nobel laureate and this country's most brilliant economist, developed models in the 1940s promoting free trade which became the cornerstone of U.S. industrial policy. Five decades later, Mr. Samuelson stunned his peers by suggesting that entire nations can lose from free trade. He wrote that Americans are still working but are in jobs that pay less and are shorn of benefits. His epiphany produced a view that as a whole the U.S. is relatively worse off because of free trade. A recent MIT study shows that corrected for inflation, median wages for men in the U.S. between 30 and 50 dropped 27 percent from 1969 to 2009.

Mr. Jandl points out that Austria is one of the world's most successful economies because of their exports. China and Germany recovered rapidly from the recession because they have high rates of savings; manufacture goods; and most importantly run massive trade surpluses. Countries that have run positive trade balances throughout history prosper; countries with massive trade deficits don't last very long.

India also has a history of mercantilism. In addition to the indirect loss of jobs in our software development industry to low wage, high value products from Infosys, Wipro, and Tata in India, there has been a direct transfer of high tech jobs by American companies to India. IBM has approximately 100,000 employees in India.

We have allowed unequal trade arrangements to develop to the detriment of our entire economy. Warren Buffett's trade proposal corrects the imbalance but in no way inhibits trade — there are no countries singled out for retribution; there are no quotas, tariffs; limits on investment in U.S. manufacturing companies; or demands for local content on goods sold in this country. A similar process was used successfully between 1974 and 1982 to balance foreign and domestic crude oil supplies among U.S. oil refiners.

Mr. Buffett's proposal requires cumulative global reciprocity in exchange for access to our markets. The foreign exchange imbalance would immediately disappear and U.S. jobs would immediately be created. Personal and corporate taxes would increase reducing the deficit. Pressure on the dollar would be removed and it would remain the reserve currency

Free trade only exists in academia. In the real world all nations — except for the U.S. — strive to gain an economic advantage by increasing exports and limiting imports.

Charles Campbell, Woodstock

The writer is a retired senior vice president with Gulf Oil Co.

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