To the Editor:
I would like to share my thoughts about President Donald Trump’s border tax and keeping jobs in the U.S.
I am an Armor lieutenant on Fort Hood who just recently returned from Afghanistan,
Trump believes that because we have a trade deficit with Mexico, we need to renegotiate our trade deals with them. In order to understand the flaw of this argument, we need to apply the law of comparative advantage first discussed by Adam Smith, and later solidified by David Ricardo.
The law states that if a country can supply us with a commodity cheaper than we ourselves can make it, then we should use the proceeds of our industry, in which we have a comparative advantage, in order to purchase it.
It is more efficient for countries to specialize in certain industries that they have an advantage in and then trade with countries to receive goods produced from industries they do not have an advantage in.
For example, imagine a very small town in which the only residents are a baker and a blacksmith. Both residents have their obvious advantages in baking bread and forging metal. Would it be more efficient for both individuals to bake their own bread and forge their own metal? Or would it be more efficient for the baker to bake bread and the blacksmith to forge metal and then the individuals would trade with each other so they both receive the bread and metal that they require?
Obviously, the more efficient model of our imaginary town is the latter. We can apply the example of the small town to a broader model in which our two residents are now different countries.
Right now, Mexico has a comparative advantage in manufacturing motor vehicles because they have access to a larger, cheaper unskilled labor market. Americans need to concede this advantage to Mexico and accept that we have a comparative advantage in the other industries such as the services and technology industry.
Instead of each country trying to produce every imaginable good themselves, it is more efficient to let Mexico specialize in the manufacturing industry and America to specialize in other industries. After each country does this and trades with one another, they receive the goods that they require in a cheaper, and more efficient, way.
Donald Trump was elected partly because he promised to bring back manufacturing jobs to the United States. If we accept the law of comparative advantage, then bringing manufacturing jobs back to the United States will make our economy less efficient, and in turn, Americans will pay higher prices for the goods they require.