Monday was the first day of the Republican Convention where Donald Trump will be confirmed as the party's nominee for November's presidential election. On Thursday, when he delivers his keynote speech, he will likely repeat his tirade against free trade agreements, which has become his trademark.
On purely economic grounds, though, he is simply wrong. Among economists, there is a broad consensus that the North American Free Trade Agreement (NAFTA) has been beneficial. Overall, NAFTA has substantially increased trade volumes and made Canadians more productive, which means that they enjoy higher living standards thanks to free trade.
There is another, unsung benefit of free trade that would also disappear if Donald Trump gets elected and decides to roll back NAFTA and other trade agreements. Simply put, free trade helps the environment.
First, free trade changes where goods are produced. Producers move to where production is the most efficient, and in many instances, there is an environmental benefit to this.
Consider the case of agriculture. Free trade ensures that food is produced as efficiently as possible in the most appropriate places. One recent study concluded that around one fifth of productivity improvements in agriculture came from moving to more appropriate locations. Since free trade liberates land that is being unproductively exploited, there is a strong environmental benefit in terms of reforestation. Moreover, shipping enormous quantities of food by boat requires far less energy per ton than shipping food by train or truck, which can actually mean fewer emissions per ton of food.
To be sure, the manner in which trade liberalization takes place is crucial in determining the extent of the positive effects.
Additionally, free trade increases the availability of environmentally-friendly goods by lowering their prices. Individuals can then increase their consumption of such goods, and firms can adopt production techniques that make use of these goods.
One telling example is the market for used cars. Since a large portion of the pollution associated with automobiles is emitted during their manufacture, increasing the lifespan of a car limits total emissions. Trade in used cars across borders tends to be highly restricted, so that even a small amount of liberalisation leads to significant increases in trade volume, with substantial environmental benefits.
In 2005, trade restrictions on used vehicles between Mexico and the United States were eliminated and 2.5 million used vehicles were subsequently imported into Mexico. Since the imported cars were cleaner than existing vehicles in Mexico, free trade in used cars reduced pollution in that country. Moreover, the cars sold to Mexico were dirtier than the existing stock of vehicles in the United States. This means that Americans were selling their used cars to Mexicans and buying cars that were more fuel-efficient, thereby reducing greenhouse gases. Basically, free trade in used cars reduced emissions per mile in both countries.
To be sure, the manner in which trade liberalization takes place is crucial in determining the extent of the positive effects. However, many studies find strong environmental benefits from free trade, with very few signs of detrimental effects. In short, free trade is good for the environment as well as for people's living standards. American voters should bear this in mind when they hear Donald Trump slamming free trade.
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