The FCC Restoring Net Neutrality Is More Unnecessary Than Ever

The Biden administration continues its quest of reviving subpar, useless policy ideas. Earlier this month, it was student loan "forgiveness." Last week, the Federal Communications Commission (FCC) restored net neutrality by reclassifying the internet as a Title II telecommunications services. 

Net neutrality is the idea that internet service providers (ISP) should treat all internet traffic equally. It entails the prohibition of charging different rates or offering different service levels for those using services that require more data (e.g., YouTube, Netflix). Looking at the economics of net neutrality, net neutrality is another form of price regulation that mistakenly treats broadband internet as if it were a monopoly. Price differentiation exists in multiple markets, including gasoline, clothing, and airline tickets. Why should internet be any different?

There were dire predictions that ended up not coming true with repealing Title II classification, including the creation of an ISP cartel, as well as rampant censorship and loss of privacy.  Repealing net neutrality did not mean the end of internet as we know it. Here are some examples of what happened during the implementation of Title II in 2015 and after its 2017 repeal:

• Improved broadband access. By the FCC's own admission, the pace of providing Americans with access to fixed terrestrial broadband and mobile broadband was nearly three times slower under Title II. 
• Improved broadband services ranking. According to the consortium M-Lab and its global broadband ranking, U.S. broadband went from being ranked 20th in 2017-18 to being ranked 12th now. If repealing net neutrality were that horrid, U.S. broadband would not have risen on the global stage. 
• During the pandemic, streaming service usage surged. In the United States, streaming services fared well and actually stayed stable in spite of growing demand (Kovacs, 2020). Contrast that with the European Union, which has had its own version of net neutrality. During the pandemic, the European Union had to ask Netflix and YouTube had to downgrade their streaming quality so the internet did not collapse in Europe. 
• Broadband innovation. Those in favor of net neutrality thought that net neutrality would kill innovation, even though the American Enterprise Institute examined 53 countries to find that net neutrality does not spur innovation (Layton, 2017).
• Increased broadband investment without net neutrality. A study of 32 OECD countries found that net neutrality regulations slow down the investment and development of new fiber-based broadband connections (Briglauer et al., 2023).
• Faster download speeds in the United States and effects on throttling. There was no statistically significant impact on throttling of internet services in the United States within a year. If anything, FCC data show that download speed increased between 2018 and 2021. 

• Fast download and upload speeds in comparison to other countries. A 2022 Phoenix Center study shows that the United States has faster download than other countries, as well as comparable upload speeds to other developed nations (Ford, 2022). 

Postscript: It is not simply the irony that the administration pushing for net neutrality is the same administration being accused of coercing social media platforms to remove what the administration deemed unfavorable content that I find frustrating. It was little wonder that I was happy when the Title II classification was removed in 2017. Net neutrality does nothing to spur innovation or protect consumers while slowing internet speed. I can only hope that either the next administration overturns Title II classification or that the federal courts overturn it. 

Reflecting on the Moral Case for Globalization

For President Donald Trump, it is about "Make America Great Again." French politician Marine Le-Pen believes that there is not a "Left or Right", but that the real fight is between "patriots and the globalists." For these nationalistic politicians, there is an intention to malign globalism by maligning the globalist elitists and making those who are opposed to them do not care about their nation's citizens. It is the "us versus them" and zero-sum mentalities that make up the mindset of the more nationalistic and protectionist elements in the Western world's politic. 

This theme and reality came up when I was reading a Cato Institute essay that was published last week: The Moral Case for Globalization. I enjoyed reading the essay because it acted as a reminder of why I am in support of freer trade, borders, and expression of ideas. But first, a definition of what globalization is. As the essay's author, Cato Institute scholar Tom Palmer, explains, "Globalization is the relatively free movement of people, things, money, and ideas across national or political borders." Greater globalization means reducing or removing state-enforced restrictions on these voluntary exchanges. Ultimately, "a consequence of increasing globalization is an increasingly integrated and complex global system of production and exchange." 

The principles of exchange for mutual advantage are vital for liberty. As Palmer points out, "There is evidence that our commonly accepted norms of morality emerge from trade, which established the importance of legitimate expectations and reputations, both of which are necessary fort he emergence of law and morality. Morality itself is a product of exchange, and the more trade, generally the more humane a society is." 

There is also a consequentialist argument the author makes, mainly that reducing barriers to trade, travel, and other forms of exchange across borders "have been spectacularly positive for the world's poor, as wages have increased, jobs have become safer, and the use of children for labor has plummeted. Increasing wealth, in turn, is strongly connected to improving health, and the global spread of improvements in medicines and technologies has improved health outcomes even in regions that have not participated as much in the exchange of goods." Earlier this month, I wrote about how more free trade results in reduced poverty domestically and internationally, so this does not surprise me. 

There are other benefits that Palmer mentions, including greater ability to preserve other cultures and traditions, as well as greater reduction in war democracy and peace become more salient norms. To echo the author's conclusion, "The world is better when barriers to free and voluntary cooperation are reduced. The world is better because of globalization." It is difficult not to come to this conclusion after reviewing the data across multiple topics. 

My 1,000th blog entry was dedicated to why I am libertarian from ethical and consequentialist lenses, which includes the importance of globalization. Allowing more people to be freer, healthier, happier, and more prosperous seems like a noble goal, which is why advocating for removing those barriers that stifle voluntary and mutually beneficial exchange has been a major theme of this blog. For more information on the benefits of globalization, you can view the video from John Stossel released earlier this month debunking globalization myths or you can read the list of selected essays below. 

• The Case for Globalism (American Enterprise Institute)
• Defending Globalization (American Institute for Economic Research)
• Food Globalization Puts Food on Your Plate (Cato Institute)
• Globalization: A Race to the Bottom or the Top? (Cato Institute)
• Globalization Creates a Global Neighborhood, Benefiting All (Cato Institute)
• The Globalization of Ideas Enriches the World (Cato Institute)
• Globalization: A Tinfoil Hat-Free Critique (Foundation for Economic Education)
• In Praise of Capitalist Globalization (Foundation for Economic Education)
• In Defense of Globalization (International Monetary Fund)

Biden Should Keep His Protectionist Nose Out of Nippon Steel's Acquisition of U.S. Steel

In December 2023, U.S. Steel Corporation (U.S. Steel) announced that Nippon Steel was going to acquire U.S. Steel. Nippon Steel (Nippon) is currently the fourth-largest steel producer worldwide and would become the third largest post-acquisition. What should be a simple business transaction in the private sector has been sucked into the politics of an election cycle. 

In March, President Biden expressed his opposition to the acquisition by saying that U.S. Steel is to remain in the United States. A day later, Nippon Steel announced that there would be no plant closures or layoffs in the United States as a result of the acquisition. Of course, that did not stop Biden from visiting the United Steelworkers Union headquarters last week. After Biden vowed that U.S. Steel would remain in the United States, U.S. Steel's stock price dropped. Contrast this to when stocks soared after U.S. Steel announcing the deal in December. Here are some facts about this acquisition that Biden would prefer to ignore:

• U.S. Steel is not what it used to be. President Biden might have some nostalgia about the good ‘ole days, but U.S. Steel has waned in its influence. In its heyday, U.S. Steel produced 40 percent of the world's steel. Now it is the 27th in world output and 2nd in U.S. output with 11.2 million tons of steel last year. At its peak, U.S. Steel employed over 340,000 employees. Now, that employment figure is at 15,000, representing a 96 percent decline from its peak. It is the 652nd largest company in terms of market capitalization, which is less than 1/100th of its size in 1901 as a proportion of the overall economy. Why? It was a combination of mismanagement and government interventions (e.g., import restrictions, subsidies, "Buy American" procurement preferences) that the U.S. government used to prop up U.S. Steel. 
• Japan is a friend and ally. Japan is not a hostile power, certainly not like China. Quite the opposite! Japan and the United States started developing their military relationship with the Treaty of Mutual Cooperation and Security in 1960. The fact that Japan is not the economic competitor that it was in the 1980s would explain why Japanese investors have not been on the radar of the Committee on Foreign Investment in the United States (CFIUS) since the 1980s. Plus, calling Nippon Steel a foreign company is misleading because it has been operating in the United States for 40 years and already has operations across eight U.S. companies employing 4,500 U.S. employees. Blocking this acquisition would risk alienating a key economic and security partner of the United States. 
• The acquisition does not harm U.S. national security. Those making the national security argument assume that putting this steel production into foreign hands would lead to domestic shortages. This is problematic for a number of reasons: 
• One is that the Pentagon only needs 3 percent of domestic steel production. 
• Two, Nippon is not looking to close U.S. production. Nippon is injecting $1.4 billion in capital investments at the U.S.-based plants because Nippon wants to ramp up steel production in the United States. This is in no small part because Nippon wants a presence in the U.S. market and the Trump/Biden steel trade barriers are getting in the way. 
• Three, the Department of Defense does not procure steel from U.S. Steel. Even if Nippon were to move production to Japan (which we established in the previous sub-point they are not going to), it would not impact the U.S. government's ability to procure steel. 
• This acquisition can help with national security. Rather than harming U.S. Steel, Nippon is saving U.S. Steel and actually contributing to the U.S. economy. While U.S. Steel will not be domestically owned, it will still have operations in the U.S. If anything, Nippon's capital and expertise will enhance the U.S. economy by making U.S. Steel's operations more efficient (see below). Together, Japan and the U.S. can better confront China's increased dominance in the global steel market, as well as its general influence in the Asia-Pacific region, with this acquisition. 

• Impact on foreign direct investment (FDI). Foreign investment encourages other companies to invest into the United States, thereby creating more wealth and job opportunities. It is because of Nippon's capital and expertise that most steel industry experts believe that this acquisition will help U.S. steelworkers and the overall manufacturing sector. The synergy with the acquisition will improve steelmaking (see below). If this acquisition is blocked, what sort of message does that send to investors in allied countries in the future? Japan is a leading source of FDI, which helps employ 900,000 U.S. citizens at U.S. subsidiaries of Japanese-owned companies. Disincentivizing foreign direct investment would only be a shot to the metaphorical foot of the U.S. economy. 

Postscript: What should be clear is that Biden is not motivated by sound economics or national security concerns, but rather with his eye on electoral concerns. Even NPR admits that Biden is opposing the acquisition to court the unions and blue-collar workers in swing states. 

Plus, this is part of a perturbing trend of the Biden administration to block several notable mergers and acquisitions, including that of Albertsons and Kroger. One of the main premises of capitalism is that parties voluntarily enter an economic transaction that both find to be mutually beneficial, which is the case here with Nippon and U.S. Steel. Private companies should not need a slew of lawyers to gain approval from the government to engage in voluntary, mutually beneficial business deals. 

The fact that Biden thinks that a nominally Japanese corporation purchasing a nominally American corporation is inappropriate should have zero place in U.S. trade or national security policy. Much like with Biden's student loan "relief" program, Biden is putting good politics over good policy. If Biden wants to be better at economic and national security policy, he needs to go beyond a limited, domestic view and take on a broader view that entails working with allies to strengthen economic and national security ties. 

A Passover Seder Insight On Simultaneously Having Space for Joy and Sadness in Life

As part of my Passover preparation this year, I participated in a Passover-themed yoga session with a local synagogue. Part of the intentionality going into the session was about acknowledging the craziness in the world along with the reasons to celebrate. The rabbi first brought up Jewish weddings. Although it is one of the happiest celebrations in one's life, a Jewish wedding has a sad ritual at the beginning (the recitation of El Malei Rachamim) and ends with a brief, sad ritual: the breaking of the glass to mourn the loss of the Second Temple. Even on such a joyous occasion, there is space for sadness. 

As the rabbi brought up, the Passover seder is no different. Take a look at the blessing over the wine, the Kiddush. The Passover seder begins with a blessing over wine, a happy occasion. As a matter of fact, the Passover Seder is at least happy enough of an occasion to have four cups of wine. Yet there is a moment in which we are to spill some of our wine at Seder to, at least in part, represent a diminishment of joy. This is not the only time this theme comes up in the Passover ritual. 

• Look at the relationship with matzah throughout the Seder. Towards the beginning of the Seder, we break the middle matzah in a ritual known as yachatz. This ritual can have multiple spiritual meanings, whether it is grappling with poverty or dealing with one's brokenness. By the time we reach the Afikomen ritual towards the end, we find those pieces and bring them together, thereby representing a sense of redemption. 
• There is another matzah-related tension in the Seder. On the one hand, we are to hide matzah, which mimics the ancient practice of stashing food out of a scarcity mentality. In spite of that perceived (or actual) scarcity, we are still meant to share with others on Passover. 
• Another example is with the bitter herbs (Maror). Jewish tradition teaches us that consuming bitter herbs on Passover is one of the three mandatory aspects of the Seder so that we can taste the bitterness that the Israelites experienced in Egypt. What is optional is having the charoset, which is a sweet mix. What I brought up a while back regarding the maror and charoset is the bittersweet nature of life. Bitterness is an inevitability in life. Whether or not we bring sweetness into lives in spite of that inevitable bitterness is our freedom and our choice. 
• The Korech (the Hillel sandwich) reminds us that life is neither all good nor all bad. Much like the Hillel sandwich, life is generally a mixture of the bitter, the sweet, and the "tasteless," neutral, "meh" moments.
• The ritual of dipping vegetables in saltwater, known as karpas, also can have mixed meaning. Does it represent the tears of the Israelites? Does it represent the fact that personal growth happens through dark times? Is that rewards come through hard work? How mixed this ritual is depends on how the ritual is interpreted and how we respond to adversity.
• Singing the song Dayenu during the Seder brings up another paradox. This song acts as a springboard to ask us what is enough. Let's say that G-d freed the Israelites had them cross the Sea of Reeds, and then left them in the middle of the desert without manna, is that really enough? We were not in that moment. Part of it is that we sing the song looking back in history. "Hindsight is 20-20," as the saying goes. We need to realize the same in our own lives, as nerve-racking as uncertainty can be. Events often make more sense looking back. In the moment, anxiety about the future can take over, especially wondering if we can make it out of a rut or if we ask ourselves if our best days are behind us. What Dayenu does is encourages us to find the good in life, even during our tribulations or uncertainty about the future.

Life is never a walk in the park the entire time. Life often gives us lessons from the School of Hard Knocks. There are moments in which we have to learn how to carry both joy and sorrow at the same time. There are other times where a paradigm shift in perspective can minimize or even eliminate sadness. To be able to do this, we need to find ways to take the edge off the bitterness in life. We need to find ways to be more open to hold space for both sadness and joy. By learning how to embrace life in its totality is how we can truly be free. 

Biden Is At It Again With Some Costly Student Loan "Forgiveness"

"If you at first don't succeed, try, try again." That is the approach of President Biden and his attempts with student loan "relief." It does not matter that the U.S. Supreme Court struck down his student loan forgiveness program last year in Biden v. Nebraska, which the bipartisan Committee for a Responsible Federal Budget (CRFB) estimated would cost $400 billion. That does not stop Biden from giving up on the idea. Last week, the White House announced a new plan to "provide relief to borrowers disproportionately burdened by student debt." This plan entails multiple provisions, including:

• Waiving up to $20,000 of accrued and capitalized student loan interest
• Eliminating student loan debt for those who have had debt for more than 20 years
• Assisting borrowers who experience hardship in paying back loans
• Applying the most favorable repayment options, whether under this latest version or from the previous version (known as SAVE)
• Helping borrowers enrolled who enrolled in low-financial-value programs or institutions

The Penn State Wharton School of Business, which is the premier business school in the country, modeled the cost of Biden's student loan plan. When combining the overlap between the new plan and previous SAVE plan, Biden's student loan plan is going to cost $559 billion!

When Biden first tried student loan "cancellation" with the SAVE Plan, I was critical enough to provide a list of 13 reasons why such a policy does such a disservice. These reasons ranged from the unfairness, cost, and lack of economic stimulus to its regressive nature, the moral hazard, and doing nothing to prevent that the problem from resurfacing. As the CRFB brought up in its response to Biden's latest plan:

You can't solve a very real debt problem by issuing more debt. The President's previous student loan cancellation plan was expensive, inflationary, poorly targeted, and would have boosted rather than reduced tuitions. This plan similarly misses the mark.

Knowing that it is an election, I know this is more than wanting to help out the little guy. It is about fulfilling a 2020 campaign promise, as well placating a certain demographic amongst the Left that is more likely to be critical of Biden's stance on the conflict in the Middle East. Biden's student loan plan is not going to do anything to lower tuition costs. If anything, Biden's plan will create inflationary pressures, both in the higher education market specifically and the macroeconomy generally. If the Biden Administration were to do the responsible thing, it would abandon this plan and work on reforms that would actually reduce college tuition costs. Sadly, it looks likely that good politics will defeat good policy once again.

4-16-2024 Addendum: Apparently, the Wharton School is not the only one to come up with an estimate. The CFRB released its analysis today (4-16-24) and found that it could cost anywhere between $250 billion and $750 billion. 

Trump's 60 Percent Tariff on China Would Not Only Hurt the Economy, But Could Hurt Government Revenue

For my regular readers, it does not come as a surprise that I despise former President Trump's obsession with tariffs. This is not simply a matter of mainstream microeconomic theory. The negative impacts of tariffs were clear before Trump began his tariff tirade. Trump's tariffs during his first term lowered the GDP by 0.21 percent, lowered wages by 0.14 percent, and reduced employment by 166,000 full-time equivalent (FTE). Making the economy worse off with his tariffs was not enough for him. He would like to take tariffs to a new level. 

In February, Trump proposed a 60 percent tariff on Chinese goods. Shortly thereafter, I showed how such a tariff would cost the economy anywhere between $200 billion and $495 billion per annum. Remember that the economy is not some amorphous blob. It consists of business and producers, as well as consumers like you and me. On average, it will cost the typical U.S. household upwards of $3,492 if this tariffs gets implemented. If that is not bad enough, it looks like this tariff could adversely affect something else: government revenue. 

An analysis from the bipartisan Committee for a Responsible Federal Budget (CRFB) examines the effects that a 60 percent tariff on China would have on government revenue. This seems counterintuitive at first. After all, if we look at a standard supply-demand graph of the effects of tariffs (see below), increased government revenue is one of the main economic benefits of a tariff. 

This CRFB analysis questions that premise in the case of Trump's 60 percent tariff. Why? In short, because it is such a large tariff. Remember that a tariff is a fancy way of saying "import tax." The larger the tax, the more likely it is to distort the economy in what is known in economics as deadweight loss. In the CRFB's static analysis, it assumes $2.4 trillion of government revenue in a decade. The problem with a static analysis is that is premised on unrealistic assumptions. Once accounting for macroeconomic effects and trade flows, we get a more accurate picture. 

In part, higher tariffs with China means less trade with China, which means less tax revenue. This, of course, depends on if certain goods are replaced with domestic or other foreign substitutes. Even assuming some offset from income and corporate tax revenue, CRFB estimates in its more conventional modeling that the tariff has the potential to lose somewhere around $200 billion to $500 billion of revenue over the next decade. 

While there is a possibility that it could bring the government a net positive in tax revenue, the fact that it could plausibly create a net negative in tax revenue should make even tariff sympathizers pause. For those who care about the impacts of tax policy, this finding is another example out a long list of examples of why we should be more than wary of tariffs. 

Measure 110 Had Its Limits, But Oregon Re-Criminalizing Drug Possession Is a Step Backwards

In 2020, the state of Oregon passed Measure 110. The point of this Measure was to decriminalize all drugs. Instead of jail time, the punishment was a $100 fine or a completed health assessment by a qualified center. It took less than four years for this experiment to end. Late last month, Oregon re-criminalized low-level drug possession due to an increase in opioid deaths and nuisances related to public drug use. My reaction is similar to my reaction last week when Idaho got rid of its syringe services programs: re-criminalizing is not going to do any favors. Below are some preliminary findings about the Oregon experiment to make me wonder about Oregon's recent decision.  

Measure 110 did not increase drug deaths. Brown University Professor Brandon del Pozo found that once adjusted for the rapid increase in fentanyl that came to Oregon later than it did the other states, there was no association between Measure 110 and an increase in fentanyl. These findings are consistent with a study from JAMA Psychiatry (Joshi et al., 2023).

Measure 110 did not encourage drug use. There are some preliminary survey data to suggest that this is the case. An RTI International survey of 467 Oregonian drug users found that only 1.5 percent of respondents started using drugs after Measure 110 began. 

There have been fewer arrests since Measure 110. Since Measure 110, there have been 83 percent fewer possession of controlled substances (PCS) arrests (Russoniello et al., 2023). Fewer arrests mean fewer interactions with the criminal justice system, particularly in terms of prosecution and incarceration. This translates into fewer law enforcement costs. 

Postscript. There are limitations to the findings here, at least in part because it has been less than four years. I made that caveat last year when analyzing the public health impacts of marijuana legalization. Between a fentanyl wave that swept the United States, the COVID pandemic, and a delay in funding for harm reduction programs, I am not surprised. It is also an issue that Oregon did not take it far enough. Similar to what I brought up with last year on Maine's partial prostitution legalization, doing it partway can either cause more problems or keep many problems intact. As Cato Institute scholar Jeffrey Miron brings up, "Legalizing [or, to a lesser extent, decriminalizing] possession, but not production, does not eliminate the underground market, so violence and quality control issues remain." Until these drugs are brought to the legal market, consumers are unsure as to the dose or purity of what they are purchasing. 

There is potential for success of decriminalization. As I pointed out last year, Portugal's twenty-plus years of drug decriminalization has been a success. However, without addressing the decriminalization or even legalization of the production, the success for decriminalization is going to be limited, especially in comparison to legalization. 

In spite of Oregon only partially decriminalizing, it beats the alternative of taking the step backwards that Oregon did. Oregon gave up on serious drug policy reform too soon. All re-criminalization is going to do is divert drug users to jails while doing very little to deter illicit drug usage. Prohibition and criminalization compound the effects of what is a public health issue, not a criminal issue. Why Oregon is going to revert back to prohibition, the very policy that got the Beaver State into this mess in the first place, is indeed a puzzlement. 

9-6-2024 Addendum: A study from the JAMA Network released this week found that decriminalization did not cause the overdose mortality; it was the increase in fentanyl (Zoorob et al., 2024).

Idaho Banning Syringe Services Program Is a Stab in the Back of Idahoans

Last week, the state of Idaho took a step backwards in public health. Idaho's Governor Brad Little signed HB617 into law, which repeals the ability for harm reduction organizations to operate syringe service programs (SSP). Also known as "needle exchange programs," an SSP provides a wide range of services, including "access to and disposal of sterile syringes and injection equipment, vaccination, testing, and linkage to infectious disease care and substance use treatment."

Why did Idahoan lawmakers get ride of their SSPs? They were concerned that SSPs increase drug use and opined that there was not enough evidence to show that SSPs incentivize substance abusers to seek treatment. Here is the problem with that line of thinking. According to the National Association of Counties, SSP participants are twice as likely to reduce the frequency of substance use and three times more likely to stop using substances all together. Even so, advocates never promoted SSPs for that purpose. 

The main purpose of SSPs was to provide drug abusers with a cleaner, safer alternative. This "meet them where they are at" approach is meant to reduce the spread of disease. SSPs have been shown to reduce HIV and Hepatitis C by 50 percent. SSPs have reduced syringe litter (Levine et al., 2019), which means less likelihood of being pricked or injured by a needle. In Idaho, the program collected nearly 600,000 needles, which kept them out of public places. Furthermore, SSPs are not shown to increase crime or illicit drug use. As a matter of fact, SSPs save upwards of $7.58 [in 2014 dollars] for every dollar spent (Nguyen et al., 2014). The cost savings for SSPs is quite high (Ruiz et al., 2019). If you want more information on how beneficial SSPs are, you can read this 2023 meta-analysis from the U.S. Department of Veteran Affairs here.

Much like we could not mask our way out of the pandemic, we cannot criminalize our way out of the opioid crisis. As a 2022 research paper from Cato Institute shows, such drug paraphernalia laws obstruct harm reduction. Criminalizing these programs will make users more likely to use dirty needles (Marotta et al., 2021) and cause a rebound in HIV cases (Zang et al., 2022). Instead of keeping those who use drugs safer, re-criminalization will decrease their likelihood to survive. Idaho's abandonment of a program clearly shown to protect those who use drugs, as well as the community as a whole, is putting its citizens at risk. 

How Free Trade and Trade Liberalization Help Out the Poor Domestically and Globally

Last month, the White House released its annual Economic Report of the President. In the report, there was a chapter on International Trade (Ch. 5, p. 173). One of the interesting admissions in the report is how trade with China has improved the purchasing power, especially of lower-income Americans (p. 203). As a matter of fact, the report calculated that 68 percent of those benefits went to low-income Americans. This finding is echoed in a report from the Federal Reserve Bank of Minneapolis that was released just last week (Horwich, 2024).

The author of the Minneapolis Fed report, Jeff Horwich, says that much of the research of international trade on consumer welfare looks at the effects on a national level. Rarely is it done to see the effects of a certain demographic, such as the poor. Even so, the fact that international trade helps out low-income households both in the United States and globally does not surprise me in the least. Why is this the case? How does international trade help out the poor specifically? 

Improved quality of life with greater imports. As this article from the Houston Chrolinc brings up, it can be cheaper for a country to import goods or services than it can be to produce them. To quote the Australian Department of Foreign Affairs and Trade (DFAT), "trade expands the markets local producers can access, allowing them to produce at a more efficient scale to keep down costs." This ensures a constant flow of more goods, which can improve the quality of life and give options they otherwise would not have. 

Lower prices lead to greater purchasing power. To quote the International Monetary Fund (IMF) from 2001: "Trade liberalization helps the poor in the same way it helps most others, by lowering prices of imports and keeping prices of substitutes for imported goods low, thus increasing people's real incomes...An open trade regime also permits imports of technologies and processes that can help the poor." 

I was first criticizing Trump's obsession with tariffs in March 2016, which was before he was president. I pointed out that tariffs decreased economic welfare. Conversely, countries with fewer trade barriers had less poverty. To quote DFAT, "Removing tariffs on imports gives consumers access to cheaper products, increasing their purchasing power and living standards, and gives producers access to cheaper inputs, boosting their competitiveness by reducing their production costs."

Free trade improves innovation and efficiency. The Mercatus Center mentions a good point in its brief on the benefits of free trade: "Over time, free trade works with other market processes to shift workers and resources to more productive uses, allowing more efficient industries to thrive. The results are higher wages, investment in such things as infrastructure, and a more dynamic economy that continues to create new jobs and opportunities." Those wage increases help out the poor, as well. 

Postscript. As a 2015 report from the World Trade Organization illustrates, free trade creates new job opportunities for the poor, raises the real wages of unskilled labor, lowers prices of goods consumed by the poor (which means greater purchasing power), and improves access to external markets for the goods that the poor consume. All of these phenomenon aggregately improve the quality of life for the poor. 

Freer trade is vital for the poor because, as the World Economic Forum states, "Open trade is particularly beneficial to the poor, because it reduces the cost of what they buy and raises the price of what they sell." Farmers and manufacturers especially can reach a wider market when there is open trade (ibid.). As the World Bank has brought up, free trade has lifted over a billion people of poverty. The Heritage Foundation, amongst many others, has shown how greater economic freedom creates greater economic growth while lowering poverty (see below). This is a truth I detailed when showing how trade liberalization does a much better job than foreign aid at alleviating poverty. 

With the overwhelming evidence in favor of greater international trade, it does beg a question for the upcoming presidential elections. If the relatively lower tariffs from Trump's previous administration made items more expensive and made Americans poorer, what will Trump's proposed universal 10 percent tariff or 60 percent tariff on China will do to the poor both in the United States and abroad? This November's election is between a Republican whose tariffs will make Americans poorer and Bidenomics that has increased inflation in a way that has made life more expensive for the poor. And let's not forget that Biden has maintained many of Trump's tariffs. While it is clear that free trade helps out those in low-income households, it is also clear that we are in an age of protectionism, regardless of who gets elected this November. It is the everyday citizen, especially the poorer ones, that suffer because politicians on both sides of the political aisle ignore the fundamentals about the benefits of free trade.