The Folly of Anti-Trade Thinking

Mark Green
Posted February 16, 2012

In his State of the Union message last month, President Obama staked out the administration’s position on trade, citing new deals with a number of countries around the world and the quest for new trade opportunities:

“We’re also making it easier for American businesses to sell products all over the world. Two years ago, I set a goal of doubling U.S. exports over five years. With the bipartisan trade agreements we signed into law, we’re on track to meet that goal ahead of schedule. And soon, there will be millions of new customers for American goods in Panama, Colombia, and South Korea.  … I will go anywhere in the world to open new markets for American products.”

Some in Congress apparently didn’t get the memo about new markets for American products. There’s an effort afoot to restrict exports of U.S. liquefied natural gas – including a bill that would compel the Interior Department to issue drilling leases for public lands only to those who would keep the gas in the United States and another that would block the Federal Energy Regulatory Commission from approving LNG export terminals through 2025. While the legislative prospects for both are uncertain, they suggest a misunderstanding of trade and the global marketplace.

Energy Secretary Stephen Chu gets it, refusing to be drawn into the “keep in America” wave during a congressional hearing this week:

“Certainly, we don't want to see natural gas prices rise dramatically, [but] there's a flip side we have to consider that it does create American jobs, and if prices are kept moderate it does bring money to United States.”

Besides being poor economics, such restrictions send the wrong message to the entrepreneurs and risk-takers who drive much of the economic growth in this country – specifically that the value of their enterprise could be arbitrarily undermined. Energy, Technology, & Policy blogger Lex Hochner:

“We should also consider the individuals and companies that pioneered the technological revolution that unlocked all of this shale gas in the first place.  They have accomplished nothing short of a natural revolution.  Why?  Because they believed that a free market price awaited their product.  It is a dangerous signal to send hard-working and creative business leaders that the government may at any time step in to destroy the value of their work product.”

Just for argument’s sake, let’s suppose the same thinking was applied to other U.S. exports. For example, what if U.S. agricultural products were restricted to this country, what would that mean? Answer: Lots of unhappy farmers and a gut-punch to the U.S. balance of trade ledger, which in 2011 tallied more than $137 billion in agricultural exports.

Like other marketable commodities, natural gas shouldn’t be artificially and arbitrarily walled off from potential buyers. U.S. grain exports equal jobs and income for American farmers. Likewise, natural gas exports would support American energy jobs and boost the country’s trade balance – even as greater production (enabled by the potential for export) would provide more revenue to governments.