Don’t blame Free Trade for economic woes

This is a short but excellent article defending the benefits of Free Trade and Globalization and their contribution to “moderating” the downward swings of the economy. Via World Trade Magazine:

Countries that put all their economic eggs in the domestic basket lack the diversification that a more globally integrated economy can fall back on to weather a slowdown. A country that increases trade as a share of its gross domestic product by 10 percentage points is actually about one-third less likely to suffer sudden economic slowdowns or other crises than if it were less open to trade. As the authors of this study concluded:

Some may find this counterintuitive: trade protectionism does not “shield” countries from the volatility of world markets as proponents might hope. On the contrary…economies that trade less with other countries are more prone to sudden stops and to currency crises.

Read the whole thing. I’ll leave you with this:

Combined with those other factors, expanding trade and globalization have helped to moderate swings in national output by blessing us with a more diversified and flexible economy. Exports can take up slack when domestic demand sags, and imports can satisfy demand when domestic productive capacity is reaching its short-term limits. Access to foreign capital markets can allow domestic producers and consumers alike to more easily borrow to tide themselves over during difficult times.