18
September
2019
|
11:13 PM
America/Chicago

One More Reason to Support International Trade: Diversity

By Teo Sepulveda, Economist at South Texas College

Have you heard the complaint that we are not supposed to buy cheap imports from China? Believe it or not, this makes for an impossible assumption. It assumes we all have the exact same goals in life.

Think of some products that you need only once. Should you buy an expensive or inexpensive product? Obviously, no one but you can answer that question but consider this example.

I am an avid swimmer, and early on when it became an integral part of my workout routine, I went to buy some swimming gear. There in front of me, I had two options: gear made in China or gear made in Germany. I made the decision to spend anywhere between $5 to $10 less by buying the least expensive kit, but the gear itself became useless in less than two weeks because I was swimming every day. I thought to myself ‘How can anyone buy something so bad, independent of the price?’ And after some thought, the answer that came to my mind explained the importance of international trade itself.

Trade allows for a diversity of lifestyles.

Sure, someone swimming every day has every reason to buy high-end gear, but why should everyone else be made to spend a lot of money for something they might use only once a year? Someone who swims once a year or less will never find out that an inexpensive product falls to pieces if they only use it once, right?

We also value space. Buying high-end products that last a long time means we must also devote space in our homes that we can likely use for more important projects or items.

When we say that long-term planning is better than short-term planning, we do not mean that every single personal project must be a long-term project. It is also not the same to say that you should plan for long-term professional goals any more than the casual golfer who invests in high-end gear. Why? Because it is pointless to waste resources on expensive items that will not be used much. For that, we use much less expensive products. One of the most overlooked social functions of international trade is the diversity of goods for a diverse array of lifestyles.

This is a concept in economics we call time preference. We are constantly making decisions that involve using resources now or at some later time. John Doyle, from the Cardiff School of Business, says time preference “is an active area of research that straddles the boundaries of psychology, economics [and finance], marketing, decision analysis, and more recently neuroscience”

Our time preferences affect our decisions about swimming, eating, studying, dating, investing, and more. Since we do not all perform many activities for the same length of time, there is no reason to think we should all be using the same exact goods for those activities. Therefore, to maintain and promote diversity, international trade provides a large array of options that helps us better fulfill our goals in life.