The Moral Case for Free Trade

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Free
trade is under attack – again. This time, however, the attack
comes from an unlikely source. It is not from environmentalists
objecting to capitalists spoiling the pristine environment of third-world
countries as they flee draconian U.S. environmental laws. Nor is
it from inefficient or uncompetitive U.S. companies kept alive by
government subsidies or import quotas. The attack is not from the
misguided NAFTA, GATT, FTAA, or WTO protestors who rail against
capitalism itself. It is not from economic nationalists who demonize
Wal-Mart and equate the opening of each new Supercenter with another
step toward the decline of Western Civilization. And neither is
it from labor unions seeking to preserve the above-market wage rates
that their members enjoy.

No,
the attack this time comes from conservatives who are known for
opposing government intervention and regulation.

Recent
issues of The New American have lamented the U.S. trade imbalance
and chronicled the decline of American manufacturing as an increasing
number of jobs are outsourced and more and more imports are allowed
in. Although the crushing burden of government regulations is often
cited as a cause, free trade is invariably viewed as part of the
problem.

Too
many unnecessary things are clouding the issue. To begin with, many
people arguing for free trade are really arguing for government-managed
trade, and many people arguing against free trade are really arguing
against government-managed trade. This is why supporters of thousand-page
trade agreements like NAFTA are viewed as free traders. And that
is why the Bush administration can use free trade rhetoric while
at the same time imposing tariffs, quotas, and “voluntary agreements.”

Then
there is the idea that trade takes place between countries. Unless
the government has complete control of the economy, trade, although
often spoken of as between countries, is between individuals. Whether
it is one individual selling an item to another individual, a small
business that has found an overseas niche, or a corporation selling
ten thousand tons of a commodity to another corporation, trade is
not between countries, it is between individuals. When trade is
thought of as only between countries, the fallacy that trade results
in some countries benefitting (winners) at the expense of others
(losers) is not far behind. Mises terms this dogma the “quintessence
of the doctrines of Mercantilism.” He further maintains that
“it is at the bottom of all modern doctrines teaching that
there prevails, within the frame of the market economy, an irreconcilable
conflict among the interests of various social classes within a
nation and furthermore between the interests of any nation and those
of all other nations.”

The
latest justification for protectionism is that trade between two
parties may hurt a third party. But again, Mises said: “The
statement that one man’s boon is the other man’s damage is valid
with regard to robbery, war, and booty. The robber’s plunder is
the damage of the despoiled victim. But war and commerce are two
different things.”

Much
ado has been made about the British classical economist, David Ricardo
(1772–1823), and his explanation of the economic principle
of comparative advantage – as if that was the deciding factor
as to whether we should have free trade. The idea is that we live
in a different world than Ricardo, and his theories are no longer
valid. Freedom, however, is eternal.

The
case for free trade is not based on fair trade, trade agreements,
international trade theory, factors of production, absolute advantage,
comparative advantage, or efficiency. These arguments miss the real
issue. There is a far more philosophical defense of free trade that
has been neglected: freedom. The moral case for free trade is based,
not on how efficient or beneficial free trade is, but on freedom
itself. Free trade simply means that every citizen of every country
is free to trade with any citizen of any country.

The
alternative to free trade is protectionism, whether in the form
of tariffs or import quotas. Besides making imported goods more
expensive, tariffs merely give the government additional revenue.
But why should the state be entitled to more money? Doesn’t the
state already spend over $2 trillion a year? To question the legitimacy
of free trade while at the same time saying that protectionist measures
are not the answer is to attempt a middle-of-the-road position,
which, as Mises showed, leads to socialism.

A
rejection of free trade is an endorsement of interventionism. If
trade is “harming” a sector of the U.S. economy, then
who is to determine the remedy? Who decides how much of a tariff
to impose? Who decides that only x amount of a good can be
imported? The industry seeking protection? Why, it is the state,
of course. This immediately raises three questions. Is the state
responsible? Is the state capable? Is the state reliable?

Is
the state responsible for protecting American industries from foreign
competition? Then why not protect industries from domestic competition
as well? And why not protect industries from each other? Why not
protect companies that make regular cameras from companies that
make digital cameras? Why not just take control of all production
and distribution in the entire economy and protect everyone from
everyone? Trade restrictions are the first step toward statism,
for if the state knows what is best in the matter of trade, then
why not the entire U.S. economy?

Is
the state capable of determining the “proper” amount of
protection required? How much of a tariff or quota should be imposed?
And what should be their duration? What goods should be subject
to a tariff or quota? What goods should be exempt? The possibility
of such an economic calculation was refuted by Mises back in 1920.

Is
the state reliable? That is, can we trust the state to make trade
decisions that are in the best interests of American businesses
and consumers? I think the answer is quite obvious. Granted, the
state is good at one thing – mass bombing of countries that don’t
submit to its hegemony.

Should
all decisions on trade matters be left up to the likes of Robert
Zoellick, the U.S. Trade Representative, Don Evans, the U.S. Secretary
of Commerce, N. Gregory Mankiw, the Chairman of the Council of Economic
Advisers, Stephen Friedman, the Director of the National Economic
Council, or some other modern-day Jean Baptiste Colbert. Or perhaps
this cabal should be expanded to include the thousands of career
bureaucrats on the government payroll.

Free
trade is not threatened by any new developments, free trade is only
threatened by government intervention. So rather than being part
of the problem, free trade is the solution. The problem is not that
we have free trade, the problem is that we do not have free trade.
We have government-managed trade. We have regulations that choke
American manufactures and small businesses. Our funding of the International
Monetary Fund, the World Bank, and the Export-Import Bank, coupled
with foreign aid, loans, bailouts, and subsidies – all courtesy of
the U.S. taxpayer – distorts the global marketplace. In short, we
have policies that reward foreign competitors while penalizing American
producers.

The
benefits of free trade are incalculable, and can never be quantified
in a spreadsheet. As John C. Calhoun wrote to the British free trader,
Richard Cobden: “I regard free trade, as involving considerations
far higher, than mere commercial advantages, as great as they are.
It is, in my opinion, emphatically the cause of civilization and
peace.”

The
debate over free trade is also a reminder that we need to return
to the non-interventionist foreign policy of the founding fathers.
Real free trade is the first plank in a foreign policy that will
make America the envy of the world instead of the scourge of the
world. Rather than being a cause of group hatred, the spread of
global markets is the surest way to promote, in the words of Jefferson,
“Peace, commerce, and honest friendship with all nations.”

Further reading: Joan Kennedy Taylor, ed., Free
Trade: The Necessary Foundation for World Peace
(Irvington-on-Hudson:
FEE, 1986).

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