Donald J. Boudreaux – December 12, 202 @ American Institute for Economic Research
(Editor's note: I published this piece because think this is well done, however, while in principle I embrace the concept of free trade, I recognize for free trade to be universally beneficial, it must be foundationally capitalistic, and must rely on the idea that "everyone" in the world of trade also embraces capitalism and free trade, which is the flaw in this piece. The rest of the world does not! I don't consider free traders as naive, I think they're foolish. Ergo, I favor beneficial and equitable free trade. That's the very foundation for solidly capital generating societies. RK)
Samuel Gregg’s 2022 book, The Next American Economy,
is an important and brilliant achievement. Gregg eloquently champions
the free, commercial society against its many detractors. Among these
detractors, of course, are today’s so-called “national conservatives”
(some, but not all, of whom might fairly be described as Trumpian). But
no less hostile to the liberal economy that Gregg ably defends are
Progressives. While on many fronts national conservatives and
Progressives have significant differences, on the economics of
international trade, both groups commit the same slew of factual and
theoretical errors.
Gregg’s manner of exposing these errors is so scholarly, so
fair-minded, and so patient that the reader is surprised to realize,
upon reaching the book’s end, that he or she just encountered an
absolute evisceration of the modern case for protectionism, and of its
fraternal twin, industrial policy.
Gregg also wisely counsels his fellow champions of free trade on how
best to make their case to the general public. Specifically, Gregg
advises taking account both of the reality of the nation-state and of
people’s affections for their country. The pleas of radical libertarians
who treat national borders as phenomena that are either unreal or
irrational will fall on deaf ears.
I agree with all Gregg says about the prominent place occupied in
people’s minds and hearts by the nation-state. And of course I also
agree that the nation-state isn’t going away any time soon. These facts
are of the sort that Frank Knight and James Buchanan described as “relatively absolute absolutes.” Like them or not, these facts are best taken as given.
But on my reading, the liberal case for a policy of unilateral free
trade has from the start (and ever since) not been much infected with
naïve globalism. It has focused overwhelmingly on the benefits of free
trade to people of the home country. Arguments that might be
described as ‘global cosmopolitanism’ have never played a role that’s
more than peripheral role in the liberal campaign for free trade.
Yet the false impression that liberal advocates of free trade naively
ignore the salience of the nation-state is indeed widespread. This
impression is created, however, not by free trade’s liberal supporters,
but instead by free trade’s illiberal opponents. Whether out of
ignorance or cunning, a familiar protectionist tactic is to falsely
accuse advocates of free trade of putting the interests of foreigners on
a par with, or even ahead of, the interests of fellow citizens.
A few years ago, for example, just before he and I were to debate free trade
at Hillsdale college, the outspoken protectionist Ian Fletcher asked me
why American libertarians are so willing to put the interests of
foreigners over the interests of Americans. Fletcher seemed genuinely to
believe that free-traders’ foundational argument is that free trade
enriches poor countries by more than it impoverishes rich countries and,
therefore, free trade is justified by a cosmopolitan utilitarian
calculation.
If we free traders really made our case on such grounds, we would
indeed deserve much of the blame for whatever skepticism the public has
of free trade.
But in fact, the core case for free trade has never taken such a
form. Both the theoretical and practical cases for a policy of free
trade have always emphasized the gains bestowed by free trade, I repeat,
on the people of the home country. Read Adam Smith. Read Frédéric Bastiat. Read Henry George. Read William Graham Sumner. Read Gottfried Haberler, Milton Friedman, Leland Yeager, Jagdish Bhagwati, Arvind Panagariya, Russ Roberts, Dan Griswold, Scott Lincicome, and Doug Irwin. Read any remotely prominent proponent of free trade – or read even me
– and you will find, front and center, arguments that demonstrate that
free trade is a boon to the home country, whether that country be rich
or poor, big or small, industrial or agricultural.
You will, in addition, it’s true, often find arguments about how home-country moves toward free trade help also
to enrich foreigners. But such arguments are not central to the case
for free trade, and for good reason: trade is positive-sum. Whenever
trade is made freer in the home country, net economic gains are created both
for fellow citizens and for foreigners. There’s simply no need to
justify free trade by resorting to a utilitarian calculus in which net
gains to foreigners are weighed against net losses to fellow citizens,
for such losses are mythical.
The fact that the case for free trade is mistakenly regarded by so
many people to be rooted in global cosmopolitanism is a cheap
public-relations victory for protectionists. They incessantly repeat
untruths about free trade, such as that free trade with low-wage
countries lowers American workers’ wages. Another false, but frequently
heard, accusation is that America runs trade deficits only because
foreign countries engage in “unfair” trade practices, or because
insufficiently patriotic American leaders allow foreign countries to
take advantage of ordinary Americans. These and similar untruths convey
the impression that American supporters of free trade are either dupes
who are blind to the damage done to the U.S. economy by free trade, or
are starry-eyed globalists willing to sacrifice the interests of fellow
Americans to those of foreigners.
Aiding and abetting this misperception of the case for free trade is
much of the familiar language used in discussions of trade. The term
“trade deficit” itself suggests that countries that run such deficits
lose to their trading partners. Some familiarity with economics is
required to understand this suggestion’s profound error.
Most people aren’t sufficiently familiar with economics to detect the
error, so protectionists successfully portray America’s nearly
half-century-long unbroken string of annual trade deficits as evidence
that free trade is inflicting on the US economy serious damage. In turn,
free-traders who oppose protectionist policies that are peddled as
means of reducing US trade deficits are easily cast as haughty or
naïve globalists.
Such misperception is furthered by language, even in official
documents, that commonly describe a government’s decision to lower the
import barriers it has erected against its own citizens as a “trade concession.” (An example occurs in this “Glossary of Terms” issued by the World Trade Organization: “Free-rider:
A casual term used to infer that a country which does not make any
trade concessions but profits, nonetheless [from] tariff cuts and
concessions made by other countries negotiating under the most-favoured
nation principle.”)
How can misunderstanding not be spread by official language that describes reductions in trade barriers as “trade concessions”?
Concessions, it’s natural to ask, to whom? Well, to foreigners. It
follows, in this bizarro view of trade, that free traders who advocate
that home-country trade barriers be unilaterally lowered plead with the
home government to ‘concede’ benefits to foreigners without receiving
similar benefits in return. Free traders thus appear, falsely, to be
utopian globalists who are insufficiently attentive to the sentiments
and welfare of fellow citizens.
Ludwig von Mises summarized well the core liberal case for free trade:
However, the inference from [David] Ricardo’s free-trade argument was
irrefutable. Even if all other countries cling to protection, every
nation serves its own interest best by free trade. Not for the sake of
foreigners but for the sake of their own nation, the liberals advocated
free trade.
Free trade does indeed enrich the world. But it also, and chiefly, enriches the people of each country that practices it,
regardless of the policies pursued elsewhere. This latter fact alone
suffices to justify each government pursuing a policy of unilateral free
trade.
Donald J. Boudreaux is a senior fellow
with American Institute for Economic Research and with the F.A. Hayek
Program for Advanced Study in Philosophy, Politics, and Economics at the
Mercatus Center at George Mason University; a Mercatus Center Board
Member; and a professor of economics and former economics-department
chair at George Mason University. He is the author of the books The Essential Hayek, Globalization, Hypocrites and Half-Wits, and his articles appear in such publications as the Wall Street Journal, New York Times, US News & World Report as well as numerous scholarly journals. He writes a blog called Cafe Hayek and a regular column on economics for the Pittsburgh Tribune-Review. Boudreaux earned a PhD in economics from Auburn University and a law degree from the University of Virginia.
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