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Free Trade, Properly Defined and Understood

Summary:
In my latest column for AIER I do my best to explain that a policy of free trade for country X does not depend upon what policies are, or are not, pursued by the governments of countries Y and Z. A slice: Protectionists define free trade differently than do economists. Economists (and all knowledgeable free traders) define free trade exclusively as a domestic condition – that is, as a policy to be adopted or not by the home government. If adopted, the home government remains blind to the nationality of its citizens’ trading partners; the home government neither uniquely obstructs nor stimulates its citizens’ trade with foreigners. In any country in which individuals and firms are left free by the government there to buy, sell, invest, and disinvest as they choose regardless of the

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In my latest column for AIER I do my best to explain that a policy of free trade for country X does not depend upon what policies are, or are not, pursued by the governments of countries Y and Z. A slice:

Protectionists define free trade differently than do economists. Economists (and all knowledgeable free traders) define free trade exclusively as a domestic condition – that is, as a policy to be adopted or not by the home government. If adopted, the home government remains blind to the nationality of its citizens’ trading partners; the home government neither uniquely obstructs nor stimulates its citizens’ trade with foreigners. In any country in which individuals and firms are left free by the government there to buy, sell, invest, and disinvest as they choose regardless of the nationality or location of their trading partners, there reigns free trade.

In sharp contrast, protectionists define free trade as a global condition. For protectionists, free trade reigns if and only if no government on earth intervenes in any way that might affect the details of how its citizens engage commercially with people in other countries. With free trade defined as such, nearly all protectionists today gaudily announce their allegiance to it.

This stance might be called the “I’m a free-trader but….” position. For protectionists, standing firm in this position is convenient and cheap. It allows them to pose as free-trade’s staunchest friends in principle without their ever having to abandon protectionist sentiments in practice. Because in practice the world will always feature governments that use tariffs and subsidies, in practice protectionists will never be without a ready excuse for their governments to use tariffs and subsidies.

Indeed, even if by some happy miracle all foreign governments immediately, unconditionally, and permanently eliminated all tariffs and export subsidies, protectionists would nevertheless offer ample excuses for their own governments’ continued use of tariffs and subsidies. If history is a guide – and, of course, it is – protectionists would allege that economic policies apparently internal to foreign countries are ones that nevertheless, when their full effects are traced out, negatively affect the international economy and, therefore, warrant protectionist policies at home.

One familiar such foreign-government policy involves legislated labor standards. Protectionists in the United States and other wealthy countries today are quick to call for tariffs to be levied at home in response to the failure of governments of poorer countries to impose workplace-safety rules, collective-bargaining privileges, and other labor standards that are as high as those imposed by governments of wealthy countries.

Lower government-imposed labor standards abroad are not only said to give firms and workers in poor countries “unfair” advantages over firms and workers in rich countries. Lower labor standards abroad also are declared by rich-country protectionists to be such an affront to human decency that rich-country governments are bound by the precepts of morality to impose tariffs on imports from poor countries in order to ‘punish’ poor-country governments for their inhumanity.

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Don Boudreaux
He is a professor of economics at George Mason University in Fairfax, Virginia. Previously, he was president of the Foundation for Economic Education.

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