What Produces Losers is Protectionism

by Don Boudreaux on March 1, 2011

in Myths and Fallacies, Seen and Unseen, Trade

Ian Fletcher asserts that the economic case for free trade doesn’t apply in the real world because it’s impractical for free-trade’s “winners” to compensate (as they do in some esoteric economic models) free-trade’s “losers.”

Fletcher slays merely a man of straw: the economic case for free trade does not require “winners” to compensate “losers.”

More troubling is the foundational inconsistency in Fletcher’s objections to free trade – an inconsistency he shares with most other protectionists. Fletcher correctly notes that changes in consumer tastes, no less than increased supplies of goods and services from foreign producers, cause some existing domestic jobs to be lost.  But he mysteriously singles out foreign trade as an institution that creates “winners” and “losers and, therefore, allegedly requires government intervention.

If Fletcher were to judge domestic trade by the same criteria that he applies to foreign trade, he’d be obliged to argue for special taxes on all new products, on all new services, and on all goods and services whose prices are cut or whose quality is improved, regardless of where these goods and services are produced.  In short, he’d have to argue for special taxes on competition and consumer choice – for the “winners” and “losers” that Fletcher thinks he sees only when patterns of foreign trade change exist no less when only patterns of domestic trade change.

Long-time Cafe patrons know that I argue that, when evaluated over relevant time horizons, trade has no losers.

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