- Cafe Hayek - http://cafehayek.com -

A Note on Trade Agreements (and ‘Sovereignty’)

Tweet [1]

Here’s my quick take on so-called trade agreements, such as NAFTA.

Such agreements of course do not result in completely free trade; therefore, such agreements aren’t optimal or ideal.  But we do not live in a world in which the ideal is always plausibly enough obtainable such that it should block attainable good.

So I ask two questions about each trade agreement:

(1) Will it make trade freer than trade would be in the absence of the agreement?

(2) Will it not reduce the prospects of achieving even freer trade in the future?

If the answer to each of these questions is “yes,” then I support the agreement, for if the “yes” answers are correct, trade will be freer than otherwise.  Better that trade become more free than not.  We can celebrate the increased freedom to trade even as we lament the remaining restrictions and as we fight to get rid of as many of those as possible.

Here’s an analogy: I support (I really do) abolishing all taxes on capital gains.  That is, my ideal capital-gains tax rate is zero.  But if I judge that eliminating this tax is not likely, should I oppose proposed cuts in the capital-gains tax rate?  I think not.  Unless I judge that a proposed cut (say a five-percentage-point reduction) in the capital-gains-tax rate today is likely enough to block what would otherwise be a good chance for a larger cut in the near future, I support today’s proposed cut.  I don’t call the result “ideal.”  But this result is better than not cutting this tax rate at all, or cutting it by a lesser amount.

And note: it would be a cheap shot for someone to accuse me of hypocrisy, of selling-out, or of not really supporting tax reduction if I endorse this tax cut rather than hold out for complete elimination of the capital-gains tax.

I support trade agreements that fail to make trade as free as I’d like trade to be for the same reason that I support tax cuts that fail to cut tax rates as far as I’d like them to be cut.

…..

By the way, one of the most ludicrous arguments that is routinely trotted out in opposition to trade agreements is that they infringe on U.S. sovereignty.  If a trade agreement makes trade freer, the only sovereignty that matters to me is not at all infringed; in fact, it is expanded and better secured.  That sovereignty is of each of us to exercise our freedom – in this case, specifically, each of us to spend our incomes as we choose.  If trade truly is made freer by U.S. participation in the agreement, I don’t give a damn if Uncle Sam’s sovereignty shrinks (whatever that might mean), for consumer sovereignty and the sovereignty of each individual person expands.  And that’s the only sovereignty that is worthwhile and worthy of protection in a free society.

Comments