The Practicality of Free Trade

by Don Boudreaux on March 6, 2008

in Balance of Payments, Myths and Fallacies, Trade

One of the most intellectually shallow arguments against free trade is the one that motivates this op-ed in today’s New York Times by Robert E. Lighthizer.  In short, the argument is that free traders are impractically principled; a better policy (the argument implies) is one that recognizes that trade is sometimes good and sometimes not so good.  Here are two letters that I sent to the NYT in response.

Robert Lighthizer dismisses principled free-traders as dogmatists who impractically stick to their guns “no matter how many jobs are lost, how high the trade deficit rises or how low the dollar falls” (“Grand Old Protectionists,” March 6).  Alas, the impractical dogmatists are Mr. Lighthizer and his fellow trade “pragmatists.”

There is no credible evidence – none, nada – that free trade causes net job losses.  Moreover, far from being undesirable, a higher U.S. trade deficit means increased foreign investment in the American economy.  And a falling dollar generally reflects worsening U.S. domestic policies, such as inflationary money-supply growth, the likelihood of higher taxes or more command-and-control regulations, and, indeed, an increased probability of U.S. protectionism – protectionism that, by stifling entrepreneurial dynamism, makes America a less attractive place for foreigners to do business.

Donald J. Boudreaux

My second letter:

Among Robert Lighthizer’s objections to principled free-traders is their opposition to protectionism “no matter how many jobs are lost” (“Grand Old Protectionists,” March 6).

If Mr. Lighthizer is referring to overall employment, his facts are wrong.  Free trade does not reduce net employment.  But perhaps he’s talking about specific jobs, such as those lost in Carolina textile mills when Americans buy more textiles from abroad.  The argument seems to be that practical statecraft often justifies protecting such jobs even if doing so prevents the creation of other jobs in their place.  If this is Mr. Lighthizer’s point, he’s too modest when calling for trade policies that allow for “practicality, nuance or flexibility.”  Because technology destroys far more jobs than does trade, Mr. Lighthizer should endorse also a “pragmatic” approach to innovation – empowering government with the flexibility and nuance to block firms’ introduction of efficiency-enhancing production techniques that displace workers.  Surely, according to Mr. Lighthizer’s practical logic, we must reject the “dogma” that tolerates “unbridled” improvements in firms’ operating efficiencies.

Donald J. Boudreaux


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