A Challenge to Mercantilists

by Don Boudreaux on November 22, 2016

in Trade

David Henderson’s excellent post today, at EconLog, on the zombie-like character of mercantilism prompts me to issue the following challenge to any protectionist/mercantilist/economic-nationalist who might wish to take it on: Identify one plausible economic problem caused by free trade that is unique to trade that spans political borders.  Just one.  That is, identify a problem with free trade that arises when people are free to buy and sell internationally but that does not arise when people are free to buy and sell intranationally.

The identified problem must be real – that is, the alleged effect must be likely to occur in reality when trade in free, and likely to create net economic harm for domestic citizens.

By confining the acceptable set of problems to those that are legitimately labeled “economic,” I mean to exclude problems, be they real or imaginary, that are better described as cultural, political, or related to national defense.  For example, the following answer is not acceptable: “Free trade creates problems because if we have a comparative disadvantage in the production of aluminum, then if a shooting war breaks out we’ll be dependent upon possible enemies for an essential war material.”

By excluding all non-economic answers I do not mean to suggest that I believe that asserted cultural, political, and national-defense rationales for protectionism are generally valid.  In fact, I believe quite the opposite.  But free international trade can indeed have cultural, political, and national-defense effects that differ fundamentally from any such effects that might be caused, or avoided, by free intranational trade.  In contrast, I can think of not a single asserted negative economic effect of international trade that is not also an effect that is likely to occur within a large and vibrant domestic market whose denizens are free to innovate and to trade with each other but not with foreigners.

But perhaps my imagination is weak and my knowledge of economic history shallow.  Perhaps you can identify one or more such negative economic effects that are likely to be caused by free international trade but that are unlikely to arise when trade is internally free but not externally free.

…..

Let me here help those who aren’t steeped in the international-economics literature by providing a list of the economic problems that are typically (or at least sometimes) alleged to justify protectionism:

– free trade destroys some particular jobs
– free trade leads to permanent joblessness of some particular workers
– free trade permanently increases the rate of joblessness in free-trading countries
– free trade destroys some particular industries or sectors (such as manufacturing)
– free trade economically devastates particular geographic regions within free-trading countries
– free trade lowers the pay of workers in high-wage countries
– free trade lowers the pay of workers in low-wage countries
– free trade leads to “trade imbalances”
– free trade promotes destructive financial speculation
– free trade leads to excessive consumer indebtedness
– free trade leads to excessive government indebtedness
– free trade promotes excessive materialism
– free trade increases economic insecurity among those whose livelihoods might be destroyed by imports
– free trade harms the environment
– free trade raises the costs of some domestic resources
– free trade promotes income or wealth inequality
– free trade allows rich countries to harmfully exploit poor people in poor countries

You can, undoubtedly, imagine still other economic problems allegedly caused by free international trade.  What are these problems?  And are these other problems, or any or all of the ones listed above, unique to free international trade?

My challenge isn’t rhetorical – or, rather, it’s not fully rhetorical.  My strong suspicion is that no one will successfully identify an economic problem that is unique to free international trade.  But I am sincere when I say that I might be proven wrong.  If so, I will admit my error.  But even in the face of such a unique problem, the case against free trade would remain as yet unestablished, for the magnitude and likelihood of that problem (whatever it might be) would then have to be weighed against the enormous and nearly 100-percent-likely benefits of free international trade.

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