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Quotation of the Day…

… is from remarks delivered by James Madison in the United States House of Representatives on April 9, 1789; these remarks are quoted on page 70 of Douglas A. Irwin’s hot-off-the-press (2017) Clashing Over Commerce:

I own myself the friend to a very free system of commerce, and hold it as a truth, that commercial shackles are generally unjust, oppressive and impolitic – it is also a truth, that if industry and labour are left to take their own course, they will generally be directed to those objects which are the most productive, and this in a more certain and direct manner than the wisdom of the most enlightened legislature could point out. Nor do I think that the national interest is more promoted by such restrictions, than that the interest of individuals would be promoted by legislative interference directing the particular application of its industry.

DBx: Madison was not a complete unilateral free trader. Like all politicians, he in practice compromised on the question. And in principle Madison, as Irwin points out, held there to be three exceptions to the case for free trade – exceptions that, Madison believed, justified tariffs:

(1) tariffs to raise revenues for the national government;

(2) tariffs to protect American shipping;

(3) tariffs to promote the government’s ability to supply national defense.

What is notable about these exceptions is how limited they are.  The first and the third exceptions are fully consistent with the economic understanding that trade restrictions are economically costly.  (Keep in mind that revenue tariffs better serve their purpose of raising revenue the less they discourage imports.) And about the third exception Madison had, as Irwin notes, doubts about its practical relevance. Irwin quotes Madison from the same April 9th speech in Congress: “[t]here is good reason to believe that, when it becomes necessary, we may obtain supplies from abroad as readily as any other nation whatsoever.”

Only the second exception – which likely has some national-defense element in it – is one that is inconsistent with the foundational case for free trade. Yet, being focused on only one particular industry, this exception is very narrow.

(The full text of Madison’s April 9th, 1789, Congressional speech can be found here by scrolling down.)