Don’t be framed into accepting the arguments of protectionists – or so I explained in this May 2001 Freeman column, which is below the fold. (Although written 17 years ago, it’s as if my column were aimed directly at Trump and his fiasco of trade fallacies.)
Experimental psychologists teach the importance of “issue framing.” The details of how a problem is presented to someone—how a problem is framed— often affect his response to it.
Human brains aren’t fleshy versions of silicon microprocessors; we are not general-purpose calculating machines. Rather, our brains evolved over countless generations to deal effectively with those specific problems that regularly arose throughout our history—problems such as determining if another person is trustworthy, or if a proposed exchange is beneficial.
Humans cannot quickly solve non-routine problems, such as calculating the square root of 323,761 or the distance between the earth and Venus. The reason is that too few of our ancestors confronted situations in which the ability to make such calculations gave them a survival advantage. But almost everyone understands immediately that ten apples is more than nine apples. Almost everyone understands that someone with shifting eyes, a sweaty forehead, and halting speech is probably lying. And researchers have found that each of us possesses an uncanny knack for remembering favors that others have done for us, as well as for remembering good deeds that we have done for others but that have yet to be acknowledged by them.
Put simply, we see and react to the world in certain specific ways. While our specialized ways of seeing and reacting greatly assist us in dealing with recurring and familiar problems, the downside is that if a familiar situation is framed in an unfamiliar way, the framing often causes us to misapprehend the situation.
Politicians frequently exploit issue framing as a means of fooling people into giving the state more power.
Here’s an example. If I correctly point out that you shop at Safeway, you yawn and ask, “So what?”
But suppose that I instead say, “Hey, you’re running a huge trade deficit with Safeway!” Especially if you view me as an authority, you might be concerned by this apparent revelation. You might even seek my help to eliminate this deficit.
My statement in this example is accurate (assuming that you don’t work for Safeway). But rather than inform, it misleads. By framing the matter in terms of trade accounts, I appear to be telling you something other than that you shop at Safeway. But, in fact, that’s all I’m really saying. I’ve deceived you with the truth—a truth framed in an unfamiliar way.
Of course you run a trade deficit with each merchant who supplies your needs! Such deficits are inevitable and beneficial. Whenever you shop at Safeway, you “export” money to Safeway in exchange for groceries “imported” by you from Safeway, and Safeway never buys any of your “exported” goods or services.
Nothing is amiss with such exchanges. But by framing the issue in an unfamiliar way, I can cause at least temporary anxiety in many people.
Everyone is relieved when they learn that the “deficit” is merely the conventional label that economists use to describe the trade-account position with Safeway of each person who shops there. Armed with such new knowledge, people understand that their trade deficits with Safeway really aren’t a problem.
Trade Deficit with Japan
Now let’s change the example a bit. A politician announces that America has run trade deficits with Japan for the past two decades. “This problem must end. Congress should slap punitive tariffs on Japanese goods to get the Japanese to understand that we Americans will no longer be bullied by their unfair trade practices.”
Such demagoguery is the stock-in-trade for many politicians and pundits. They frame issues in language that misleads the public into thinking that many non-problems are in fact problems requiring government intervention.
Among the many illusions created by such statements about international trade is the suggestion that trade is carried out by nations. Much mischief disappears as soon as we understand that individuals, not nations, trade. Japan never trades with America. Instead, individual Japanese trade with individual Americans.
And all trade is voluntary. Each exchange between someone in Japan and someone in America makes each trading party better off. But by framing the issue as two titans struggling in battle—“Japan” versus “America”—the peaceful, voluntary, and mutually beneficial nature of trade is masked.
Framing the exchange relationship properly—that is, describing international trade as always involving voluntary exchanges among consenting adults who happen to live in different political jurisdictions—helps to avoid two other dangers with the typical framing of trade issues by protectionists. The first is seeing trade as a zero-sum game; the second is forgetting that trade, ultimately, is about satisfying the wishes of consumers and not about enhancing the profits of producers.
By framing trade issues in nationalistic terms, it’s easy to mislead unsuspecting folk into seeing trade as war in which the only choice is to support or obstruct “our” government’s attempt to help “us” defeat foreigners. And all mention of trade deficits with the foreign country only heightens the fears of those who don’t understand the reality. If “we” have a trade deficit with Japan because “we” buy more from Japan than “they” buy from “us,” that must mean that “we” are losing something valuable to Japan through trade. Best to restrict the amounts that “we” buy from Japan, no?!
Some domestic producers, of course, have greedy reasons for encouraging the framing of trade issues in nationalistic terms. Doing so helps them win government protection from foreign competition. If trade is a war of “us” versus “them,” and if the imports “we” buy from “them” contribute to “our” deficit with “them,” then it seems only right to protect “our” producers from “theirs.”
Consumers get lost in such framing. Nowhere is their welfare recognized. Instead, “our” side is seen as consisting of “our” firms fighting against “their” firms to determine who will sell the most on each other’s shores. Any policies that help “our” guys outsell “their” guys is, therefore, seen as beneficial for “us”—or so the tale is told. But it’s just a tale.
So, let’s frame trade questions properly: all trade consists of voluntary transactions among willing buyers and willing sellers, each of whom expects to be made better off. The ultimate economic reason for free trade is that it allows everyone—including our fellow citizens—to spend their money as they see fit. Consumers thus get the most satisfaction possible from their incomes. Whenever government restricts consumers’ buying from foreigners, it not only hurts domestic firms that would prosper in the export market, but also lets politicians second-guess people’s spending choices. All trade restraints batter the rights of ordinary people to spend their money as they wish.
When framed in this way, protectionist arguments lose much of their luster.