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Making the Case for Free Trade

Here’s a letter to an economics graduate student who asked to remain anonymous:

Mr. T:

You accuse me of “doing a disservice” to you and other of my fellow economists by “over-simplifying our theoretical understanding of trade.”  You insist that the “exceptions shown by theory to [the case for] free trade should not be ignored.”

With respect, while I appreciate your e-mail, I disagree with your assessment of my efforts.  Nearly all of my writings on trade are for popular audiences.  These writings appear on my blog and in newspaper and magazine columns.  These audiences are not composed of my fellow economists who understand the elemental case for free trade.  Instead, these audiences are composed of people many of whom do not understand the important basics that economists understand – people who do not understand, for example, that foreigners sell to us only because they wish to buy from us or to invest in our economy; that resources diverted to domestic industry X by a tariff are thereby diverted away from domestic industries Y and Z; that a rising U.S. trade deficit does not imply that Americans are going further into debt; that the low wages paid to many foreign workers – especially, but not only, because these low wages reflect low productivity – do not give low-wage countries an “unfair” advantage (or, for that matter, any advantage at all).  Until and unless non-economists better understand these and other foundational truths, ordinary men and women will be unwitting victims of demagogues and cronyists.

You might respond that I’m nevertheless professionally obliged always to point out the ifs, ands, and buts that appear in textbooks and academic papers on trade.  And I would disagree with your response, for four reasons.

First, the qualifications to the economists’ case for a policy of free trade are very few in number.  Second, they are unlikely to arise in reality with sufficient frequency to justify our condoning government discretion to obstruct trade.  Third, although we economists can describe these exceptions theoretically, we – and much more so politicians and other government officials – can be trusted neither to identify the existence of these exceptions in reality nor to respond to them apolitically and in ways that will actually improve matters.

Fourth and most importantly, to the extent that trade policy today falls short of what most economists would recommend, the reason is that ordinary people do not understand the basic case for free trade.  In other words, actual problems with existing trade policy are not the result of a failure of policy-makers and the general public to appreciate and acknowledge the theoretical exceptions to the case for free trade; instead, these problems are the result of a failure of the general public to understand the case for free trade itself.  Therefore, before any public discussion of exceptions to the case for free trade becomes important, the public must first have what it doesn’t now have: an adequate understanding of the case for free trade.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030