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In today’s New York Times my intrepid Mercatus Center colleague Veronique de Rugy makes the case for unilateral free trade [2]. Some slices:
Economists since Adam Smith have understood that free trade is the best policy. Studies show that countries with freer trade have both higher per-capita incomes [3] and faster rates of productivity growth [4]. Economists have also long understood that barriers to trade, while pitched as a way to help domestic workers, always heavily penalize domestic consumers. For instance, when Uncle Sam imposes stiff barriers on sugar imports to protect a few hundred producers in Florida and Louisiana from competition, these farmers’ gains come at the larger expense of consumers who are obliged to pay more than twice [5] the world price of sugar, on average, each year since at least 1982.
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The fact is, free trade is a robustly good policy [6] — which doesn’t mean that it affects all Americans in the same way or at the same time. Not only is it the best policy when other governments practice free trade; but it’s also the best policy even when other governments are wildly protectionist. By lowering its trade barriers, a government enriches its citizens regardless of the policies implemented by foreign governments. This idea runs counter to the public’s assumption that we benefit from lowering our trade barriers only if other governments lower theirs.
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Far from suffering from its free-trade stance, Hong Kong’s economy [7] has experienced multiple periods of rapid growth. In 1950 its average per capita income was about one-third the average United States income, but by 2017 it was slightly higher. In 1960 life expectancy in Hong Kong was three years lower than in the United States, whereas by 2017 it was five years longer. Sure, other free-market policies contributed to this economic success story, but at the very least unilateral free trade hasn’t stopped Hong Kong’s transformation into one of the richest economies in the world.