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Quotation of the Day…

… is from page 295 of the 2015 Fourth Edition of Dartmouth economist Douglas Irwin’s excellent volume, Free Trade Under Fire:

America’s free and competitive markets, and its willingness to accept goods and services from all over the world, is one is one reason it is so highly regarded. If the United States weakens its commitment to a system of open world trade, other countries will inevitably follow. The United States is expected to set an example for the world, and people everywhere look to it for leadership. The trade policy choices that it makes have ramifications far beyond America’s shores and have implications well beyond economics.

DBx: It’s sad but true that governments often mimic each other’s worst policies. And for trade policies, this sad truth applies with greater-than-usual frequency. With rare exceptions – for example, Britain for much of the 19th century and Hong Kong today – each government abuses its own citizens with trade restrictions on the grounds that other governments inflict similar abuse on their citizens.

Suppose that private businesses behaved as governments behave. Caterpillar, for example, would refuse to buy steel, electricity, insurance, and other inputs from outside suppliers unless and until John Deere, General Motors, and other manufacturers do the same. Despite the much higher cost of doing so, Caterpillar would manufacture its own steel, generate its own electricity, and self-insure as long as other manufacturers follow similar economically destructive policies.

Eventually noticing the economic destructiveness of these business practices, executives of these companies would send lieutenants to joint negotiations in which each company agrees to improve its operating efficiency and lower its costs by buying more of its inputs from outside suppliers, but only on the condition that each of the other companies continues to do likewise.

And when one renegade business advisor suggests to Caterpillar that it should buy its inputs from outside suppliers whenever outside suppliers offer good deals and regardless of what other companies do, that renegade business advisor is ridiculed for his detachment from reality and his failure to understand the nuances of proper business strategy. No one takes this dreamy-eyed business advisor seriously. He’s dismissed as a quack.


Alas, in the real world, the only politically practical way to persuade each government to reduce the economically destructive trade barriers that it imposes on its citizens is to have other governments do the same. Again, sad but true. Still, while a policy of unilateral free trade is unambiguously the best way to go – both economically and ethically – it’s better to have trade made freer through multilateral agreements among governments than to not have trade be made freer at all.