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Again: Free Trade, Unilaterally

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Here’s a letter to a Cafe Hayek reader, Pat Barry:

Mr. Barry:

Thanks for your e-mail.

You’re correct that economists – even Adam Smith – have long recognized the theoretical possibility that retaliatory tariffs today, if these pressure foreign governments to lower their trade barriers, can improve the well-being of home-country citizens tomorrow. But you’re mistaken to describe this exception as “practical.” It is not practical at all; it’s purely theoretical – by which I mean that the conditions necessary for protectionism motivated by this exception to work in reality are so unlikely that it is a mere curiosity. And yet it is a curiosity that is extraordinarily prone to be used mischievously by protectionists grasping for excuses to justify their quests for monopoly power.

If nothing else, the impracticality of this exception to the case for free trade is guaranteed by the fact that government officials are unlikely to possess the knowledge – and are sure not to possess the political courage – required for the successful use of such retaliatory tariffs.

I endorse what David Ricardo wrote in 1816 about the case for a policy of unilateral free trade: “These are principles which cannot be too widely extended, nor too generally adopted in practice; but if foreign nations are not sufficiently enlightened to adopt this liberal system, and should continue their prohibitions and excessive duties on the importation of our commodities and manufactures, let England set them a good example by benefiting herself; and instead of meeting their prohibitions by similar exclusions, let her get rid, as soon as she can, of every vestige of so absurd and hurtful a policy.”*

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

* David Ricardo, Proposals for an Economical and Secure Currency [2] (1816).

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