… is from pages 223-224 of the 1936 English-language edition (translated from German by Alfred Stonier and Frederic Benham) of Gottfried Haberler’s classic 1933 work, The Theory of International Trade With Its Application to Commercial Policy:
[E]xperience shows that the restrictions on free competition may lead to a less efficient conduct of economic affairs. Free Trade has an educative effect. Home producers are spurred by foreign competition to become more efficient and to adopt quickly any improvement in methods of production, no matter where it is first introduced.
DBx: Indeed. And this reality points to one of the many downsides of offering protection to an industry on national-security grounds: because protection shields domestic producers from foreign competition, it reduces the likelihood that protected producers will be exposed to, and will adopt, innovative ideas of foreigners – innovative ideas that might well become useful for national-defense purposes.
Richard McKenzie, writing in 2018, generalized and extended this important insight.
