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Principles of International Trade

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In my latest column for AIER, I discuss three principles of international trade [2]. This column is the first in a four-part series to be completed before January 20th, 2021. A slice:

If no one bats an eye when your neighbor in Nashville trades in the 2011 Chevy that he bought ten years ago in order to buy a 2021 Ford today, why should anyone bat an eye if your neighbor today buys instead a 2021 Toyota? In both cases your neighbor acts to get the most value for his money; in both cases a seller voluntarily satisfies your neighbor’s demand. And in both cases the trade is carried out by individuals. There’s no special involvement of governments or any collective. Your neighbor buys, and the auto-dealership’s owner (using a salesperson as an agent) sells.

That the Toyota vehicle is assembled in Japan, while the Ford vehicle is assembled in Michigan, is irrelevant. No one who observes the single transaction through which your neighbor purchases an automobile from Toyota would describe the exchange as “America trading with Japan.”

Your neighbor, of course, isn’t the only American to buy an automobile from a foreign manufacturer. Each day, many Americans do so. Likewise, many Americans daily buy other kinds of goods and services from foreign suppliers, just as many foreigners daily buy a wide variety of goods and services from American suppliers. Yet each such exchange is its own event, conducted voluntarily by flesh-and-blood buyers and sellers. These exchanges differ in no essential respects from your neighbor buying a vehicle from Toyota. If in none of these individual exchanges there is any evidence of “America” trading with “Japan,” summing these exchanges together does not result in “America” trading with “Japan.”

It’s just people trading with people. Period.

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