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On Evidence of the Economic Consequences of a Policy of Unilateral Free Trade

Commenting on this excellent EconLog post by Pierre Lemieux, “Steve” writes:

One of the issues with free trade is that I think lots of people sort of understand and accept that bilateral free trade makes sense. Unilateral free trade makes people uncomfortable. Of all people, Boudreaux has me mostly convinced that unilateral free trade is also a good idea, but I would still be happier if there was some empirical evidence. Boudreaux seems to believe that economic reasoning is all that is needed to justify ideas, but I think that people who favor unilateral free trade need to do a better job including real numbers and examples to bring the case that we should support unilateral free trade.

Here’s the first of what will be at least two comments that I’ll leave at EconLog in response to Steve’s comment:


Thanks for your remarks about unilateral free trade.

Your request for empirical evidence of the beneficial consequences of a policy of unilateral free trade is fair. It’s unfortunate, therefore, that the world has supplied so few examples of national governments following such a policy. But history does have some. An example is Hong Kong which, under British rule from the 1840s until 1997, had almost no trade restrictions. As Columbia University economist Arvind Panagariya summarizes (on page 163) of his data-rich 2019 book, Free Trade & Prosperity, “Industrialization in Hong Kong took place under a wholly free trade regime, with trade playing a central role in it.” The people of Hong Kong famously prospered.

Another example is Britain itself. In the mid-19th century Britain rid itself of almost all protective tariffs, a policy that remained in place until well into the 20th century. I’m no expert on British economic history, but I know enough to know that per-capita income in Britain grew during the latter half of the 19th century. For example, as shown on page 30 of this 2019 paper (by Solomos Solomou and Ryland Thomas), GDP in Britain per hour worked appears in 1900 to have been at least 50 percent higher than it was in 1860. And pages 34 and 35 show that, in the second half of the 19th century, Britain’s real GDP grew by 181 percent. Page 37 of this paper shows that British industrial production over this same time period grew by about 250 percent. (The U.K.’s population appears to have grown by about 50 percent from 1850 to 1900.)

This much is certain: The data show that a policy of unilateral free trade did not impoverish the British people or even cause them to economically stagnate.

But would the British people have, during that country’s time as a “Free Trade Nation,” prospered even more had their government instead obstructed their freedom to purchase imports? To answer this question there can obviously be no direct empirical evidence. Anyone who argues such a case – that is, anyone who argues that the British people in the latter half of the 19th century would have prospered even more had the government there not followed a policy of unilateral free trade – must rely on theorizing or on indirect empirical evidence the relevance of which can be established only by theorizing. (Ditto, of course, for anyone who might argue that the people of Hong Kong would have prospered even more had that country not been a free port.)

I have more to say about this matter, but will save my additional ruminations for a later, separate comment.