… is from page 5 of the 2015 Fourth Edition of Douglas A. Irwin’s important book, Free Trade Under Fire:
In fact, the economic case for free trade is based not on faith but on logic and evidence.
DBx: Yes.
The true mystics are protectionists. It is they who tell us that government officials somehow know better than does the market which goods and services are best to produce (and in which quantities) in the home country and which are acceptable to import. It is protectionists whose case, to be valid, requires that the government officials who implement and enforce trade restrictions be able to comprehend the countless details of the effects of their tariffs, quotas, and subsidies not only on the final, easily seen nodes of exchange (as when a tariff is collected on Brazilian-made steel being unloaded at Port Houston), but also which resources will be diverted in the U.S. into the production of steel or steel substitutes, from where these resources will be diverted, and what will be the consequences of the higher prices of the goods and services now produced in lesser quantities or lower qualities as a result of this tariff-induced diversion of resources into the production of steel and steel substitutes. Which American consumers will suffer and by how much? And which American producers will suffer – not just those producers who use steel and steel substitutes, but also those who use inputs now made more scarce because resources have been artificially diverted into the production in America of more steel and steel substitutes?
Validity of the protectionists’ case requires also that politicians and other government officials remain immune to the pressures of interest groups who stand to gain from tariffs at the expense of fellow citizens. And it’s fair to note that protectionists regularly offer interpretations of scholars such as Adam Smith, David Ricardo, Alfred Marshall, and F.A. Hayek that are at best tendentious, often out of context, frequently flawed by a misunderstanding of economic terms and concepts, and sometimes simply wrong on their face. People with facts and logic on their side need not resort to tendentious interpretations of the literature.
Protectionists never tell us how and from where government officials will get the information they must possess to out-perform markets. Indeed, in almost all cases they simply ignore this issue, as if it’s never occurred to them to consider it. Protectionists incessantly make assertions along these lines: ‘A country should choose to specialize in producing goods that will be best for the country to produce.’ Such an assertion is oh-so-easy to make. And after all, who could possibly dissent from the proposition that a country should specialize in producing things that are best for the country to specialize in producing? But after stating (and re-stating) this trivial, empty truism, protectionists tell us nothing about how to pour operational content into it – again, for example, how to know which are the goods the country ‘should’ specialize in producing and which goods are acceptable to import. The relevant knowledge and information required for protectionism to work its magic is simply assumed. Its existence is taken on faith.
Nor do protectionists justify their belief that interest-group politics – contrary to an overwhelming lesson of history – will not intrude into the tariff- and subsidy-dispensing decisions of politicians and their underlings. That these political officials will behave apolitically is simply assumed.
We are asked to accept the case for protectionism on faith. We are counseled to believe that miracles will occur.
