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Quotation of the Day…

is from page 35 of the 5th edition (2020) of Douglas Irwin’s superb book Free Trade Under Fire (footnote deleted; link added):

For more than two centuries, economists have pointed out the benefits of free trade and the costs of trade restrictions. As Adam Smith argued more than two centuries ago, “All commerce that is carried out betwixt any two countries must necessarily be advantageous to both.” Therefore, he concluded, “all duties, customs, and excises [on imports] should be abolished, and are commerce and liberty of exchange should be allowed with all nations.” The economic case for free trade, however, is not based on outdated theories in musty old books. The classic insights into the nature of economic exchange between countries have been refined and updated over the years to retain their relevance to today’s circumstances.

DBx: Seldom embarrassed about offering illogical arguments, protectionists frequently dismiss the case for free trade on the grounds that it was first rigorously formulated in the 18th century. ‘Such old ideas can’t possibly be relevant today,’ so goes the obviously illogical argument. But if we grant for a moment the validity of such an argument, then the case for free trade is only further strengthened, for the arguments in favor of protection are far older. Adam Smith, remember, responded to what he called “the mercantile system” – what we today call “mercantilism” – a hackneyed mash-up of mistaken propositions and beliefs about international trade devised and promulgated long before Smith first put quill to parchment.

The case for protectionism today differs little in detail, and none in its foundation, from pre-Smithian 16th-, 17th-, and 18th-century mercantilism.

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