Here’s a letter to a commenter on Facebook:
Mr. T__:
Reacting to my recent letter in the New York Times that is critical of Trump’s understanding of trade, you post on Facebook that “imports as % GDP doesn’t seem to correlate with the wealth of a country; e.g., US @ 13.89%, Ethiopia @ 13.99%. Argentina @ 13.89%.”
One response to your post is simply to say “Great! Trump and other protectionists can stop worrying that an increase in U.S. imports will decrease the wealth of the U.S.” But you deserve a deeper response.
Contrary to your implication, the economic argument for free trade does not imply, or even suggest, that a richer country will have imports that are a larger share of its GDP than will a poorer country. The amount that a country imports depends not merely on trade policy but on many other factors, not the least being population and geographic size.
Singapore – a small, rich country – has imports that are 137% of its GDP; the U.S. – a large, rich country – has imports that are about 14% of its GDP. Djibouti – a small, poor country – has imports that are 174% of its GDP; India – a large, poor country – has imports that are 24% of its GDP.
The economic case for free trade boils down to this simple but profoundly important reality: Because trade restrictions artificially shrink the access that the people of a country have to goods, services, capital, and markets, the people of a country will be materially wealthier the freer they are to trade with foreigners. This truth holds regardless of the size of a nation’s imports relative to its GDP.
Trade restrictions – in all but the most abstruse and unrealistic blackboard models – necessarily make the people of a country poorer in the same way as members of a family would be made poorer if the father, in a fit of insanity or cruelty, coercively obstructed the ability of his wife and children to shop at supermarkets and on Amazon.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
