Ideally, every government would implement a policy of unilateral free trade. But governments, of course, by their nature testify that reality is very far from ideal. Here’s a letter to a long-time correspondent.
Mr. B__:
Thanks for your email in response to this blog post of mine in which I express support for the World Trade Organization and its predecessor, the GATT (the General Agreement on Tariffs and Trade). You reasonably ask:
Why does trade need to be “organized” at all? Why can’t a nation declare itself unilaterally to be a free trade nation? Get rid of trade “negotiators”, for example. What do they need to negotiate when all interferences harm only one’s own citizens? Allow our citizens to buy whatever goods and services they desire from anywhere in the world. After all, economic law does not change at our national borders.
The reason multilateral trade negotiations, such as are conducted under the GATT and WTO, are useful is because governments are mesmerized by mercantilist superstitions. As such, governments delusionally believe that the gains that a nation reaps from trade come from its exports, while imports are the cost that that nation unfortunately must endure in order to enjoy the bounty of exporting.
Because every government is bewitched by this absurd misconception, the government of country X correctly understands that the only way that it can persuade other governments to allow their citizens to buy more of country X’s exports is for it, the government of X, sacrificially to allow its own citizens to buy more of other countries’ exports. Given every government’s keen interest in increasing its country’s exports, trade negotiations impel each government to lower its barriers to imports in exchange for other governments lowering their barriers to imports.
In trade negotiations, the sole goal of each government is to increase its country’s exports. Nevertheless, the unintended beneficial result is a lowering of trade barriers by all governments who are party to the trade negotiations. The result, in short, is freer trade. Note that this happy result is brought about by an invisible-hand process; it’s brought about, not because any government values free trade as such, but instead because each government selfishly – and, frankly, rather stupidly – seeks as its end goal to increase its country’s exports.
A government that’s economically informed, wise, and committed to promote the best interests of its citizens would, as you recognize, immediately implement a policy of unilateral free trade. Alas, in practice every government is economically ignorant, unwise, and committed to promote the interests only of powerful of special interests. Given this sad but inescapable reality, freer trade is best pursued, as a practical matter, through mercantilist multilateral trade negotiations among governments each attempting to maximize its country’s exports.
‘Taint ideal. But it’s better than the only other practical alternative, which is each government alone imposing barbarous trade restrictions.
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
