Free Trade's Never-Ending Battle
SEPTEMBER 01, 2004 by ARTHUR FOULKES
Filed Under : Scarcity, Protectionism, Free Trade
Arthur Foulkes is a freelance writer living in Indiana.
Bastiat, did you live in vain?
I can think of few people who did more for the cause of free trade in his lifetime than Frédéric Bastiat. A nineteenth-century French lawmaker, pamphleteer, economist, and philosopher, Bastiat is well known to free-trade advocates even today. His classic satirical essay “A Petition,” which calls for protection of candle makers from unfair competition from the sun, is a staple in the library of all anti-protectionists.
Yet I sometimes have to wonder if the cause of free trade isn’t hopeless. Each day someone new calls for an end to the “exporting of jobs,” “dumping,” or “foreign dependence”—all catch phrases for protection. And the public largely applauds.
“It’s bad for workers,” said a young woman on National Public Radio’s “Morning Edition,” speaking about freer trade with Latin America. “It puts profits ahead of people,” she said. That radio piece included quotes from four people opposed to free trade and just one quote from a supporter, but even he was careful to couch his words in neomercantilist clothing. Free trade will boost U.S. exports, he stressed, avoiding any mention of dreaded imports. As Orwell might have penned it: “Exports good, imports bad.”
Why are things this way? Bastiat wrote that the enemies of free trade “have a marked advantage over [free traders]. They need only a few words to set forth a half-truth; whereas, in order to show that it is a half-truth, [free traders] have to resort to long and arid dissertations.”1 A bumper sticker can make the protectionist argument (“Hungry? Eat your Japanese Car!”), while free traders, in Bastiat’s words, are forced to make—God help us!—“An appeal to reason.”2
My stepson is a clever if sinister boy. When he was 14 or 15 he informed me he had devised a plan to “ruin the economy.” He would build a machine that would produce whatever anyone desired instantly. Want a new car? Presto, here’s a Jaguar in your favorite color. Want a steak dinner? Presto, here’s a fillet mignon with baked potato and steamed vegetables. By instantly meeting all human needs, the machine would simultaneously bankrupt all businesses creating global unemployment.
After wondering for an uneasy moment why my stepson would be spending his time dreaming of ways to spread planetary ruin, I came to my senses and said, “That sounds great! Good luck with the machine!”
This may not have been the reaction he was expecting, but, as I went on to explain, if his machine really could instantly create whatever anyone wanted, we certainly would not need jobs, businesses, or any of the other things people usually think of when they talk about “the economy.” In that sense, his machine really would “ruin” the economy, since there would be no need for any further economizing. Scarcity itself would be a thing of the past. However, his machine would not spread the global despair I suspect he had in mind. Like many people, he was equating economic well-being with jobs, business activity, trade, and so on, perhaps not realizing these things are not ends, but only means to the ultimate goal of all economic activity: consumption.
The famous French economist Jean-Baptiste Say emphasized that we have to produce in order to consume. We can either consume what we have produced or—more likely—trade what we have produced to others. Our demand for goods and services forces us to produce marketable commodities. The demand of producers creates supply (not the other way around, as John Maynard Keynes misrepresented Say’s Law). Say’s Law may help explain why my stepson and others equate economic welfare with employment and production. We serve others to serve ourselves, and the way we serve others is called our “employment.” Thus jobs are seen as synonymous with well-being. And jobs are what most protectionist measures are designed to preserve. But this is not the whole story.
Trade restrictions prevent American consumers from buying foreign-made goods at prices lower than American businesses and workers can supply them. Their effect is to reduce consumption for the sake of production. Although some people in the protected industries prosper, the wider population is always worse off than it would be absent the protectionist barriers.
In short, tariffs amount to a tax on everyone to pay for the privileges of a few chosen workers and industries. Certainly this tax is spread over a large number of people and is therefore difficult to see, buried deep inside the prices of goods and services. Yet it is there nonetheless. For instance, Americans waste $13 billion annually to preserve the domestic textile industry.3 They also pay three times the market price for sugar and an extra $91 million annually for apple juice, all thanks to import barriers.4 Tariffs on lumber raise the cost of new homes to the point that some 300,000 people are priced out of the housing market annually.5 Such examples go on and on.
Two hundred years ago 97 percent of Americans lived on farms; today, because of technological and other innovations, only around 2 percent do. Did all those who lost farming jobs languish and die? Or did they find new ways of producing goods and services for their fellow men? More recently, did the millions formerly employed in now-extinct manufacturing plants simply perish and did their children find (or make) no other opportunities?
New professions and jobs that no one could have imagined two decades ago have replaced the old jobs because we’ve allowed less productive means of creating some consumer goods to die away or be performed overseas. Our standard of living has all the while increased, not, as protectionists always warn, decreased.
Freedom of trade, with its attendant specialization, productivity growth, and never-ending fluctuations in relative production costs, means the face of the world’s economy is always changing. Indeed, change is the only constant when people are free to conduct their economic affairs. Any effort to eliminate change is the work of despots, never the result of voluntary exchanges in a free market. Bastiat was right; the protectionists have an easier job than we. But, as long as we continue the struggle, he will not have lived in vain.
- Frédéric Bastiat, Economic Sophisms (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1996), p. 4.
- Dan Ikenson, “Threadbare Excuses: The Textile Industry’s Campaign to Preserve Import Restraints,” Cato Institute Trade Policy Analysis No. 25, October 15, 2003; www. freetrade.org/pubs/pas/tpa-025es.html.
- J. Christopher Robbins, “Apple Concentrate Tariff,” Mises.org Daily Article, May 2, 2002, www.mises.org/fullstory.asp?printFriendly=Yes&control=946.
- Daniel T. Griswold, “The Economic Effects of Significant U.S. Import Restraints,” testimony before the U.S. International Trade Commission, December 4, 2001, www.freetrade.org/pubs/speeches/itct-dg120401.html.