The moral case for free trade
Make no mistake: The facts are on the side of free trade. There’s a reason it receives nearly universal support from professional economists — a notoriously disagreeable bunch — and “Smoot-Hawley” has become a four-letter word.Throughout history, largely protectionist countries have not prospered economically.
But wonky arguments about comparative advantage and efficiency gains tend not to move the needle with the public or elected officials, as the last few years have proven. Politicians from both parties use inflammatory rhetoric to mask weak arguments against free trade. Candidate Donald Trump, for instance, said the Trans-Pacific Partnership — a promising trade pact between 12 Pacific Rim nations— was tantamount to rape of the United States. NAFTA? A “disaster” and “the worst trade deal in history,” which has caused “carnage” in the United States. Meanwhile,Bernie Sanders has argued that TPP even “threatens” American democracy.
Given such stark rhetoric from those with weaker economic arguments, it’s time for free traders to make the moral case for trade.
The first moral argument for free trade is that it expands human freedom. It is important to note that, by and large, countries and governments do not trade. People trade, whether for themselves and their families or as part of their businesses. Free trade expands the scope of autonomy for consumers — both businesses and individuals — outside the scope of governmental decision-making. Why should we let politicians interfere with free citizens purchasing legal goods from another country if they can find better quality products, lower prices, or both outside the United States? Besides very narrow exceptions for national security, why should we allow the government to infringe on a seller’s ability to sell a legal product to whomever he or she chooses, including foreigners?
We shouldn’t.
Thankfully, some leading politicians are pushing back against protectionistrhetoric. For instance, Rep. Kevin Brady, R-Texas, chairman of the House Ways and Means Committee, which has jurisdiction over trade agreements, routinely emphasizes the “free” component of free trade. Last year, channeling his inner Milton Friedman, Chairman Brady said one of “America’s greatest economic freedoms is the freedom to trade — to buy, sell, and compete anywhere in the world with as little government interference as possible.” This, he continued, “lies at the heart of free enterprise and I believe [we] must expand that freedom” — music to the ears of free traders and free marketers who have lately been berated by misleading political rhetoric.
The next moral argument for trade is that tariffs and trade restrictions are crony capitalist giveaways funded through regressive taxes. Such policies mostly benefit special interests with big enough lobbies to secure protection from competition, and come at the expense of individuals and businesses who are forced to shoulder higher costs from restrictions on imports. More liberalized trade rules do not just mean cheaper electronics and other luxury items; basic necessities such as food and clothing would also be cheaper if there were fewer restrictions on agriculture and textiles imports.
Consider the ramifications of steel restrictions. The Trump administration currently is examining whether steel imports pose a national security threat to the United States. If they believe the answer is yes, the administration likely will impose tariffs or some other restrictions on imported steel, which will raise prices for downstream users. The national security case is extremely weak; this appears to be nothing more than a payoff to the administration’s allies in the steel industry.
But where is the morality in restricting steel imports? Sure, the administration can protect its friends in the steel industry. But what about American businesses who use imported steel? As Dan Pearson of the Cato Institute noted recently: “Steel mills employ 140,000 workers. Manufacturers that use steel as an input 6.5 million, 46 times more.” Steel mills’ $36 billion of productivity in 2015 represented just 0.2 percent of U.S. gross domestic product, Pearson notes, while the economic value contributed by U.S. firms that use steel was 29 times larger. In short, clamping down on steel imports threatens considerably many more jobs than could be saved by “protecting” the steel industry from foreign competition.
The American public understands the problems with crony capitalism. But free traders need to emphasize that tariffs and import restrictions are just an extension of the Washington favor factory they rightly detest.
The final moral argument for free trade revolves around global poverty. While foreign aid may have some benefits, a surefire way to improve conditions in developing countries is to give their citizens and businesses the ability to sell products and services to American consumers. Why should we punish poor people in developing nations by blocking or taxing products sold to willing buyers in the United States? Haven’t they suffered enough already?
The case for free trade is sound, but the politics have shifted. To win back the argument, free traders must emphasize not only the economic but also the moral reasons for free trade.
Image by hxdyl
