Home Economic Trends Free Trade Straw Men – Donald J. Boudreaux (02/12/2020)

Free Trade Straw Men – Donald J. Boudreaux (02/12/2020)

Straw men are famously frail. Immobile and brainless, they pose no threat to their opponents, who easily massacre them. Yet despite the unfairness of these battles – for straw men are always magnificently out-matched – slayers of straw men habitually pose as intrepid marksmen using their unique skills with the pen (or keyboard) to save humanity from the depredations that it would otherwise suffer at the hands of the now thankfully dead men of straw.

Few groups of policy pundits boast as many straw men slayers as does that of protectionists. Indeed, protectionists likely hold several world records for the number and variety of straw men whom they mow down and the frequency with which they perform this mowing.

Presented below is a list of only some of the more commonplace straw men who would put humanity in peril were it not for their courageous protectionist assassins. Immediately after each straw man is a correction of the record.

Straw Man: Free trade is cynically imposed on the country at the behest of soulless and greedy corporations.

Fact: Free trade is naturally what exists when government refrains from bestowing special privileges on domestic producers. A government no more “imposes” free trade on its citizens by refraining from taxing and subsidizing their commerce with foreigners than it imposes freedom of movement on its citizens by refraining from shackling them with leg irons.

Furthermore, what greedy corporations want is not free trade at home for the products they sell, but protectionism. Because free trade intensifies the competitive pressures under which corporations operate, greedy corporate owners and managers seek, not free trade, but tariffs and other forms of protection from competition.

You show me a tariff, and I’ll show you a domestic company that lobbied for it.

Straw Man: Free trade is officiously imposed on the country by out-of-touch and arrogant elites.

Fact: This straw man is today, like the populists who frantically fight it, multiplying like Tribbles. Yet it’s doubly preposterous.

First, free trade is simply a condition of freedom for all people – including, of course, for all ordinary man and woman – to choose to purchase imports, and not to have their tax dollars used to subsidize exports. Elites who impose their vision of society on others butt into the affairs of those whom they seek to control. Arrogant and officious elites do not leave ordinary people free to do whatever ordinary people peacefully choose to do – which is to say, such elites oppose a policy of free trade and the principles that support it.

Second, what is elitist – by its very nature – is protectionism. It is the protectionist, not the free trader, who obstructs the spending choices of ordinary people. It is the protectionist, not the free trader, who not only claims to have divined the knowledge of what are ‘the industries of the future,’ but who is so arrogantly confident in his prophecy that he feels entitled to force others to act as he commands.

Protectionists, of course, often peddle their schemes under the banner of helping to protect the masses from the pretensions of elites. But the fraudulence of this advertising is immediately exposed upon realizing that it is protectionists, not free traders, who presume to superintend and override the peaceful commercial choices of ordinary men and women.

Straw Man: The economic theory that supports the case for a policy of free trade assumes perfect knowledge, perfect mobility of labor and capital within the home country, perfect immobility of capital between countries, absence of market distortions at home and abroad, and [fill in this blank with whatever other assumptions, from the sensible to the silly, that might occur to you].

Fact: While economists over the centuries have theorized about international trade using a variety of simplifying assumptions, almost all of these assumptions are meant only to focus attention on the particular features of trade that happen to be under consideration at the moment. The realism of these assumptions is not necessary for a policy of unilateral free trade to be economically justified.

For example, when I introduce my undergraduate students to the principle of comparative advantage, the particular feature that I wish to demonstrate is that a person’s (or a firm’s, or a country’s) technical superiority at performing some productive task does not necessarily mean that that entity is the superior producer economically. To make this demonstration as clear as possible I make a large number of unrealistic assumptions. 

Among these assumptions is that the existing pattern of comparative advantage – that is, the various quantities that are possible for each of the entities in my example to physically produce – remains unchanged. Yet this assumption is necessary neither for the principle of comparative advantage to hold in reality, nor for a policy of free trade to work in reality.

Those who are guilty of relying on the realism of whackadoodle assumptions are protectionists. It is protectionism, not free trade, that requires for its success the possession by real-world individuals – namely, government officials who impose tariffs and dispense subsidies – of unrealistically vast amounts of knowledge. It is protectionism, not free trade, that works only under other similarly bizarro scenarios, such as that the largesse made available in the home country by subsidies doled out by foreign governments to their exporters somehow causes the total amount of goods and services available at home to fall by an amount in excess of the benefit received at home from the foreign subsidies.

In short, if you’re looking for a policy that works only if zanily unrealistic assumptions happen to hold, look no further than protectionism. You’ll find that free trade is not such a policy – and that anyone who alleges otherwise is, as William Buckley said of John Kenneth Galbraith, “a pyromaniac in a field of straw men.”