Saturday, August 4, 2018

Why Free Trade is Best, Not Trade Retaliation

Richard Ebeling emails:

Dear Bob,

The second installment of my new video series called “Economics Straight Talk,” (sponsored by the Future of Freedom Foundation) is on “Free Trade is Best, Not Trade Retaliation.” Trade retaliation, as I explain, harms your own consumers and producers, as whole, far more than any attempted harm to foreign exporters hit with “retaliatory” tariff barriers.




  1. If a country had legal slavery and produced high quality handmade goods at an attractive price, should we allow trade with them?

    If a country allowed child labor and produced textiles below the price of anywhere else should we trade with them?

    If a country had no environmental protection and spewed toxic chemicals everywhere but produced at lower cost because of that should we trade with them?

    If we believe reducing carbon emissions is important and we restrict our industry to attain goals of carbon reduction, but a country had no such qualms and produced goods with no consideration of carbon production and consequently produced lower cost goods should we trade with them?

    If a country legally did not recognize the trademarks and patents registered in the US should we trade with them, what about with a company created in such a country simply to produce patented goods royalty free?

    If comparative advantage would lead to all the world's steel being produced in China should we have free trade and allow that to happen?

    1. @douglas

      1. If you don’t like what China is doing, then you are free to boycott them. But if you use violence to impose your preferences on others, then your moral high ground falls out from under your feet.

      2. If your claim is that Americans are aiding and abetting Chinese companies in the commission of crimes, then this must be proven on an individual basis. You can’t simply punish ALL Chinese and American trade counterparties on the grounds that SOME may be engaged in illegal activity. To do so is to subscribe to the monstrous notion of collective guilt, which is decidedly unlibertarian.

    2. Douglas, it is a conceptual error to assume that trade happens between countries. It happens between individuals (including individual firms). A consumer based in the US buys a consumer good from a firm based in China; a firm based in the US buys an intermediate good from a firm based in China. Only politicians and those who are economically ignorant talk about countries trading with one another (and, as usual, if a politician is framing something in a particular way, your skeptical radar should be buzzing loudly).

      Thus decisions about whether to trade or not trade are economically and morally most appropriately made at the individual level. Why should anyone in the US have any say in your purchasing decision, and why should you have any say in theirs?

    3. If I try to buy the product of slave labor or child labor or intellectual property theft from a US entity I am thwarted by law. Enforcement may fall on the producer/seller but law prevents those things. If any of those things are legal or informally allowed in China and I am allowed to freely buy form the Chinese producer, it is a problem.

      Or are you saying it is just a personal moral decision if I support say coerced prostitution by paying the pimp? Certainly the slave, the child laborer and the theft of intellectual property violates the nonaggression principle. If it were domestic actors forcing children to work in factories, is it just a matter of individual moral scruples whether anyone buys their product?

    4. Douglas, this is a much bigger discussion, but I would disagree that voluntary child labor and intellectual property "theft" violate the NAP (forced labor would, but not all child labor is forced).

      However, all of that is besides the point. The state has no legitimate interest in these activities (in fact, it has no legitimate existence), and thus it is the wrong party to forcibly intervene to prevent trades from occurring. If A wrongs B, it is up to B or his agents to take action against A; unconnected C has no right to intervene of his own accord.

      And yes, you could separately decide whether to trade with A. Whether purchasing from A constitutes a violation of the NAP -- through aiding and abetting -- will depend on the circumstances.

  2. Do we have free trade with, say, China? I don't think so. We open our markets to them, but not vice versa

    1. @Robert What?

      Of course it’s trivially true that international trade is largely fettered by states, and that it would be better if it were more free. However, it’s an overstatement to imply that China’s markets are totally closed to Americans.

      China is the US’s 2nd biggest trading partner, and trade is a mutually beneficial quid-pro-quo. The Chinese would not just sent goods to the US if they weren’t receiving a subjectively greater value of goods in return. (And if for some reason they did, that would be even better for Americans since it would mean they’re getting free stuff.)

  3. Re: Robert What?

    --- Do we have free trade with, say, China? ---

    There is no 'we', Kemoszbe, and yes, there IS free trade between American buyers and sellers with Chinese buyers and sellers, with governments in between taking their share of the property like the pirates they are.

    --- I don't think so. ---

    You're halfway correct. You don't think.

    1. @Francisco, you twit. Name a couple of the American made things that are sold in large anounts to China? Why then is there such an enormous trade imbalance with China? I own a small B2B software company. I sell all over the world but in twenty years I have never had a sale to China. Of course that doesn't mean my software is not in use there. There is no "free trade" with China because Free Trade cannot be one sided.

    2. @Robert What

      Trade is voluntary and mutually beneficial a priori, so it’s incorrect to describe it as “one sided.” It’s possible that trade REGULATIONS between 2 states could be one-sided, and that the resulting volume of trade between them could be correspondingly diminished. However, given that China is the US’s 2nd largest trade partner, any such discrepancy is clearly insufficient to decisively impede the 2 countries’ collective trading relationships.

      And the notion of a trade “imbalance” is an accounting artifact at best, and a dangerous fiction at worst. In any given transaction, each party trades something of lesser subjective value in exchange for something of greater subjective value. It’s a positive sum game in which both sides gain. In such a context, it’s incoherent to talk about an “imbalance.”

  4. The problem with all of these questions is the use of the pronoun "we". There is no "we" capable of making moral choices. Only individuals have that facility. Every group of people, every "we", allows some group within the larger group to make choices on their behalf. But is this abdication of human nature a good thing? I think it weakens society because it weakens its members.