Gene Epstein of Barron’s turns to 18th-century economist Adam Smith to help counter modern-day critics of free trade.
“In every country,” wrote Adam Smith in The Wealth of Nations, “it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest. The proposition is so very manifest, that it seems ridiculous to take any pains to prove it.” Smith went on to observe that this self-evident proposition could not “have been called in question, had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind.” …
… Free trade refers to the right to buy and sell in any market, foreign or domestic, without tariffs, duties, or other forms of interference. While Smith observed that the vast majority of us prefer to pay less rather than more for what we buy, not everyone does. For example, some get psychic benefit by paying more for goods made solely in the U.S. That is not only their right; they are also free to try to persuade others to do the same. But when they urge government-imposed tariffs and duties that make it more costly to buy from abroad, they are trampling on the rights of others.
A constitutional amendment was once proposed by free-market economist Milton Friedman that would simply declare, “The Congress shall not impose any taxes on imports or give any subsidies to exports.” In one stroke, then, the U.S. would abolish the need for trade agreements with other countries. Just as New Yorkers are free to buy and sell with Californians without a government-negotiated agreement, Americans could freely buy and sell with Chinese, Japanese, and Mexicans, among many others.
Notice I did not say that these others would necessarily be free in the same way. One critic called me “delusional” because I was urging free trade for the U.S. while ignoring the fact that other countries’ governments do not reciprocate. They often subsidize their exports and tax their imports, while also trying to keep the value of their currency cheap in relation to the U.S dollar, in order to cheapen the cost of their goods and make ours more expensive.
What my critic was really saying, however, is that our government must coerce us into rejecting low-cost imports that result from foreign subsidies. If U.S. consumers and businesses purchase heavily subsidized goods and services from a particular country, economists would call that improved terms of trade; we would be acquiring more imports in return for exports to that country. While such a relatively free lunch might be hard to sustain, it would be foolish to raise objections. And if cheap is bad, it must be bad from any source. With equal logic, my critic should want to roll back other factors that have made imports cheaper, including container shipping, modern telecommunications, and the improvement of harbors and airports.
