Freedom to Trade: Refuting the New Protectionism
Well Written and Cogently Argued
SEPTEMBER 01, 1999 by CHARLES ROWLEY
Free trade against protectionism is one of those few issues over which economists have reached consensus. Free trade attracts the vote of the very large majority of economists, whereas protectionism typically attracts the support only of those who are paid mouthpieces for the special interests. Yet this remarkable consensus belies the facts of the international trade reality. The guns of the economists, like the French guns of the Maginot Line, appear to point in the wrong direction. International trade is highly regulated; and protectionism dominates free trade despite the cogent economic arguments against it.
The book under review represents a sterling effort to carry the case for free trade forward to the general public in language stripped of the jargon of economics. It is written well and cogently argued. Chapter one, written by Edward Hudgins, director of regulatory studies at the Cato Institute, focuses attention on the fundamental freedom to trade, correctly stressing that the individual trades and not the nation. Although the concept of comparative advantage strangely is never mentioned, the classical case for unilateral free trade is outlined, briefly but accurately, both in terms of static specialization and in terms of dynamic market discovery criteria.
The second chapter, written by Bruce Bartlett, briefly reviews the trade history of the Netherlands, Great Britain, the United States, Japan, and Germany, and succinctly demonstrates the close correlation between periods of relative free trade and periods of relative prosperity in each of these nations. The aim of this chapter is to show that generally nations rise to power and wealth through free trade and decline when protectionism takes over. In my opinion this case holds least well for the United States, whose dramatic advance between 1875 and 1900 coincided with Republican high-tariff policies justified by infant-industry rhetoric. Of course, it is the elementary post hoc ergo propter hoc logical fallacy to conclude, as some do, that protectionist tariffs were the cause of our economic growth. It is also questionable whether rising German economic power between 1871 and 1939 was based on free trade policies. It is always satisfying when the facts fit our predilections; equally, however, it is unwise to force the fit.
Chapter three, written by Hudgins, attempts to refute the myth of the “race to the bottom,” which charges that U.S. free trade policies result in a loss of jobs to other countries and in declining real wages in the United States. Using simple charts to excellent effect, Hudgins makes a strong case that recent job creation in the United States has far surpassed that of its major international rivals and that real wages in the United States, correctly measured, have increased at approximately the same rate as underlying productivity. Hudgins also fingers the explosive growth of government in the United States over the past three decades as the major single factor depressing productivity and obstructing the growth in real wages. Undoubtedly, this is the best chapter in the book, and one that should be read by any intelligent adherent to the intellectually confused trade policies of Ross Perot and Pat Buchanan.
The next chapter, also written by Hudgins, changes direction into a surprisingly vigorous defense of recent trade treaties entered into by the United States, arguing that they do not infringe national sovereignty. I have no dispute with the author in this judgment. However, I contest his view that certain of these treaties are supportive of free trade. In particular, the regional trade agreements, epitomized by NAFTA, divert U.S. attention away from genuinely multilateral trade agreements; for example, excessive attention to NAFTA almost aborted the Uruguay Round. They also provide a regulatory conduit through which the forces of protection obstruct the flow of imports into the United States. The post-Uruguay shift from the informal General Agreement on Tariffs and Trade to the much more bureaucratic World Trade Organization as an enforcement agency is also not a change with which genuine free traders should be enamored.
Among the remaining essays, the best is chapter eight, written by James Dorn, providing a compelling analysis of the relationship between trade and human rights based upon a study of the People’s Republic of China over the period 1978 to 1997. Dorn makes an eloquent case in favor of keeping trade open between the United States and China as a basis for promoting liberty in the latter country. This is a refreshing change from the self-serving arguments in favor of such open markets typically advanced by U.S. export interests.
Edited volumes typically suffer from unevenness of quality and lack of cohesiveness. This monograph, despite its brevity, is no exception. In addition, the monograph is weak in its use of public-choice analysis, which is unfortunate since public choice goes far to explain why the guns of the Maginot Line indeed point in the wrong direction.
Nevertheless, I recommend this book to anyone who is eagerly searching for a short volume capable of explaining in nontechnical language the case for free trade and the arguments against trade protection.
Charles Rowley is a professor of economics at George Mason University and general director of the Locke Institute.