Mises Wire

Free Trade, and the US as “an Antiquated and Unnatural Construct”

Sometimes, I get letters from readers that are full of great observations. Here’s one of them (in response to today’s article):

Dear Ryan,

...In a recent discussion with a friend of mine, I was trying to make the point that government policies cannot be justified solely on whether they are good or bad for Americans. Indeed, let’s suppose that erecting some sort of trade barrier with China would enhance the welfare of Americans.  Let’s even assume that it makes ALL Americans better off. It seems like a no brainer to support, but is it? Suppose that, instead of a trade barrier, it was shown that the United States would better off if China did not exist at all. Would the US be justified in simply bombing China off the face of the earth? Clearly not. But the different outcomes cannot be explained from an efficiency standpoint. Morality and ethics are at play, but morality and ethics are at play in both cases. In the latter, it’s readily apparent; in the former, it’s more subtle but still rests on putting the interests of Americans ahead of foreigners. (As an aside, this is one of my gripes about America, particularly but not exclusively on the left side. People advocate all sorts of redistributive policies to help middle-income Americans — buying a house for example — when billions (with a ”B”) of our fellow humans live at subsistence levels.) 

Going one step further, we hear so much about the loss of well-paying American manufacturing jobs in favor of lower paid service jobs. China is again in the crosshairs. When I hear this kind of talk, at least two questions come to mind: 1) what can we do about it? and 2) what are we prepared to do about it? The older I get, the more I think the best medicine is to do nothing — not here, but in many areas. The proposed intervention is almost always worse than the illness. Are we prepared to cut off all international trade? Are we prepared to literally wage war against China?

This leads to a related question: why should we talk about the loss of American manufacturing jobs? Lately, I’ve been telling anyone who will listen that I have come to see the United States as an antiquated and unnatural construct. It could be viewed as a noble experiment, but it just doesn’t fit in the world in which we live. We live in an age of globalization. I don’t know why a resident of Seattle should lament the loss of a manufacturing job in South Carolina but not one in Vancouver, B.C. Is it simply because there is a border in between? This is exactly one of the points you make and I couldn’t agree more.

As my thinking has evolved over the years, I focus more and more on political divisions. I learned all about comparative advantage as an undergraduate. The principle remains sound, but I feel like the conversation is entirely misplaced. America does not need to specialize in producing goods X, Y, and Z. Certain people within America may focus on producing goods X, Y, Z. Countries don’t have comparative advantages at all. Regions and peoples might, due to geography, resources, climate, etc. When preferences or demographics change, these advantages may be upended. Whether this is good or bad is largely irrelevant; it’s a fact. The world is not static, for better or worse.

Lastly, I want to return to the concept of economic efficiency. Free traders often make their case on efficiency grounds, using comparative advantage and the like. I’ve been listening to podcasts by the economist Russ Roberts and he often acknowledges that some people, sometimes quite a few people, are made worse off by free trade and globalization. For instance, American workers whose jobs go overseas are made worse off. America as a whole may be better off, especially in the long run, but those workers may bear the brunt of it. I share Roberts’s and others’ concern and sympathize with those whose lives are affected. But, I come back to my original point. I think free trade is morally right, regardless of the outcome. Even if you showed that the loss of American jobs to China left all Americans worse off, I do not believe that would be a sufficient reason for the US government to intervene. The world is a complex, dynamic, and uncertain place. The best medicine is to leave people the freedom to address these realities in the manner they see fit.

Anyway, I wanted to share these thoughts with you. Keep up the great work.

Best regards,

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