Wednesday, 26 April 2017

Free Trade

Suppose someone wants to build a factory in China. What are the reasons for blocking them? When companies are at home whats the point of protecting them with tariffs? Here is a list of some of the reasons some hate free trade. They are followed by some quick responses by me.

Objections to free trade:

1) Building a factory in China hurts local workers.
2) The factory builder has the duty to support the country that gave him roads, education and all the other things that lead to him being able to have the wealth and power to build factories.
3) We need to be “nationalists” and put our workers first.
4) Trade deficits are bad.
5) There are local companies that will go under if we don't protect them.
6) An “international game” develops that allows rich and powerful to break laws. We have to stop free trade in order to stop these international players from avoiding rule of law.


1) It's innovation that helps workers in the long run. That's what improves their standard of living.

2) This response gets things reversed. If you want roads, a good education system and so on, you need a dynamic society filled with ambitious people. It's not the roads that facilitates this. It's the opportunity to be ambitious and part of something dynamic...

3)This begs the question. Will we really make our workers better off by enacting protectionist measures? I think we will make them better off by giving them a better standard of living, opportunities a more dynamic society and so on...

4) A country, by having a big market of consumers, attracts lots of goods and services from other countries. This leads to its own population having a better standard of living. Why? Because they pay less to have more and better things they need and want in their life. How many tv's and cars do the countries with the big market attracting others have?

5) Some companies may go under if they do not make their product cheap or good enough to compete with the foreign products. I agree this can cause short term harm. But, just like the people who made stage coaches ultimately benefit from the creation of cars; others benefit from technology and innovation. Let's add that foreign countries that “unfairly” block/protect OUR (whatever our home country happens to be) products just end up hurting their own people's standard of living.

Let's consider an important objection to 5.)

5a) Losing your manufacturing job “now” is worse than losing the stage coach job was in the past. The cars replacing stage coach makers were made locally.

Response to 5a)

As I understand it 5a.) is basically saying: The situation is fundamentally different now to what it was years ago when the black smiths and the stage coach makers lost their jobs.

The above statement is not factually true except in the following sense: New jobs being created are increasingly specialized and are often beyond the skill level of current workers. That is, there was a gap in skill between stage coaches and cars; but, we are still able to make cars with workers without extremely specialized skills. Sketch artists and computer programmers are not so easily handed “unskilled” work.

Thus the problem, in modern times, isn't the lack of jobs; but, the education gap between those who lost their jobs (in manufacturing for example); and, skills needed where there are job shortages. This problem is compounded by corporate/office culture (or academic culture) where there is a shortage of higher paying jobs. Will the anti establishment, union culture, prepare these workers for jobs that pay at higher rates? Learning new skills is not the only challenge these workers face. They must learn to be ambitious.

6) Let's make a distinction between enforcing rules on international players and stopping the benefits of free trade. If it turns out that its correct for businesses to pay taxes then enforce taxation law. If labor or environmental standards are the problem, then enforce rule of law to protect these standards. (A separate question might be whether some of these standards are actually good; but, let's assume for the moment there are at least some standards most would agree on.)

If NAFTA or WTO or the EU allowing agreed upon standards to be broken, then let's re negotiate any agreement to help a nations enforce rule of law. We should not, btw, open up these agreements for the purpose of sabotaging them or bringing about a “nationalist” agenda. Such opening of agreements should be done in good faith.

Additional Arguments/Comments:

7) Free trade isn't just an economic issue. It's a moral one. If I try to sell a book to someone outside my country what place is it for my government (or the foreign one) to step in and charge me or a foreign buyers a prohibitive fee? Even if a utilitarian argument could be created to justify such a policy; it would have to be demonstrated harms for “everyone” has reached a threshold great enough to over rides rights of individuals and business. Most trade examples are not going to meet this standard. Certainly not selling books across borders, for example.

8)It's easy to villainize big international players like Apple; but, take a look at or and note: many of the international players are individuals and small businesses. Big companies like Ebay, Amazon and AliBaba are in essence providing structures or “rails” for these small players to operate. Yea, they get super wealthy in the process of doing so...

9) The benefits of free trade is a counter balance to war. Take a look at the US/Canadian border. Once one of the most militarized borders in the world, it is now recognized among the friendliest. Let's not pretend there is some kind of inherent friendship between these two nations when American troops were burning down peoples homes in their vigilance to capture Fort George.

It was, “the benefits of co operation”, that made this border peaceful; and, I'd argue, the way forward to making others more friendly as well.

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