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No Nation Can Harm Another Economically

No Nation Can Harm Another Economically
Profile photo of Patrick Barron

My recent Mises Daily Article titled Two Common Objections to Unilateral Free Trade drew some criticism that I would like to answer.

 

Unilateral free trade rewards the country that adopts it

 

Several commented that my use of the term “unilateral” negated my argument. They resurrected the argument that free trade is beneficial to both parties only if both agree to remove trade barriers to the other’s products. Otherwise, the party that removes its trade barriers suffers economically by having its industries destroyed by the party that keeps its trade barriers in place. This argument stands all of economics on its head by asserting that consumers are required to support producers; whereas, the purpose of production is to meet consumer demand. If one producer, whether domestic or foreign, wishes to lower its price, accept a lower return on capital, obtains an agreement from its employees to work for less, and thusly is able to capture more market share, no one is harmed. Even if a government taxes its citizens in order to provide subsidies to some producers, this is no concern of the consumers or producers in another country. It is no business of anyone other than the taxpayers of the subsidizing government. These people have a legitimate gripe, for they are being robbed to pay privileged insiders within their own country. Producers in the country that lowered its trade barriers have the choice to redirect their capital to other uses and employees have the freedom to work in other industries. The country’s cost of living drops, and its standard of living rises. Even those workers temporarily unemployed will benefit from this lower cost of living.

 

Concentrate solely on freeing one’s own economy

 

Others commented that my use of the term “unhampered market” negated my argument. I pointed out that there is always more work to be done and that there is opportunity for all in an unhampered market. These commentators pointed out that no country has an unhampered market; therefore, unilateral free trade would cause permanent unemployment. This makes two false assumptions. One, that workers can only train for one job in a lifetime and, two, that it is futile to lower barriers to employing capital and labor efficiently in one’s own country. The obvious proper response is to insist that one’s own government allow its citizens full economic freedom and not waste its time trying to persuade other governments to adopt economically sound policies. If other countries wish to punish their own citizens, that is their business and not ours. In fact we are made richer by their poor policies which provide us with subsidized products.

 

Conclusion

 

The only just policy that any government can take is to free its own economy to allow its citizens to purchase any legal product no matter where produced. This provides investors and workers with the only government help they need; i.e., the freedom to employ their capital and labor wherever it may achieve the greatest return. A nation’s citizens will enjoy the highest possible standard of living that adopts low taxes, the few regulations that merely support normal commercial law to protect citizens from fraud, and sound money to allow producers and consumers alike to correctly value their present transactions and expected future returns.

 

A corollary to freeing a market economically is to reduce public expenditures that discourage rational actors from engaging in socially destructive behavior. Welfare payments of all kinds, taxpayer supported public schools, unsound and unfunded government mandatory retirement schemes all reduce socially beneficial behavior. In fact our nation’s so-called immigration problem would go a long way to being solved if neither immigrants nor native born citizens had access to welfare, so-called free public schooling, free or subsidized housing, etc. on demand, nor could they trespass on either public or private property. This may not solve the immigration problem to everyone’s satisfaction, but it would be a huge step in the right direction.

 

The only economic problems that this country or any country faces come from its own misguided attempts to thwart the free market within its own borders. Stop complaining about what other countries are doing for the simple reason that they cannot harm us. Our economic future lies in our own hands.

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Profile photo of Patrick Barron

Patrick Barron is a consultant to the banking industry. He teaches Austrian school economics at the University of Iowa and Bank Managemant Simulation for the Graduate School of Banking, University of Wisconsin. Visit his blog. Send him mail.

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