The Updated Case for Free Trade
Trade is a core value of civilization. The very act of trade implies respect for people’s rights. Suppose you have something I want. I could take it by force or I could offer to trade you something in exchange. Not only that, but since you have the right to say no, I have to offer you something you value even more than what you give up. Civil exchange puts the civil in civilization—both morally, by rewarding peaceful behavior, and economically, by making possible the division of labor.
Stanford University historian Josiah Ober argues that one cause of Ancient Greece’s cultural flowering was a relatively liberal attitude toward trade and commerce—and its decline was caused in part by a turn inwards. The great Belgian historian Henri Pirenne made a similar claim about Ancient Rome. Dartmouth University economist Doug Irwin traces free-trade arguments through Saint Augustine and Thomas Aquinas up to the first modern defense of free trade in Henry Martyn’s 1701 Considerations Upon the East India Trade. Adam Smith made a moral and economic case for trade in 1776 that economists have been refining ever since.
The 30-fold improvement in living standards since around 1800 is due in large part to gradual popular acceptance of the benefits of trade. The process has not been smooth. In the first half of the 20th century, growing nationalist sentiment and a rejection of bourgeois virtues helped lead to two world wars and the Great Depression. The free world came to its senses after those horrors, and spent the next 75 years lowering trade barriers, helping hundreds of millions of people to rise out of poverty. That era may now have ended with the Trump administration’s protectionist turn, the Biden administration’s normalizing of that change, and rising nationalism here and abroad.
The case for free trade may be an old one, but it needs to be restated often. To that end, the Cato Institute’s Scott Lincicome and Alfredo Carrillo Obregon this week released “The (Updated) Case for Free Trade,” an accessible restatement of the moral and economic case for free trade that offers a stark contrast to the protectionist alternatives politicians from both parties are now proposing.
They also take a look at how trade policy can affect America’s most important foreign policy challenge going forward: China.
China represents real challenges, but dealing with it does not warrant abandoning free trade. Instead, historical and recent evidence demonstrate that China’s economic threat to the United States has been exaggerated, that aggressive unilateralism will prove less effective in influencing the Chinese government’s behavior than multilateral engagement, and that the United States will be better positioned to respond to a rising China if it embraces the openness and confidence that made America an economic powerhouse.
The whole paper is worth reading.
Trade might not be a front-page issue at the moment, but it underlies nearly every issue that is getting significant ink, including supply chain problems, housing prices, the pandemic response, and foreign policy challenges such as those involving Russia and China.
Sound trade policy and the liberal values that undergird it need as many able defenders as they can get; Lincicome and Obregon’s contribution is essential in that regard. Readers interested in another easily accessble defense of free trade should also check out Iain Murray’s and my paper “Traders of the Lost Ark.”