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Free Trade without the “But”

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Heads of state throughout the Western Hemisphere gathered recently in Quebec City to talk about setting up a hemispheric free-trade zone. But as usual, the politicians spoke with forked tongues.

When these guys say “free trade” they really mean “free trade, but.” There are more exceptions than you can imagine. Everyone wants an exemption for some unique industry or situation in his own nation. Everyone says, in effect, “I want you to fully open your markets to my exporters, but I have good reasons not to fully open my markets to your exporters.” That’s not free trade.

Guess who’s leading the way in this charade: the United States. U.S. leaders always talk a good free-trade game, but their actions never measure up to their words. The United States could set a good example by offering to scrap its farm subsidies and anti-dumping laws, but don’t hold your breath. It’s not going to happen.

So how can U.S. negotiators get angry when El Salvador or St. Lucia ask for special exemptions for their products? The anti-dumping laws are designed to keep out low-priced products that undersell similar American products. They are often used against steel imports. The theory is that if another nation’s manufacturers are “unfairly” selling at a low price — dumping — the government should step in to protect the U.S. manufacturers who will be harmed.

But the idea of dumping is meaningless. Any price can be branded unfair if your price is higher. The affected domestic industry and the government can always use their arcane formulas to show that the foreign price is “below costs.” But even if they were, so what? When K-Mart does it, we call it a “sale.” Who gets upset? Why can’t Americans buy the lowest-priced goods no matter how they got that way? Free trade is supposed to mean free trade.

Ah, say the free-trade-butters, after the foreign manufacturers drive the American firms out of business with their low prices, they will raise prices to exorbitant levels. This is the same warning made about free competition among American firms. But it doesn’t happen. Low prices are usually the result of efficiencies, not chicanery. And if it did happen, it would still be good for American consumers. We’d buy up the cheap goods, and when the foreign firms jacked up their prices, American competitors would return to the marketplace (assuming they left it in the first place). We don’t need the government to protect us from trade.

That’s really the key point. Consumers don’t need protection. All protection is aimed at producers. Who are they being protected against? The temptation is to say “against the unfair practices of foreign competitors.” That would be wrong. It is protection against us consumers! All barriers to trade are of this nature.

That is why the trade talks are deceptive. They are premised on the idea that the most important beneficiaries of open trade are exporters. That is wrong. The most important beneficiaries are consumers. In fact, the whole economic system exists for the benefit of consumers. We produce in order to consume, not vice versa.

But what about workers who lose their jobs to foreign competitors? They find other jobs, and that’s good. We live in a world of scarcity. Our demand for things always exceeds the supply. Any time labor is freed up from one task, it can be devoted to other tasks we couldn’t afford to take on yesterday. We are richer, not poorer, when competition destroys jobs.

The free-trade-butters and crypto-protectionists don’t see it that way. Their loyalty is to established firms, not consumers. That’s why they set up managed-trade regimes designed to open export markets and agree to open their own markets only as much as necessary.

Let’s finally get this straight. We should open our markets not as a favor for others in order to get them to open theirs. We do so as a favor for ourselves as consumers. Free trade is good because it makes consumers’ incomes worth more by giving them access to the world’s full array of products.

Government has no right to tell us who we can buy from. If we really want free trade, all we have to do is declare it.

Sheldon Richman is senior fellow at The Future of Freedom Foundation in Fairfax, Va. (www.fff.org), and editor of Ideas on Liberty magazine.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.