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First off,
Neither NAFTA nor any other trade agreement in effect today is an example of free trade. Free trade does not require thousands of pages of regulations, often drafted by lobbyists and heavyweights from major industries and corporations. Instead, they are perfect examples of socialism; they are trade as dictated and controlled by the State to favor certain groups at the expense of others.
I expect some will argue that "trade that is only free one way amounts to economic suicide", that one country should only reduce or eliminate tariffs on products coming from countries that reciprocate by reducing or eliminating their tariffs. This is a bit like accusing the people in charge of other countries' central banks of devaluating their currencies in order to gain some advantage. It ignores the fact that, in reality, restricting the movement of people, products or capital is injurious, first and foremost, to the people in the country whose gov't is doing it. Just like devaluating a currency is most harmful to the people in the country where that currency is legal tender. It's like complaining that your enemy shot himself in the foot while you have not.
In "Human Action", Mises put forth solid arguments to support his idea that the only alternative to free trade is violence and war. When govts use force to restrict the movement of people, products or capital, imbalances cannot be peacefully resolved. The demand for certain things cannot be peacefully met, certain products and services cannot be peacefully supplied. Imbalances grow and, eventually, the dam overflows and fails.
Anyway, here's a portion of an interesting article on the subject. As the author points out, protectionism, tariffs and immigration restrictions make no sense, neither economically nor logically.
* * *
...
The Economic Argument
So far, this all ignores the economic arguments against restricting free trade. Those of us not engaged in the direct importation of goods will also suffer when goods are restricted. Trade restrictions on pharmaceuticals, auto parts, food, and whatever else only makes those goods more expensive. And not all those goods are consumption goods, of course. Entrepreneurs use those goods to create new goods and then must charge higher prices to his customers also. A janitor who must pay higher prices for a truck or a shop vac due to trade restrictions must pass on a portion of that cost to the customer. And, with higher prices, the janitors will have fewer customers and fewer profits. Shopkeepers in turn must then have dirtier shops because they can afford fewer janitorial services.
Yes, a tiny portion of the population that’s engaged in the domestic manufacture of shop vacs and trucks will benefit. But, it’s the janitors and their customers (the hair salon and sandwich-shop owners) who are paying the price of subsidizing the factory workers.
These issues aren’t part of an intellectual exercise. The downside of restricted trade is very real for real people.
But, we don’t need me to explain the economic problem with restricting trade. Adam Smith, Ludwig von Mises, and the entire line of liberal, laissez faire economists agree on this point.
The Nationalist Argument
The nationalist program of using protectionism to shield American workers from competition is based on the idea that trade with outsiders hurts the local economy. But many who accept this idea in the international sphere then promptly forget the idea when applied domestically.
For example, we’re told by the nationalists that it hurts California workers if Californians buy goods from neighboring Mexico, but it’s apparently A-OK for Californians to buy goods from Illinois or New York, both of which are distant economies that likely contribute far less to the economic well-being of Californians than the economy of northern Mexico.
Murray Rothbard mocked this mindset in the context of immigration when he wondered why it’s not a problem when someone moves from Massachusetts to take a job in Michigan. In that case, the response is never to complain about how people from Massachusetts are stealing the jobs of people in Michigan. No, the argument is only applied if someone crosses an international boundary to do the same.
As with trade, then, it’s bizarre to argue that goods imported from Virginia to California are perfectly tolerable — and even beneficial — while imports from neighboring Tijuana are somehow damaging.
...
* * *
The full article is well worth reading.
https://mises.org/library/oppose-free-trade-embrace-violence
Neither NAFTA nor any other trade agreement in effect today is an example of free trade. Free trade does not require thousands of pages of regulations, often drafted by lobbyists and heavyweights from major industries and corporations. Instead, they are perfect examples of socialism; they are trade as dictated and controlled by the State to favor certain groups at the expense of others.
I expect some will argue that "trade that is only free one way amounts to economic suicide", that one country should only reduce or eliminate tariffs on products coming from countries that reciprocate by reducing or eliminating their tariffs. This is a bit like accusing the people in charge of other countries' central banks of devaluating their currencies in order to gain some advantage. It ignores the fact that, in reality, restricting the movement of people, products or capital is injurious, first and foremost, to the people in the country whose gov't is doing it. Just like devaluating a currency is most harmful to the people in the country where that currency is legal tender. It's like complaining that your enemy shot himself in the foot while you have not.
In "Human Action", Mises put forth solid arguments to support his idea that the only alternative to free trade is violence and war. When govts use force to restrict the movement of people, products or capital, imbalances cannot be peacefully resolved. The demand for certain things cannot be peacefully met, certain products and services cannot be peacefully supplied. Imbalances grow and, eventually, the dam overflows and fails.
Anyway, here's a portion of an interesting article on the subject. As the author points out, protectionism, tariffs and immigration restrictions make no sense, neither economically nor logically.
* * *
...
The Economic Argument
So far, this all ignores the economic arguments against restricting free trade. Those of us not engaged in the direct importation of goods will also suffer when goods are restricted. Trade restrictions on pharmaceuticals, auto parts, food, and whatever else only makes those goods more expensive. And not all those goods are consumption goods, of course. Entrepreneurs use those goods to create new goods and then must charge higher prices to his customers also. A janitor who must pay higher prices for a truck or a shop vac due to trade restrictions must pass on a portion of that cost to the customer. And, with higher prices, the janitors will have fewer customers and fewer profits. Shopkeepers in turn must then have dirtier shops because they can afford fewer janitorial services.
Yes, a tiny portion of the population that’s engaged in the domestic manufacture of shop vacs and trucks will benefit. But, it’s the janitors and their customers (the hair salon and sandwich-shop owners) who are paying the price of subsidizing the factory workers.
These issues aren’t part of an intellectual exercise. The downside of restricted trade is very real for real people.
But, we don’t need me to explain the economic problem with restricting trade. Adam Smith, Ludwig von Mises, and the entire line of liberal, laissez faire economists agree on this point.
The Nationalist Argument
The nationalist program of using protectionism to shield American workers from competition is based on the idea that trade with outsiders hurts the local economy. But many who accept this idea in the international sphere then promptly forget the idea when applied domestically.
For example, we’re told by the nationalists that it hurts California workers if Californians buy goods from neighboring Mexico, but it’s apparently A-OK for Californians to buy goods from Illinois or New York, both of which are distant economies that likely contribute far less to the economic well-being of Californians than the economy of northern Mexico.
Murray Rothbard mocked this mindset in the context of immigration when he wondered why it’s not a problem when someone moves from Massachusetts to take a job in Michigan. In that case, the response is never to complain about how people from Massachusetts are stealing the jobs of people in Michigan. No, the argument is only applied if someone crosses an international boundary to do the same.
As with trade, then, it’s bizarre to argue that goods imported from Virginia to California are perfectly tolerable — and even beneficial — while imports from neighboring Tijuana are somehow damaging.
...
* * *
The full article is well worth reading.
https://mises.org/library/oppose-free-trade-embrace-violence
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