(This will be my last post on free trade, I think. Sonic Charmer – twice – and Aretae both have some final thoughts as well.)
A couple years ago, if someone had told me that they were a protectionist, I would have reacted as if they told me they were a creationist. From an economic theory perspective, you either believe in free trade, or you’re an idiot.
However, free trade is an area where history and economic theory disagree. The puzzle pieces don’t quite fit, so to speak. History and economic theory do not merely disagree, they seem to directly contradict each other. Economic theory suggests that free trade is necessary for growth. History suggests that restricting trade is a necessary condition for development. Either historical reality or economic theory is – at least partly – wrong. This apparent conflict is why I am interested in free trade. In general, in conflicts between reality and theory, I bet on reality.
The application of other economic ideas to free trade also yields results that are not clearly 100% pro-free trade. For example, the application of marginalism to free trade is instructive. Let’s take the marginal industry. Assume that there is an incredibly tiny benefit for the US if there is free trade in good X. In other words, each good X purchased in the US will be very very slightly cheaper if the production of good X occurs in Korea (for example). This shift in production to Korea is good depending on what happens to workers that are now unemployed in the US. People can legitimately disagree about which side has greater costs and benefits, but I don’t think that they can legitimately disagree about this being the fundamental issue. Unfortunately, most free traders won’t admit the possibility that free trade is not a free lunch (this fact alone makes me very suspicious about their claims).
We should discuss free trade and trade restrictions in a realistic context. Realistically in the US, free trade must be accompanied by some welfare-style benefits to displaced workers. Thus, on one hand, we have free trade and welfare benefits financed by income taxation. On the other hand, we would have restricted trade resulting in more workers being employed, higher costs for consumers, lower levels of welfare benefits and lower levels of income taxes. Honestly, I’m not sure which situation is better.
Ultimately, I think the uber-pro-free trade argument depends on the belief that all people are essentially equal – that anyone can do anything if they try really hard. I reject this view. Some people in any country are not going to be able to do more than provide menial labor. I therefore think it’s at least plausible that a country could be too advanced – i.e. it could have more low-skilled people than it has low-skilled jobs. From a stability standpoint, this is a recipe for disaster. Again, if you don’t have a rose-colored view of humanity, this is a problem.
Finally, I don’t buy the view that economic growth is all that matters. If it is, then ending Communism was bad for Russia. Less snarkily, even if you agree that economic growth is the "god-metric," it does not follow that you have to support free trade. The theory of comparative advantage does not say that free trade will improve economic growth in the long run, it only says that it will boost economic benefits in the immediate-term. In other words, free trade is not about improving economic growth, it’s about making the current level of economic activity as high as possible. This may seem like a slight distinction, but if the goal is creating economic growth, it’s a distinction that is hugely important. Even less snarkily, try this thought experiment. Marriage – traditional marriage – almost certainly decreases economic growth. In many cases, it allows women to stop working. It creates less demand for housing. If I suggested that this was a reason to ban marriage, you’d – correctly – call me a retard. Nobody actually believes that economic growth is all that matters.