“When goods are not allowed to cross borders, soldiers will.” —Frederic Bastiat
It’s safe to say that the majority of economists agree in favor of free trade and against protectionism. Many argue against political candidates that threaten to end trade agreements, and employ tariffs on Mexico and China.
But it’s also important to be aware of some of the problems with free trade:
- The first problem with free trade is that people use GDP as a conventional argument.
- Or when economic value is taken away, or created without a price tag. Free trade can dissolve industries with hidden values.
- People assume that trade is sustainable, and short-term binges can lower long-term living standard.
- People assume that free trade doesn’t create income inequality.
- Assuming in comparative advantage can lead internationally mobile factors of production to migrate to another country, which isn’t always best for the country from which they came.
- Theory guarantees gains from trade- but these gains can stimulate productivity abroad and make our rivals stronger.
Although there are problems with it, global free trade will likely prevail over protectionist policies.The question isn’t competition is better for the economy, but at what cost is this coming? Is it acceptable to allow a business or country that cannot compete against a foreign competitor in an industry to have to stop being business of providing those products?
Could you elaborate a little on bullet points #1 and #2? Especially #2 – I’m not sure what you mean there.
For what it’s worth, I tend to be fairly pro-trade. If, for example, trade does “stimulate productivity abroad and make our rivals stronger,” wouldn’t this allow firms abroad to sell goods at lower prices to American consumers?
Additionally, a developed nation blocking free trade is likely to generate more income inequality on a global scale if it, say, makes it more difficult to buy products from developing nations.
Just a couple of short thoughts. Curious on others’!