Freedom to Trade: Refuting the New Protectionism

Article excerpt

Freedom to Trade:

Refuting the New Protectionism

edited by Edward L. Hudgins

Cato Institute 1997 . 88 pages $10.00 paperback

Reviewed by Charles K. Rowley

Free trade against protectionism is one of those few issues over which economists have reached consensus. Free trade attracts the vote of the very large majority of economists, whereas protectionism typically attracts the support only of those who are paid mouthpieces for the special interests. Yet this remarkable consensus belies the facts of the international trade reality. The guns of the economists, like the French guns of the Maginot Line, appear to point in the wrong direction. International trade is highly regulated; and protectionism dominates free trade despite the cogent economic arguments against it.

The book under review represents a sterling effort to carry the case for free trade forward to the general public in language stripped of the jargon of economics. It is written well and cogently argued. Chapter one, written by Edward Hudgins, director of regulatory studies at the Cato Institute, focuses attention on the fundamental freedom to trade, correctly stressing that the individual trades and not the nation. Although the concept of comparative advantage strangely is never mentioned, the classical case for unilateral free trade is outlined, briefly but accurately, both in terms of static specialization and in terms of dynamic market discovery criteria.

The second chapter, written by Bruce Bartlett, briefly reviews the trade history of the Netherlands, Great Britain, the United States, Japan, and Germany, and succinctly demonstrates the close correlation between periods of relative free trade and periods of relative prosperity in each of these nations. The aim of this chapter is to show that generally nations rise to power and wealth through free trade and decline when protectionism takes over. In my opinion this case holds least well for the United States, whose dramatic advance between 1875 and 1900 coincided with Republican high-tariff policies justified by infant-industry rhetoric. Of course, it is the elementary post hoc ergo propter hoc logical fallacy to conclude, as some do, that protectionist tariffs were the cause of our economic growth. It is also questionable whether rising German economic power between 1871 and 1939 was based on free trade policies. It is always satisfying when the facts fit our predilections; equally, however, it is unwise to force the fit.

Chapter three, written by Hudgins, attempts to refute the myth of the "race to the bottom," which charges that U.S. free trade policies result in a loss of jobs to other countries and in declining real wages in the United States. Using simple charts to excellent effect, Hudgins makes a strong case that recent job creation in the United States has far surpassed that of its major international rivals and that real wages in the United States, correctly measured, have increased at approximately the same rate as underlying productivity. …