Most economists from the time of Adam Smith have favored
free international trade and have opposed tariffs and
quotas. A tariff
is a tax on an import and a quota is a limitation on the
number of units that may be imported. On the other hand, a
great many people over the years have argued for some form
of restriction on international trade, for "protection" from
foreign producers. Politicians have at times been persuaded
by economists and others who have been in favor of free
trade, and have been persuaded at other times by those
arguing for restrictions. The United States and other
Western nations have had sizable fluctuations in the average level of tariffs.
Those who favor protection sometimes claim that it is
unfair to ask Americans to compete with cheap foreign labor.
Some go on to argue that because labor is cheaper abroad,
foreigners can undersell the United States in any product,
and that if American business is not protected, the very
standard of living in the United States is in danger.
Economists have written some simple yet effective stories to
rebut this argument. One of the best and oldest is
Frédéric Bastiat's "Petition
of the Candlemakers."
Bastiat's petition, published in 1874 in English, is a
satire arguing that France would be better off if it had a
law forbidding buildings to be lit with natural light.
Without windows, Bastiat tells the reader, there would be a
huge demand for artificial light, and a great many people
would benefit from this demand. All the processes of
candlemaking, including agriculture because tallow comes
from sheep and cattle, would benefit. The maritime industry
would benefit because more ships would put to sea to hunt
whales. Metal workers would be needed to make light
fixtures. Bastiat argues that directly or indirectly, all
Frenchmen would be better off because of the greater production of artificial light.
Bastiat takes a position that everyone should recognize
as absurd and shows that it makes sense in terms of the
arguments used to support tariffs. He carefully ignores the
concept of opportunity cost, but those who support tariffs
never mention this concept either. If a country rejects
cheap light from the sun or cheap food from foreign nations,
it will need resources to satisfy the demand for these
items. Using resources to produce artificial light or
domestically grown food means that these resources cannot be used for other purposes.
A fable by James Ingram also illustrates that free
international trade is production
efficient. In his book, International Economic
Problems (John Wiley, 1970), he tells of a mysterious
entrepreneur, Mr. X., who announces to the world that he has
found several amazing discoveries that allow him to produce
cheap televisions, automobiles, cameras, and other goods. He
sets up a plant on a large tract of land along the coast of
North Carolina; hires 5000 employees who are sworn to
secrecy; and begins buying grain, coal, and machinery. As
the trains of grain and coal roll into his factory, other
trains full of televisions and automobiles roll out of his
factory into showrooms across the country. Mr. X is hailed
as another Edison or Bell, and his company becomes a
favorite with Wall Street investors.
Consumers love Mr. X because his products are so much
cheaper than what they could buy before. Of course, his
competitors dislike him, but their attempts to get laws
restricting his operations get nowhere. The Houses of
Congress ring with speeches saying that some economic
adjustment is an inevitable by-product of technological progress.
Then, one day a small boy trying out his new skin-diving
gear accidentally penetrates Mr. X's security shield and
learns Mr. X's secret. Nothing is produced at the factory.
It is all a front for a giant import-export business. Mr. X
transforms grain and coal into autos and televisions by
trade. His secret revealed, Mr. X is reviled and his factory
shut down. Members of Congress proclaim that the American
standard of living has had a narrow escape from the threat
of cheap foreign labor and urge more money for research in industrial technology.
Freer trade and technological advance have similar effects. Both increase the range of choices open to consumers, but both also disrupt established producers. Because economists have traditionally viewed production as a means to an end, while consumption is the end, they have judged the effects of both technology and trade in terms of their effects on consumers and not generally worried a great deal about producers.
The case for free international trade, told in stories above, can also be told in terms of production and consumption-possibilities frontiers.
Copyright Robert Schenk