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Fellows with Friedman

Free Trade

John Cochrane

Free trade allows Americans to buy better goods at lower prices and provides bigger markets to sell our goods. 

In his chapter of Blueprint for America, Cochrane eloquently explains:

“As Adam Smith and David Ricardo explained two centuries ago, it is better for England to make wool and Portugal to make wine, and to trade, than for each country to do both. English winemakers likely disagreed. 

“The founders understood the benefits of immigration, complaining in the Declaration of Independence that King George ‘. . . has endeavored to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither.’

“Their Constitution brilliantly forbids internal protectionism against the movement of goods and people, setting up the world’s largest free trade and free migration zone and, not coincidentally, what became the wealthiest nation on Earth. 

“Two centuries of economic scholarship have only deepened and reinforced these lessons. . . .

Trade is already pretty free. The challenge is mostly to preserve and extend what we have and to avoid one of those periodic global disasters such as the 1930s, when the world slid into trade barriers, or occasional national disasters of isolationism, protectionism, and Juche (North Korean for self-reliance).”

Read the rest of the chapter here.

Click here to watch the video based on the chapter.

John Taylor

International trade allows countries to consume more goods than they can produce on their own. They can do so by specializing in the production of goods for which they have a comparative advantage. This is true even if the country has an absolute advantage in producing all goods more efficiently than the other countries it can trade with. Not only that, John Taylor argues, in free markets, goods and services have to improve to be sustainable. In protected markets, on the other hand, they don’t have to get better to survive.

Another way to look at the consequences of free trade is to examine their similarities to what happens when a new technology is invented. In both cases, goods and services get better and more affordable for everyone, new jobs are created, and some jobs are replaced. So, the next time someone proposes new trade barriers, Taylor suggests, imagine instead that they had proposed outlawing a new invention.

Click here to learn more.

Richard Epstein

Richard Epstein argues that the great advantage of free-trade policy is that it reduces political risks and makes it impossible to conceal glaring structural defects from the world. And once these flaws are recognized at home, free trade gives the federal government and the individual states strong incentives to clean up their act so that they can once again be attractive to foreign investment. He also urges the United States to reduce the drag that its regulations impose on all businesses that operate within its borders, which means rooting out the various forms of monopoly power, like unions, that can only survive if protected by state law.

Click here to read more.