Some great insights on the non-obvious case for free trade from Cato’s Dan Ikenson

From Mark Perry.

"Some great insights on trade from Dan Ikenson’s excellent 2016 article “Trade on Trial, Again“:

The case for free trade is not obvious. The benefits of trade are dispersed and accrue over time, while the adjustment costs tend to be concentrated and immediate. To synthesize Schumpeter and Bastiat, the “destruction” caused by trade is “seen,” while the “creation” of its benefits goes “unseen.” We note and lament the effects of the clothing factory that shutters because it couldn’t compete with lower-priced imports. The lost factory jobs, the nearby businesses on Main Street that fail, and the blighted landscape are all obvious. What is not so easily noticed is the increased spending power of the divorced mother who has to feed and clothe her three children. Not only can she buy cheaper clothing, but she has more resources to save or spend on other goods and services, which undergirds growth elsewhere in the economy.
Consider Apple. By availing itself of low skilled, low-wage labor in China to produce small plastic components and to assemble its products, Apple may have deprived U.S. workers of the opportunity to perform that low-end function in the supply chain. But at the same time, that decision enabled iPods and then iPhones and then iPads to be priced within the budgets of a large swath of consumers. Had all of the components been produced and all of the assembly performed in the United States the higher prices would have prevented those devices from becoming quite so ubiquitous, and the incentives for the emergence of spin-off industries, such as apps, accessories, Uber, and AirBnb, would have been muted or absent.
But these kinds of examples don’t lend themselves to the political stump, especially when the campaigns put a premium on simple messages. This is the burden of free traders: Making the unseen seen. It is this asymmetry that explains much of the popular skepticism about trade, as well as the persistence of often repeated fallacies.
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When we transact at the local supermarket, we seek to maximize the value we obtain by getting the most for our dollars. We strive to “import” more than we “export.” But when it comes to trading across borders or when our individual transactions are aggregated at the national level, we tend to forget these basic principles and accept the fallacy that the goal of trade is to achieve a surplus. But, as Adam Smith put it: “What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.” Never mind the intellectual consensus: This is common sense.
The benefits of trade come from imports, which deliver more competition, greater variety, lower prices, better quality, and new incentives for innovation. Arguably, opening foreign markets should be an aim of trade policy because larger markets allow for greater specialization and economies of scale, but real free trade requires liberalization at home. The real benefits of trade are measured by the value of imports that can be purchased with a unit of exports — our purchasing power or the so-called terms of trade. Trade barriers at home raise the costs and reduce the amount of imports that can be purchased with a unit of exports.

MP: You might be a protectionist if when you shop at your local supermarket you seek to maximize your household’s value by giving up the most of your hard earned dollars for the least amount of groceries, i.e., maximize your household’s exports of labor services (wages) and minimize your household’s imports of groceries."