On Exceptions to the Case for a Policy of Unilateral Free Trade

By Don Boudreaux.

"In my latest column for AIER I discuss some rules for considering exceptions to the rule in favor of a policy of unilateral free trade. Two slices:

Someone emailed me not long ago to say that “it’s impossible to import another nation’s goods without importing some of its values. When the UK used to import Southern cotton, it necessarily imported the South’s tolerance of slavery. Or when we import Chinese goods, we necessarily import Chinese statism.”

This observation about trade deserves respectful attention.

Might this observation point to legitimate exceptions to the case for a policy of unilateral free trade? Of course. But as is true for all rules, the asserted exceptions must be carefully considered on a case-by-case basis and constrained by imposing the burden of persuasion on those persons who support setting the rule aside in any particular instance. This burden’s weight should never be modest, and be heavier for more-important rules.

The fact that following a rule in a particular case might not yield, in that case, an optimal outcome is itself never a good reason to violate a rule. We do not follow rules because we expect that in each instance the results will be optimal. Indeed, following a good rule might never produce an optimal outcome. Instead, by following rules we expect that the ongoing stream of outcomes will be superior to the stream of outcomes that would emerge if in each instance people made a case-by-case determination of how to act. You do not run through red lights even in those instances when you’re highly confident that doing so would cause no accident. By following the rule “remain stopped whenever the light is red” you know that you will in many cases remain stationary when moving forward in that case would be better – when running through that particular red light would save you valuable time without causing harm to anyone else. But by following this rule, over time the risk of you injuring yourself and others with your automobile is kept far lower than it would be without the rule.

In short, good rules, while almost never producing optimality in any one instance, produce streams of outcomes that approach optimality when judged as streams.

Therefore, correctly identifying as “suboptimal” the results of a policy of unilateral free trade in one or more cases in no way justifies restricting trade in those cases. A policy – a rule – of unilateral free trade is justified because the stream of results over time will be better than these would be absent this rule. Justification of a policy of free trade does not rest on the claim that free trade in each and every case yields ‘optimal’ results, or a stream of results as excellent as those that would be achieved if protectionist policies were run only by people with God-like knowledge and goodness.

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What help do these ruminations offer to address my correspondent’s concerns about trading freely with the Chinese? The answer is that they prompt questions that must be answered satisfactorily before conceding that the rule of free trade should in those particular instances be violated. Such questions include:

• When we trade freely with China, do we really “necessarily import Chinese statism”? Do Americans’ purchases of iPhones assembled in China really necessarily bring to America’s shores Chinese statism? Might the possibility of these purchases exist despite, rather than because of, Beijing’s statism? Because the years of investments in China that today make these, and other, purchases possible were driven more by market forces and not by statism, perhaps what we’re mostly importing today from China is not statism but, instead, the fruits of whatever market liberalism remains in that country.
• Even if we come to the highly unlikely conclusion that Americans’ imports from China now are largely the fruits of Chinese statism (rather than of market forces in China), does the amount of Chinese statism that we import exceed or fall short of the additional dollop of American statism necessary to restrict Americans’ freedom to trade with the Chinese? The alleged “imported” statism must be weighed against the domestically produced statism proposed for use as an antidote.
• Furthermore, what holds true for America holds true also for China. And so when statism is increased in America in the form of additional protectionism, one result will be that, through her trade with America, China will import more statism. How should we Americans weigh this negative consequence?"