The Online Library of Liberty

A project of Liberty Fund, Inc.

• One: Free Trade—a Timely Proposal
• Two: the Nature of Protectionism
• Three: the Positive Case For Free Trade
• Four: the Reasons For Protectionism
• Five: Progress Toward Free Trade
• About the Author

One

Free Trade—A Timely Proposal

Free Trade is the policy of competitive private enterprise in international trade, of reliance on the free market, of governmental noninterference with imports and exports. Protectionism is the policy of curbing imports for the supposed benefit of the home economic system.

Economics can appraise policies as means toward particular ends, but economics alone cannot lay down the ends that policy “ought” to aim at. For this reason, a supporter of any economic policy must rest his case not only on economic analysis but also on his idea of what is “desirable”—on his conception of the “good society”—on his so-called “value judgments.” Fortunately, intelligent discussion will often reveal a broadly-based agreement on fundamental values. The following value judgments underlie the case for Free Trade argued here: (1) That the well-being of individual human beings, as they themselves see it, is supremely desirable. (2) That high and rising standards of living in terms of useful goods and services are an important element in human well-being (though not necessarily of overriding importance). (3) That people should have as much freedom to run their own lives and businesses as is compatible with the freedom and well-being of others. (4) That no group of people has a right, merely because of the occupation or industry in which its members work, to special favor from the government at the expense of the general public.

The core of the Free Trade case—that unrestricted international specialization makes more goods and services available to the people of all trading countries than does restriction—has been argued for at least two centuries. Yet the same false old arguments for trade barriers still keep cropping up, as influential as ever among uninformed people. One must keep on refuting these fallacies lest the Free Trade case lose by default.

For a person who accepts the value judgments stated above, the Free Trade case does not depend on special historical conditions. It does not have to be buttressed with ridiculous bits of recent economic history arranged in statistical tables with such titles as “U.S. Imports of Shrimp (Heads-off), Mexico, 1935-1950”; “United States Imports of Household Decorated China Table and Kitchen Articles, 1937-39; 1947-50”; “Anthraquinone Vat Brown R-Colour Index No. 1151 Strength Comparisons”; and “Use of Coconut, Cottonseed, and Soybean Oils in Margarine.” However, precisely to show that the Free Trade case is not history-bound, it is worth while to review the arguments pro and con against a background of current events.

Proposals for lowering American import barriers or even for outright Free Trade have become more and more respectable in recent months among practical businessmen. The National Committee for Import Development has been growing in influence. The United States Council of the International Chamber of Commerce has recommended a 20 per cent across-the-board tariff cut in January 1954 and further progressive cuts thereafter. The Committee for Economic Development, the National Foreign Trade Council, and the National Association of Manufacturers have all recommended a more liberal trade policy. The Chamber of Commerce of the United States recently sponsored a factual report criticizing American Protectionism and calling by implication for reform. In its convention of April 1953, the Chamber of Commerce, adopting the most liberal statement on foreign trade policy in its history, urged that broad national interests rather than the welfare of single industries guide tariff adjustments. The Public Advisory Board for Mutual Security, made up of prominent Americans in business, labor, agriculture, and other fields, has submitted to President Eisenhower a report calling for customs simplification and much lower tariffs.

Early in 1953 the Council on Foreign Relations surveyed the opinions on trade policy of 825 leading citizens in 25 American cities. A large majority, favoring a free world market rather than government controls on trade, agreed that tariff cuts should have an important place in United States policy. A majority supported an increase in imports in the broad national interest, even though some domestic producers would face sharper competition.

Individual businessmen who have spoken out lately for easing import barriers include Eugene R. Black, president of the International Bank for Reconstruction and Development, Warren Lee Pierson, chairman of Trans World Airlines, Philip D. Reed, chairman of the General Electric Company, David Rockefeller, senior vice-president of the Chase National Bank, L. L. Colbert, president of Chrysler Corporation, W. Holway Hill, vice-president of Boston’s State Street Trust Company, Harris McIntosh, president of the Toledo Scale Company, and M. P. Langdoc of the Eureka Williams Corporation. Referring to international trade, John S. Coleman, president of the Burroughs Adding Machine Company, has challenged businessmen to “practice the free competition we preach.” Supporters of complete or nearly complete Free Trade as an eventual goal include a few of these men, apparently, and also—to name just a few—J. D. Zellerbach, president of Crown Zellerbach Corporation, John E. Raasch, chairman of the John Wanamaker stores, Kenneth Parker, chairman of the Parker Pen Company, Norman P. Davis of the Federal Reserve Bank of New York, and Roy A. Foulke of Dun & Bradstreet.

A speech on February 17, 1953 in which Henry Ford II called for eventual complete Free Trade has already made history. Mr. Ford wants “a new law without loopholes encouraging the most rapid possible elimination of all tariffs.” He showed his sincerity by asking an end at once to the 10 per cent tariff on automobiles.

Another historic statement was issued in the fall of 1952 by the Detroit Board of Commerce, representing 6,000 industrialists. The Detroit Board called for “a Tariff Law consistent with the economic facts of our time—leading to the eventual elimination of all tariff barriers in the United States.”

The great recent interest in “freer” trade or even complete Free Trade led Fortune magazine to entitle an article in its March 1953 issue “Free Trade Is Inevitable.” While perhaps an exaggeration, such a title shows that Free-Trade proposals are respectable nowadays and deserve serious thought.