The Online Library of Liberty

A project of Liberty Fund, Inc.

• The Liberty Fund Library of the Works of Ludwig Von Mises
• Foreword to the Liberty Fund Edition
• Preface
• Omnipotent Government
• Introduction
• Part I: The Collapse of German Liberalism
• I: German Liberalism
• 1.: The Ancien Régime and Liberalism
• 2.: The Weakness of German Liberalism
• 3.: The Prussian Army
• 4.: The Constitutional Conflict In Prussia
• 5.: The “little German” Program
• 6.: The Lassalle Episode
• II: The Triumph of Militarism
• 1.: The Prussian Army In the New German Empire
• 2.: German Militarism
• 3.: The Liberals and Militarism
• 4.: The Current Explanation of the Success of Militarism
• Part II: Nationalism
• III: Etatism
• 1.: The New Mentality
• 2.: The State
• 3.: The Political and Social Doctrines of Liberalism
• 4.: Socialism
• 5.: Socialism In Russia and In Germany
• 6.: Interventionism
• 7.: Etatism and Protectionism
• 8.: Economic Nationalism and Domestic Monopoly Prices
• 9.: Autarky
• 10.: German Protectionism
• IV: Etatism and Nationalism
• 1.: The Principle of Nationality
• 2.: The Linguistic Group
• 3.: Liberalism and the Principle of Nationality
• 4.: Aggressive Nationalism
• 5.: Colonial Imperialism
• 6.: Foreign Investment and Foreign Loans
• 7.: Total War
• 8.: Socialism and War
• V: Refutation of Some Fallacious Explanations
• 1.: The Shortcomings of Current Explanations
• 2.: The Alleged Irrationality of Nationalism
• 3.: The Aristocratic Doctrine
• 4.: Misapprehended Darwinism
• 5.: The Role of Chauvinism
• 6.: The Role of Myths
• Part III: German Nazism
• VI: The Peculiar Characteristics of German Nationalism
• 1.: The Awakening
• 2.: The Ascendancy of Pan-germanism
• 3.: German Nationalism Within an Etatist World
• 4.: A Critique of German Nationalism
• 5.: Nazism and German Philosophy
• 6.: Polylogism
• 7.: Pan-germanism and Nazism
• VII: The Social Democrats In Imperial Germany
• 1.: The Legend
• 2.: Marxism and the Labor Movement
• 3.: The German Workers and the German State
• 4.: The Social Democrats Within the German Caste System
• 5.: The Social Democrats and War
• VIII: Anti-semitism and Racism
• 1.: The Role of Racism
• 2.: The Struggle Against the Jewish Mind
• 3.: Interventionism and Legal Discrimination Against Jews
• 4.: The “stab In the Back”
• 5.: Anti-semitism As a Factor In International Politics
• IX: The Weimar Republic and Its Collapse
• 1.: The Weimar Constitution
• 2.: The Abortive Socialization
• 3.: The Armed Parties
• 4.: The Treaty of Versailles
• 5.: The Economic Depression
• 6.: Nazism and German Labor
• 7.: The Foreign Critics of Nazism
• X: Nazism As a World Problem
• 1.: The Scope and Limitations of History
• 2.: The Fallacy of the Concept of “national Character”
• 3.: Germany’s Rubicon
• 4.: The Alternative
• Part IV: The Future of Western Civilization
• XI: The Delusions of World Planning
• 1.: The Term “planning”
• 2.: The Dictatorship Complex
• 3.: A World Government
• 4.: Planned Production
• 5.: Foreign Trade Agreements
• 6.: Monet Ary Planning
• 7.: Planning International Capital Transactions
• XII: Peace Schemes
• 1.: Armament Control
• 2.: A Critique of Some Other Schemes Proposed
• 3.: The Union of the Western Democracies
• 4.: Peace In Eastern Europe
• 5.: The Problems of Asia
• 6.: The Role of the League of Nations
• Conclusion

5.

Foreign Trade Agreements

In the age of laissez faire commercial treaties were considered a means of abolishing, step by step, trade barriers and all other measures of discrimination against foreigners. In those days the most-favored-nation clause was a requisite of such treaties.

Then the tide turned. With the ascendancy of interventionism imports were deemed disastrous to a nation’s economic prosperity. Discrimination against foreigners then came to be regarded as a good means for promoting the well-being of a country. The meaning of commercial treaties changed radically. Governments became eager to overreach one another in negotiations. A treaty was valued in proportion as it hindered the other nation’s export trade and seemed to encourage one’s own. Most-favored-nation treatment gave way to hostile discrimination.

In the long run there cannot be such a thing as “moderate” protectionism. If people regard imports as an injury, they will not stop anywhere on the way toward autarky. Why tolerate an evil if there seems to be a way to get rid of it? Protectionism was bound to evolve into the license and quota system and into foreign exchange control. The ultimate goal of nearly every nation’s foreign-trade policy today is to prevent all imports. This means autarky.

It is vain to expect anything from purely technical changes in the methods applied in international negotiations concerning foreign-trade matters. If Atlantis is resolved to bar access to cloth manufactured abroad, it is of no importance whether its delegates must negotiate directly with the delegates of Thule, or whether the subject can be dealt with by an international board in which other nations are represented. If Atlantis is prepared to admit a limited amount—a quota—of cloth from Thule only because it wants to sell a corresponding quota of wheat to Thule, it is not likely to yield to a suggestion that it allot a part of this quota to other nations. If pressure or violence is applied in order to force Atlantis to change its import regulations so that greater quantities of cloth can be imported, it will take recourse to other methods of interventionism. Under a regime of government interference with business a government has innumerable means at hand to penalize imports. They may be less easy to handle but they can be made no less efficacious than tariffs, quotas, or the total prohibition of imports.

Under present conditions an international body for foreign-trade planning would be an assembly of the delegates of governments attached to the ideas of hyper-protectionism. It is an illusion to assume that such an authority would be in a position to contribute anything genuine or lasting to the promotion of foreign trade.

Some people cling to the belief that while universal free trade and a world-embracing division of labor are quite wrong, at least neighboring countries should enter into closer economic coöperation. Their economies could complement each other, it is argued, if they were prepared to form regional economic blocs. This doctrine, first developed by German nationalism, is fallacious.

As a rule neighboring countries offer similar natural conditions for production, especially in agriculture. Their economic systems are less likely to complement each other than to make them competitors on the world market. A customs union between Spain and Portugal, or between Bulgaria and Yugoslavia, or between Germany and Belgium would mean little. The main problems of foreign trade are not regional. The conditions for Spanish wine export could not be improved through free trade with Portugal, or vice versa. The same holds true for the production of machines in Germany and Belgium, or for agricultural production in Bulgaria and Yugoslavia.