George Bernard Shaw once said, “If all economists were laid end to end, they would not reach a conclusion.” Oh, but we have. Economists have concluded that free trade is good.
One of the most widely accepted premises in economics is that trade makes everyone better off. In a 2012 survey of economists published by the University of Chicago, more than 95 percent of economists agreed or strongly agreed that “freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment.”
President Donald Trump doesn’t appear to agree. He has followed through on a plan to raise import tariffs, that is, trade barriers, on steel and aluminum for “national security” reasons. The president further suggested that such a plan would help his administration negotiate “better” international trade deals.
But this begs the question, why do we need trade deals anyway? Just trade freely. Economic theory and historical evidence have long shown that we all benefit from trade across open borders.
In Adam Smith’s “Wealth of Nations” published in 1776, he demonstrated how a country increases its economic opportunities through specialization and trade. In the early 19th century another classical economist, David Ricardo, further supported Smith’s work with the theory of comparative advantage. This economic model shows that trade makes everyone better off because it allows people to specialize in those activities in which they have advantages in both skills and costs.
According to the 2017 Economic Freedom of The World Annual Report published by the Canada-based Fraser Institute, the top-quartile countries in terms of free trade grow at twice the rate of those in the bottom quartile. Furthermore, the top-quartile countries have less poverty. The benefits of free trade flow to those that need them most.
The president and other policymakers seem to think international trade is a contest where one side has to lose. Supposedly, if we are importing more goods, we must be losing the game. In fact, a higher level of trade between countries increases investment and economic growth for everyone.
Idaho knows the benefits of trade. The Idaho Department of Commerce reports that between 2003 and 2016, Idaho exports more than doubled. The destinations for many of our products include Canada, Singapore and China. These countries are likely to buy fewer Idaho products if President Trump’s tariffs last long.
Economists agree. Don’t try to “win” a trade war, which is anything but. Just trade freely.
Peter Crabb is professor of finance and economics at Northwest Nazarene University in Nampa. firstname.lastname@example.org.