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Author Topic: Free Trade  (Read 8361 times)
Freedom Crazy
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Bruce Dickinson


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« on: August 12, 2006, 05:43:29 AM »

Jasque may say I got this all wrong and have errors here, but here goes anyway. I will also add I leaned heavily on Henry George in writing this ;P


Free trade is often thought of by many in the world today as being harmful to the average person, to lead to a loss of jobs in the marketplace, and even to be harmful to poorer countries who engage in free trade with richer countries. Many advocate protective tariffs as a means to protect industries and to save jobs. However, one must ask, how can the artificial raising of the price of a product be at all beneficial to the consumer? A protective tariff does exactly as it suggests, it protects a certain good, not from anything bad, but from something that many people see as good, that being competition. By taxing goods that come into the country, those goods have their price raised and passed to the consumer as the supplier of those goods will not bear the cost of the tariff and will have to pass it down to those who buy it.

This means the price is higher than it otherwise would be, harming the consumer. An example of this could be something like lamb. British farmers may be able to produce lamb of a good quality for about £4 for 4 lamb chops, New Zealand farmers, can produce it for £2.50 for 4 lamb chops and then have to pay 50p to transport it to Britain. This makes the cost £3 and thus they have a cost which is £1 cheaper than British lamb. Now suppose the British Government, obligated to by being a member of the European Union, imposes a tariff of £1 on that product. Instantly, the cost of the New Zealand lamb is £4, the same as the British lamb. Each consumer, who would of paid £3 if they wanted New Zealand lamb, is now forced to pay £4 for the product, irrespective of if they want New Zealand or British lamb. Thus, they are forced to pay an extra tax on the product to help “protect” British lamb. This allows British farmers to continue to sell goods despite their being better farmers who can produce lamb much cheaper than they can. Consumers are less well off, New Zealand farmers are less well off and British farmers are protected from competition that may have led to them improving their efficiency. One the main benefactors from protective tariffs is the Government, they get an extra tax while also looking good by protecting the British farmer.

Of course in real life, New Zealand lamb is often cheaper than British lamb, despite the tariff. That extra £1 it costs multiplied by counting all other products with tariffs on, and you get a major harm to the consumer that raises prices and decreases their available disposable income. If consumers were paying the real price of the products they buy, they would be a lot better off, have more money to spend, which would go into the economy elsewhere, creating jobs, increasing demand and benefiting the economy. I have given you the practical argument for free trade; I now give a philosophical argument based on individual liberty.

Protective tariffs, a tax imposed on a product entering the country, are as much applications of force as blockading fleets, and their object is identical, to prevent trade. The difference between the two is that blockading fleets are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. It is the equivalent of considering our own people enemies and the people of other nations, despite there not being any war to fight.

It is a tragedy that what is applied to commerce are terms suggesting strife, and to talk of one nation invading, deluging, overpowering or flood another with goods? These are goods! What are they but good things! Things we are all glad to get. Every tax that raises prices for the encouragement of one industry must operate to discourage all other industries into which the products of that industry enter.

Thus a tariff or duty that raises the price of lumber, discourages the industries which make use of lumber. These would include those connected with the building of houses and furniture to those engaged in the making of matches and wooden toothpicks. If a Government imposes a tariff that raises the price of iron, this discourages the innumerable industries into which iron enters; a duty that raises the price of sugar discourages the fruit-preserver, the maker of syrups and sweets, and so on. Thus it is evident that every additional industry protected lessens the encouragement of those already protected.

Men of different nations trade with each other for the same reason that men of the same nation do - because they find it profitable; because they thus obtain what they want with less labour than they otherwise could. Trade is not invasion. It does not involve assault on one side and resistance on the other, but mutual consent and gratification. There cannot be trade unless the parties to it consent; any more than there can be a quarrel unless the parties to it disagree. Trade, by allowing us to obtain each of the things we need from the locality best fitted to its production, enables us to utilize the highest powers of nature in the production of them all. Not only is trade in the best of interests of man, it is also in the best interest of nature.

Trade has ever been the extinguisher of war, the destroyer of prejudice, the circulator of knowledge. It is by trade that useful seeds and animals, useful arts and inventions, have been carried over the world, and that men in one place have been enabled not only to obtain the products, but also to profit by the observations, discoveries and inventions of men in other places. Wits are sharpened, languages enriched, habits and customs brought to the test of comparison and new ideas kindled.

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Bruce Dickinson
The Anarchist Federation of Freedom Crazy
Former Archon Basileus of the Politeia

Government is the great fiction, through which everybody endeavors to live at the expense of everybody else. – Frederic Bastiat

Give a man some wood for a fire and he will be warm for a night, set a man on fire and he'll be warm for the rest of his life.
Jasque
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« Reply #1 on: August 12, 2006, 11:45:37 AM »

Very well said!  I especially like this part,

Quote
Protective tariffs, a tax imposed on a product entering the country, are as much applications of force as blockading fleets, and their object is identical, to prevent trade. The difference between the two is that blockading fleets are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. It is the equivalent of considering our own people enemies and the people of other nations, despite there not being any war to fight.

If anybody is interested, I can point out a few of the potential flaws of Free Trade.

One of the really great (and funny) arguments against protectionism comes from Frederic Bastiat's The Petition of the Candlemakers.  An excerpt:

Quote from: bastiat
We are suffering from the ruinous competition of a foreign rival who apparently works under conditions so far superior to our own for the production of light, that he is flooding the domestic market with it at an incredibly low price.... This rival... is none other than the sun....

... We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull's-eyes, deadlights, and blinds—in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat.
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Jack McDonald,
President of the Radioactive Republic of Jasque
Former Archon Basileus of the Politeia
Pansada
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Corintur


« Reply #2 on: August 12, 2006, 08:32:14 PM »

"...conditions far superior to our own..."

Sounds like the Japanese and their clever long-term business models.  Angry
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Matriarch Porcelina of the Shaelin Khapf
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(Corintur;  Consul of the Meritocracy)
Posul
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« Reply #3 on: August 16, 2006, 01:37:47 PM »

Imperial Preference still would of been correct for the early part of the 20th Century.

Free Trade is fine, so long as everyone is practicing it.
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Jasque
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« Reply #4 on: August 16, 2006, 03:53:58 PM »

Free Trade is fine, so long as everyone is practicing it.

I don't agree.  If that was the case, then there would have been little incentive for anyone to ever try free trade.  Even today, not everybody practices free trade.

Free trade can be beneficial even if only one nation is practicing it.  Consider two nations, Posul and Jasque.  Posul is good at making wool, and Jasque is good at making uranium-235.  Both nations impose a 100% tariff on the goods of the other.  However, Jasque decides to drop the tariff on wool from Posul.  The consumers of Jasque can now buy imported wool at half the old price.  Of course, this may hurt the domestic wool producers of Jasque, but the consumers now have more money to spend on other goods and services.  And remember, wool was not the major industry of Jasque. 

As a result of the lower prices, the purchasing power of Jasque’s consumers will increase.  This increase in purchasing power will increase the demand for goods and services in Jasque. So long as the economy of Jasque can meet this new demand, Jasque will see economic gains.  To be precise, Jasque gains cheaper wool by dropping its tariffs.

Basically, if one nation implements free trade, it does nothing more than lower the tax on a specific good.  Consumers will always benefit.  The only possible downside is if the domestic industries can no longer compete, and if the nation’s economy is not strong enough to create new jobs for those affected.   This may certainly be a problem for some economies, but it is wrong to say that no economy on Earth can adjust when the prices of imported goods are lowered.  This would logically lead to the conclusion that high import prices are beneficial to an economy.  And that would be a ridiculous assertion. 
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Jack McDonald,
President of the Radioactive Republic of Jasque
Former Archon Basileus of the Politeia
Freedom Crazy
Aristocrat
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Merit: 13
Posts: 549


Bruce Dickinson


WWW
« Reply #5 on: August 17, 2006, 12:13:44 PM »

Here here!
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Bruce Dickinson
The Anarchist Federation of Freedom Crazy
Former Archon Basileus of the Politeia

Government is the great fiction, through which everybody endeavors to live at the expense of everybody else. – Frederic Bastiat

Give a man some wood for a fire and he will be warm for a night, set a man on fire and he'll be warm for the rest of his life.
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