The case for free trade

It is easy to establish the arguments for free trade both in theory and in practice.

In theory, if it were true that the people of one country would be better off not trading, or restricting trade with the people of another country, then for exactly the same reason, it would be true that the people of one state within a country would be better off not trading, or restricting trade with the people of another state within that country. Society doesn't stop at the border. The principles of economics apply just the same regardless of political boundaries.

And if it were true that the people of NSW, say, would be better off restricting trade with the people of Queensland, then for the same reasons it would be true for the people of one region within NSW – say the Hunter Valley - as against the people of another - Sydney. And so on, down to the level of the town, the household, and the individual. Reduced to its absurdity, protectionism asserts we would all be better off if social co-operation were abolished, and everyone produced in isolation their own food, clothing, shelter, transport, communications and entertainment.

When you point this out, the critics of free trade rush to resile from that logical consequence. No, they say, free trade in most things is obviously necessary and desirable for human society; it is only free trade in this or that category of goods or services which should be restricted.

But this only raises the question, if free trade is necessary and good where they agree with it, why doesn't the same argument apply where they oppose it? In the end, there is no rational standard by which any given claim for protection can be established but by arbitrary whim, or the special pleading of vested interests.

The original colonies that later made up the states both of Australia and the U.S.A imposed tariff barriers between themselves before their respective federations. The irony of any Australian arguing for protectionism is that Australia as we now know it – a free trade zone between its several states and territories - would not exist were it not for the efforts of earlier advocates of free trade who exploded the economic fallacies on which the case for protectionism rests.

The fundamental economic fact that makes free trade mutually beneficial, is that labour in co-operation is more productive than labour in isolation. If the assumptions of protectionism were true, and free trade was actively detrimental to those who participate in it, then during the long ages of human evolution those at the margins of subsistence who practiced social co-operation would have died out, and man would have evolved to be a solitary species like the snow leopard.

The fact that this has not happened, is because free trade underlies the social principle - the tendency of humans to form themselves into societies. We did not evolve social emotions such as sympathy for the less fortunate, and then later evolve a material basis for them to be advantageous. It's the other way around. Social emotions evolved because the greater degree of social co-operation based on the division of labour is mutually beneficial, especially to the less fortunate.

Charles Darwin observed that competition is fiercest between species and varieties that are most similar to each other. However man has more and more been able to transcend that rudimentary fact of animal life based on voluntary exchange and, after money was developed, on free trade.

"The antagonism between an animal starving to death and another that snatches the food away from it is implacable.
Social cooperation under the division of labour removes such antagonisms. It substitutes partnership and mutuality for hostility. The members of society are united in a common venture."

Mises, Human Action, at p.273

http://mises.org/Books/humanaction.pdf