Free or Fair Trade?


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The bottom line is that what’s fair or unfair is an elusive concept and the same applies to trade. Last summer, I purchased a 2010 LS 460 Lexus, through a U.S. intermediary, from a Japanese producer for $70,000. Here’s my question to you: Was that a fair or unfair trade? I was free to keep my $70,000 or purchase the car. The Japanese producer was free to keep his Lexus or sell me the car. As it turned out, I gave up my $70,000 and took possession of the car, and the Japanese producer gave up possession of the car and took possession of my money. The exchange occurred because I saw myself as being better off and so did the Japanese producer. I think it was both free and fair trade, and I’d like an American mercantilist to explain to me how it wasn’t.

Mercantilists have absolutely no argument when we recognize that trade is mostly between individuals. Mercantilists pretend that trade occurs between nations such as U.S. trading with England or Japan to appeal to our jingoism. First, does the U.S. trade with Japan and England? In other words, is it members of the U.S. Congress trading with their counterparts in the Japanese Diet or the English Parliament? That’s nonsense. Trade occurs between individuals in one country, through intermediaries, with individuals in another country.

Who might protest that my trade with the Lexus manufacturer was unfair? If you said an American car manufacturer and their union workers, go to the head of the class. They would like Congress to restrict foreign trade so that they can sell their cars at a pleasing price and their workers earn a pleasing wage. As a matter of fact, it’s never American consumers who complain about cheaper prices. It’s always American producers and their unions who do the complaining. That ought to tell us something.

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  • Jim

    This has to be one of the worst articles I've ever seen. It's so typical of the narcissism that is so prevalent in today's society. That Japanese import you so love is from a country that strongly discourages the purchase of an American made automobile in its own land. That sir is the definition of 'unfair trade'. The Chinese and South Koreans are even worse. Trying to make fair/free trade comparisons to religions, etc. is just nonsensical, the same as your purchase.

    When your grandchildren complain about not being able to find a decent job just show them all the foreign products you so love to purchase.

    • adamjw2

      You are mad at the free market concept. It's not complicated. If the American automobile manufacturers made a better product, then people would buy it. Sorry, but people want the best for their hard earned money.

    • abraham83

      Yes, Jim, you speak clearly and accurately. Unfortunately the left has put out so much economic nonsense about free trade over the last 50 years that putative "conservatives" lack the ability to understand what you say. Or even to address the inconsistency of their arguments. Indeed, like George Bush, they will only continue to inflict damage to our economy and our country.

      I recommend John MacArthur's book, "The selling of Free Trade" on the subject.

      See my overall comments below.

    • abraham83

      I intended to show support for your clear and direct words on the issue of massive job loss in America to "free" trade. Those who second Mr. Williams specious arguments can generate no reasonable traction, since the entire concept is a sham–particularly Mr. William's sophistic staw man of "fair" versue "free" trade.

      To substantiate my point and provide scholarly citation–something Mr.Williams did not bother to do–I suggested a book by John MacArthur which elaborates the argument. However, the FPM staff chose to censor my post.. Too bad. Doesn't seem to comport with their campaighn to 'Adopt a Dissenting Book'. Dissenting from Mr. Williams' argument, that is.

  • Robert Arvanitis

    Jim:
    Hard to imagine a worse farrago of bad ideas.

    You conflate protectionism with free speech.

    Worse than that, you clearly misunderstand the value of free trade EVEN IF it is one sided. If the Japanese want to subsidize American car buyers, that is an excellent outcome for America, The huge gains by car buyers more than outweigh the small opportunity loss to US carmakers. (Of course the noisy few too often out-shout the majority which is why we have so much bad trade policy and blatant rent-seeking…)

    Worst of all, you ignore the key issue — just who gets to say what is "fair." No government hack nor left activist, not on my watch.

    • Jim

      Robert:

      As much as I also hate government intrusion, government has it's place. Politicians have been responsible for the laws of our land. It doesn't mean all the laws are right, but most of the laws require most of us to act in a responsible manner or face the punishment.

      Sorry to hear that you think my opinion is the 'worse farrago of bad ideas'. That kind of statement makes me think you just have your head in the sand. Most of those on the right and the left like to resort to name calling and insults to try and discredit those who don't agree with them. You equate an 'excellent outcome for America' by having cheap foreign goods, which in the long run erase American jobs and take a toll on our economy. It's easy when you still have a decent paying job to take this position. However, when the economy of our country suffers because of the transfer of wealth and jobs to other countries, I just can't see how it's anything close to an 'excellent outcome for America'.

      • 2maxpower

        Jim wrong …Robert correct.

        don't give up Jim. you still could figure this out.

        • abraham83

          You have little cause to be condescending to Jim. Rather, you might try to meet his objections with knowledgeable arguments. If you have them–and not thin seat-of-the-pants opinions.

          • 2maxpower

            sorry to disappoint you. obviously I disagree with Jim and agree with Robert. next time i will sprinkle sugar on it for you.

            I have an opinion and stated it. I have no intention of rewriting the authors essay or putting Robert's words in different prose.

  • http://www.okcteaparty.org Dan

    To me Dr. Williams point is simple:

    Fair trade — manipulated by other intermediaries — may (and probably usually does) limit individuals from getting the best product (the produce with the most utility to the buyer) and the best (lowest?) price.

    Fair speech also limits the best (most truthful) speech from easily (at the lowest cost) getting to a hearer's ears or eyes. But as in any free market, there may be a lot of crap out there that has (and deserves) no currency. Such is life. Freedom is messy.

  • abraham83

    Mr. Williams sounds like a knee-jerk ideologue of the left, which is where many thoughtless conservatives now stand on issues of trade and immigration, to name only the more prominent. It is only the left that poses "fairness" against freedom of speech and religion with their constitution-nullifying harassment laws, their affirmative action legislation, and their many wealth distributiion inniatives. It is only the left that wants to destroy national borders with the importation of millions of 3rd world aliens, the new "free" labor. (Whoops! I forgot about George Bush and his North American Alliance.)

  • abraham83

    Shortly after the founding of our republic, the issue of "free" trade came to the fore when Islamic razzias from the Muslim territories of North Africa confiscated our merchant ships in the North Atlantic and the Mediterranean Sea and enslaved their crews. The independent states of the fledgling America appealed to Washington to protect their vessels which led to the formation of the U.S. Navy and ultimate military intervention in 1815 to finally protect the nation's economy. Without this naval force, the American economy would have been strangled. This Muslim interference with our trading was facilitated by trade competitors France and England who perpetuated the tribute blackmail to Islamic despots and ceased protecting America vessels after the Declaration of Independence in 1776. Once America showed the way with guns, the Mediterranean was truly opened to "free" trade and all nations benefited.

    (continued below)

  • abraham83

    In short, a nation's trade is of national concern. It cannot be facilitated without banks, a labor force, consumers, currency and protection, all of which exist to further the wealth and integrity of the nation AS A WHOLE. The free-trade shibboleth that each area of the world's economy contributes what it does best, cheaply and efficiently does not address the looting that occurs to Third-World areas that can only contribute cheap labor and plentiful natural resources, lacking an industrial base and even the necessary labor force to run it. The industrialized west could benefit from such a lop-sided exchange, and truly this imbalanced relationship would keep such backward sectors forever in a primitive state: there never would be a necessity to modernize and enter true competitiveness on all fronts since their "efficient" contribution could never expand. Free trade restricted their capital accumulation, prevented economy diversity and kept them in a servile state.

    (continued below)

  • abraham83

    The road to bankruptcy down which the EU is now traveling is a foretaste of what awaits America under "free" trade with China, an avowed enemy of our nation. The EU has had to subsidize the bankruptcies of the more profligate members such as Portugal, Italy, Ireland, Greece and Spain by channeling useful economic capital into absorbing their debts. This will depress growth rates, living standards and industrial innovation for the entire sub-continent. If each had retained their own currency and insisted upon bilateral trading agreements–as before– the PIIGS would have been isolated long ago, their economies would have undergone the necessary corrections, and the more productive nations would not have been dragged into the morass.

    (continued below)

  • abraham83

    The lesson can be expanded to the entire issue of international "free" trade. Of course, China is in no way an equal trading partner, inasmuch as it is a communist country controlled from the top down with manipulation of the currency and the labor force, which is not far removed from serfdom for their people. They can dump cheap products onto the market, control labor unrest, dragoon the prison/slave labor of millions of prisoners. On top of this, they are engaged in massive industrial and military espionage in America, and are building a formidable military force with which to challenge a nation they are diligently working to undermine. With a large trade imbalance, they can "buy"compliance from their American trading partner all the while weakening their avowed capitalist enemy. Meanwhile American run-away shops in China can only expect future confiscation of their plant and equipment in return for dirt-cheap serf labor, not even the traditional protection of the usual bi-lateral agreement.

    (continued below)

  • abraham83

    American industries open in China while they close in the US, putting millions out of work and reducing the future buying power of the very consumers (read "citizens") free trade is aimed at reaching. With industrial production exported abroad, the need for a highly educated work force will diminish to the point that only low-wage labor of the Chinese and Mexican coolie level will be available, and universities and their enrollments will dry up.

    We will have become an efficient, albeit third-world economy: the reversal will be complete. Then Mr. Williams will truly have the fruits of "free" trade, and totalitarians will rule the earth.

    • Jim

      This is an excellent presentation and I agree with all of what Abraham83 has written. In addition the Chinese are constantly trying to break into our computers to steal secrets. Yet there are many on both the right and left sides that will still rush to buy Chinese goods simply because they are cheap. I find it amazing to see both the right and the left, who hate each other, overlook these facts and rush out to buy products from China and then justify their purchase by the very reasons outlined above. It's just impossible to argue or debate with such logic.

      I'm really disappointed to see so many who just refuse to see what is and has been happening to our economy. This has been going on for almost 40 years now and has really taken foothold in the last 20 years. It's really surprising to see what damage has been caused in just 20 years.

      In the end we are mostly doing this to ourselves. Even though I like to blame our government leaders for incompetence and many of our corporate leaders for greed, at the end of the day most of us can look in the mirror to see who is mostly to blame.

  • http://www.shugartpoliticalaction.shugartmedia.com/index.html Tar_n_Feathers

    "Fairness" is a nonsense buzzword used by govt. interlopers. "Fair: vs. "unfair" is a fake conflict that bureaucrats like to cite when demanding that you hand over more of your rights or your money. I don't buy it and never have. Just because something doesn't work out in your favor, doesn't necessarily make it unfair.

  • Reason_For_Life

    Williams' point is clear and correct. "Fair Trade" is just a means of restricting individual choice to those approved of by the state. Under fair trade you can only buy products made by the politically connected. It's a great way for congressmen to raise money provided by the manufacturers of goods that fail in the marketplace.

  • Randy

    Dr. Williams is correct about free trade. If the Congress and the President were to pass protectionist legislation designed to reduce imports and artificially elevate the price of Japanese made cars, American auto makers and their unions would rejoice. On the other hand, if Japan passed protectionist legislation desiged to reduce imports and artificially elevate the price of American made cars, American auto makers and their unions would howl in protest, cry "Unfair!!!" and demand Congress and the President pass retaliatory legislation on Japanese cars. Protectionism sounds great IF you are the one being protected, but NOT when you are being protected against. Protectionism is inherently unfair, and it begets retaliation, but the mercantilists will never acknowledge their hypocrisy. Nor do they learn the lessons of history. See: Smoot-Hawley.

  • Randy

    Mercantilists also never discuss the forgotten man: the consumer at home, and the laborer abroad. Protectionism inevitably means higher prices for American consumers, and those higher prices hurt the American poor most of all. Worse off still are the poor in foreign nations who manufacture the products subject to American protectionism. These "working poor" must either lose pay or worse, lose their jobs, and the alternatives for them are far worse than the alternatives for an American who loses his of her job. But the mercantilists can't be bothered with the troubles of the poor.