Free Trade vs. Protectionism | Carmen Dorobăț

so good afternoon everybody as you can see our numbers have dwindled from yesterday I was warning you that we're competing today with the judge Napolitano and a graduate seminar I have discovered however that professors Werner instituted a quota both on the graduate seminar and judge Napolitano's class I have to start with the disclaimer that I did not ask for the quota I did not ask for protection from competition just so you know I did not go lobbying for it it just happened had I done that it would have been completely against what I'm gonna tell you today in today's lecture so that's as long as you're clear on that if you have any issues of obviously take it up with professors to learn them so what I thought we were gonna talk about today is as you can see the topic it seems fairly broad free trade versus protectionism and I will focus primarily on the subtitle the idea of the differences between ideology and bureaucracy now if you've attended yesterday's lecture on the division of labor you know that I focused on the economic principles that underpin our understanding of international trade our understanding of this phenomenon of exchange whether it's within borders or across borders in past years professor her burner used to give a lecture on free trade and its enemies which is available on YouTube in various iterations and and in that lecture he used to focus on all sorts of economic arguments against protectionism used to tackle the idea of the balance of payments as a reason the balance of payments deficits as a reason for protection focused on mercantilist and neo mercantilist arguments on the infant industry argument and so on I thought that for this lecture I'm gonna try to compliment both the lecture that I gave yesterday and professors herb earners past lectures and I would focus more on the history of free trade some of the salient points in history of how free trade developed did we actually have free trade at any point in time when to Dewey one was when was it that we came closest yeah how prevalent has protectionists been protectionism been over the last two or three centuries and then I thought I would also speak to you a little bit about how to be strategic about promoting free trade because I noticed in a lot of my students thinking that well multilateral free trade agreements might be the best way to go about it and I personally disagree with that and I thought I would present you my view on how to best get to global free trade so keeping that in mind I thought that today we would start as I said with the historical part looking at free trade before and after the two world wars if you remember yesterday we were talking about the importance of both the sound monetary system end of Peace for voluntary exchange and for the division of labor and you can imagine what kind of impact the two world wars had on the global division of labor yeah it led means is used to call it the international destruction of global division of labor happened within the two world wars and then we're gonna talk a bit about the trends that are happening right now in international trade in the 21st century and whether there are any trends that are promoting free trade or rather going against free trade and then I thought I would do so with you something that I do with my students as well which is compare a little bit the academic discussion the rhetorical discussion on free trade with what actually happens when a trade policy is draft and how trade policy looks like how tariffs look like in practice you'll see in a minute what I mean and then we're gonna conclude the lecture looking at why trade agreements don't work and when I mean trade agreements I mean intergovernmental trade agreements multilateral bilateral yeah and what can be done again from a strategic point of view so how do we get to that point where we would have global free trade so if you were to take a snapshot of the way the international trade looks like today both in international trade theory and international trade policy I think Frank Towson statement still stands franchisee was one of the leading international trade theorists in the early 20th century and he said that the doctrine of free trade however widely rejected in the world of politics holds its own in the sphere of intellect so that tends to still be true today the doctrine of free trade is generally a lot more accepted in academic circles than it is in political circles and in public circles as well now that being said free trade is a very debated topic both in academic circles and in public opinion as I was saying scholars tend to have very well defined opinions they will you you will have a very hard time finding an international trade scholar that would say they're not Pro free trade Paul Krugman is pro free trade just to kind of give you an example yeah I got a phone call about two months ago when the discussion on Trump's tariffs would at its height from The Spectator in the UK for an interview nicely I felt very flattered which you know my feelings of flattery went away in a few seconds when they said you're the 40th person were calling we're trying we're trying to find someone to give us an interview that would be in agreement with Trump's tariffs so I was about the 40th person on the list that they had tried because all the other 39 before me had said no Trump's tariffs are not gonna work so you may be tempted to say looking at this that well there's definite agreement amongst academics that you know the free trade is the best thing for the world economy but you would be wrong yeah a lot of mainstream economists are very inconsistent in their view first of all what they understand by free trade is not what Austrian economics understands by free trade so on the one hand they see free trade as referring solely to international free trade they don't apply the same principles to in turn that they apply to international trade to domestic exchange yeah so they make this distinction and this colors the way they view free trade as well so they don't understand I free trade they don't understand the absence of government intervention yeah they understand the way of managed trade free managed trade by the government and on the other hand they also scholars are also inconsistent in not accepting the principles of the principles of comparative advantage to its full consequences so they will again what they understand by free trade is some level of tariffs but the problem here is as Mises used to point out to his students if tariffs are good then they cannot be high enough if tariffs are bad then they cannot be low enough yeah but what most scholars will say well no definitely free trade doesn't mean zero tariffs free trade means some sort of like mutual understanding on a good level of tariffs yeah so they're very inconsistent on the other hand the public is very ambiguous themselves in their opinions about globalization I was hinting at this yesterday you have to understand that we have never experienced purely free trade we have never experienced unhampered globalization so I was trying to explain to you that for instance if certain groups have you know will lose their job after we open the borders to foreign competition that is a loss that they feel directly now the benefits that come from opening the borders in terms of increasing the standard of living access to a lot more Goods and so on those benefits tend to be in a way taken away from them by other government interventions by their domestic government interventions by a poor monetary policy for instance so in a way the public never gets to fully feel the benefits of free trade they feel a great amount of them for sure but they never tend to feel them fully as fully and as directly as they feel like for instance a job loss so that's what I think that and you can pound about with the lack of education about these issues and that's why you get this sort of ambiguous view about globalization in the public now as I was saying free-trade debates usually encompass only international exchange yeah this is true for scholars as well as for the public but Mises said that there's absolutely no difference between domestic exchange and international exchange between domestic trade and international trade it's only a difference in the data only a difference in the way we collect the data yeah it's the arbitrary border that is drawn between countries yeah and finally it's worth remembering that when we do talk about government trade policy and we will talk about this today is that we tend to assume that they're motivated by a certain type of ideology by some type of theoretical framework which might be true depending on the advisers that they have but at the same time trade policy's always motivated primarily politically and what I mean by politically is I mean interest groups that are a lobbying for protection like myself with dr. salerno yeah that's where the trade policy really gets its motivation from and I think no matter what you call it free trade fair trade manage trade the ultimate the ultimate reason of a trade policy is for both companies yeah like the crony capitalist capitalists lobbying for protection as well as for the government to gain power and to gain benefits at the expense of others John Stuart Mill used to call protection an organized system of pillage of the many by the few so in a way things have always been like this sadly enough I wish I could tell you that there's been a time when this hasn't happened but there has been a time when this was this level of protection this level of government intervention in international trade was very much reduced and this was in the second half of the 19th century in Great Britain you could call that the Golden Age of free trade and he was due primarily to the influence of classical liberalism you had the influence that classical liberalism had on the domestic policies in Britain that's where it was initiated I could give you here an example the repeal of the Corn Laws yeah so there was a lot more economic freedom in domestic matters in Britain and that translated into there foreign policy and it was primarily through the work of an Englishman Richard Cobden and a Frenchman Michel Chevalier who were friends and who worked together tirelessly to sign what's called the first modern trade agreement between England and France with the purpose of reducing French duties on English imports by about 30 percent now they went to Napoleon the third to try to convince him and Napoleon the third said I am actually quite willing to sign this treaty but you have to remember that in France we make revolutions not reforms they didn't abandon their pursuit however and in 1859 they did sign the treaty now I have to mention here Britain had already reduced import taxes on French goods to almost nothing before this treaty was ever even in discussion yeah so Cobden had already worked he was a member of parliament had already worked on reducing British import duties before suggesting this to the French government the French government only like reciprocated after the fact and the treaty was very successful the the volume of trade between England and France doubled and there quite a few economic historians that attribute to the treaty and to the trade relationship between England and France the great development in the technology of transportation and telecommunications that happened in the second half of the 19th century so after the first Industrial Revolution the sort of second Industrial Revolution yeah the first undersea Telegraph cable was between England and France and it was to facilitate business between the two countries yeah however this was a very short interlude if you want to a history that's primarily belongs to protectionism rather than free trade it ended in France the treaty was scrapped about at the end of the 19th century so it only lasted for about three decades and Britain was very much an oasis of free trade in the world European countries were very protectionist the US was very protectionist as well in this trend continued into the first world war and it was actually made worse by the First World War no peace is absolutely necessary to free trade and free trade is absolutely necessary to peace they work together yeah Sonia when you have military spending when you have war making it's really hard to it's impossible to expect free trade so you can see here after the first world war for example in the United States the smoot-hawley Tariff Act imposed duties on imports of about 53 percent in 1931 and 59 and percent in 1932 these were on average yeah obviously a lot of countries had closed themselves to foreign trade during World War one for reasons of national security and protection and so on and trade volumes you can account the you can take into account the Great Depression here as well trade volumes globally declined by 25% between 1929 and 1933 so Mises called this the disintegration of the international division of labor yeah the disintegration of the world economic system that was made possible by classical liberalism the emergence of classical liberalism in France in England and the French English trade agreement yeah the first world war started or accentuated this disintegration and the Second World War basically completed it so after 1945 you have now what we can call the new international economic order and the United States was the front-runner here in leading this post-war reconstruction and this new international economic order and Rosine Sally who's a trade theorist who works for who - who teaches at the London School of Economics and works also works for the Institute of Economic Affairs he's very classical liberal so he explains that after 1945 the idea of Trade and the idea of lace affair became completely separated less affair was completely abandoned because war by definition requires heavy government intervention and heavy growth of the government if you've ever read anything by Professor Robert Higgs you know that the government's grow tremendously during periods of war yeah so it's him almost impossible to roll them back afterwards and a consequence of that was well now we've had two world wars a lot of government interventions within this time like a very heavy percentage of of the economic activity is controlled or even done by the government so the idea of less affair was completely abandoned so what do we do now with the idea of free trade or trade or global trade so the idea became that free trade what was known as the idea of free trade is now compatible with a series of first Vest interventions by the government yeah to correct what they call domestic market failures yeah or international market failures if you want so all of a sudden the accident was not on reducing tariffs on rolling back the government from these affairs but it was on the government needs to have a fairly active role in making sure that trade policy is conducted correctly it's conducted to the main to the greatest benefit for our nation and so on this was happening primarily in the Western economies Western European economies and in the United States but this was also accentuated by the newly decolonized States who now were on their own and able to devise their own trade policies and they adopted actually a very very old style mercantilist view where they did not think that where they thought that actually the benefits from being integrated in world trade come from exporting and not from importing so they focused on in industrializing their nations yeah on reducing their exports of raw materials and so on and obviously these can help coupled with a lot of increases in in tariffs as well on top of this during the two world wars the government's had gotten very sweetened to the ability to inflate their currency now professor Selina will talk to you on Friday I think about various monetary systems but the idea is before the First World War we had a gold international gold standard and this was very taxing for the governments they weren't able to inflate as much as they wanted because that brought about an exodus of gold out of the country yeah a drainage of gold out of the country so they wanted something they wanted to be able to do something to be able to inflate as much as they wanted or as much as they had been permitted during the war they'll already started in the interwar period in 1922 by having the central banks meet in genoa to discuss expanding credit or inflating at comparable rates so that the dream yeah the drain of gold wouldn't be as significantly felt and that came to a more further completion with the Gold Exchange standard in 1944 and finally with the Rhiannon renunciation of the gold fetters yeah the the the constraints that the gold standard put on governments which happened with the closing of the gold window in 1973 where the connection between the dollar and the gold was completely severed now in this very bleak outlook came about the general agreement on tariffs and trade which was fairly successful yeah this was an initiative to try to get international trade back on track after the two world wars and it had about seven rounds and he was it was it made progress in reducing trade barriers tariffs trade barriers but you have to remember that these trade barriers had significantly increased during the two world wars so the level that gap brought tariffs back to was actually higher than it had been before the 20th century yeah so we didn't go back to a situation and even comparable to that of Cobden and Chevalier you know not to mention not better and then GATT was followed by the World Trade Organization which if you've ever read any of my articles which I'm sure you did has actually done a lot worse than GATT yeah the world trade organization is very large it has about 164 members and negotiations are done with huge delegations that can never get along so in its in its entire existence it actually that has actually never signed an agreement a multilateral trade agreement yeah they do meet in some very exotic locations though so that if they do sign it it'll have a really nice name like the Bali package or you know I think Bora Bora is next so that's it's very nice yeah now even within this very bleak outlook yeah after 1945 global trade did develop though and it was primarily due to technological development yeah which made it possible and it was also due to the fact that I like to think that markets are very resilient yeah so this was all piled up on the strength of international trade and somehow markets found a way to breathe through the loopholes yeah perhaps the best example yeah of trade growing in spite of government intervention and not thanks to it as people tend to think are the rising the the Asian economies who have experienced a tremendous rise in their commercial power and imposition in international trade after 1980 and specifically after the 21st century yeah so China and India gobbled the by entering in global trade ended up doubling the global workforce yeah and this shifted capital across the world it was a tremendous shift of capital and of production and obviously of comparative advantage across the world yeah the reason this happened is because these countries started to realize that the very closed border policy that they had to trade is actually not working to their advantage don't imagine that they liberalized tremendously but the very small liberalization that they did promote had a tremendous impact on it and you can only wonder counterfactually what would actually happen if they would liberalize completely or if they were liberal more on their domestic policies as well yeah so as I said I find that world trade is really resilient in that sense now I have a quote here from Mises that explains sort of the intellectual the the the debt that Western economies have to these economies you know how people will say that the reason these economies took so long to get involved in world trade is because they were exploited by the richer economies Mises had a very original way of treating this question and I'll just I'll just read the quote he starts by explaining the policies that these what he calls least developing or underdeveloped countries had he said they wanted to nationalize before they had permitted business to build plans and enterprises which could be expropriated they wanted to establish a new fair deal in countries whose distress consisted precisely in the fact that they had not known what is today disparage as the old and unfair deal all these radical intellectuals of the underdeveloped countries blame Europe and America for the backwardness and poverty of their own peoples they are right but for reasons which are very different from those they themselves have in mind Europe and America did not cause the plight of underdeveloped nations but they have prolonged its duration by implanting in their intellectuals the ideologies which are the most serious obstacle to any improvement of conditions the Socialists and interventionists of the West have poisoned the mind of the East I thought that's a tremendous way of explaining not only the historical development of this particular issue but the importance of ideas and of economic ideas yeah elsewhere a Mises says that what these countries lacked was good sound economic ideas in capital nothing else yeah so as I said all of these were however just very partial liberalisation and this was true this is true of the Asian economies that have risen tremendously in the 21st century and is also true of the Western economies and so on so where we have free trade it's very little compared to what it could be and still it's very successful but the approach some people have called it Smith abroad and Keynes at home yeah so we'll be free traders abroad with other people and will be heavily interventionist at home yeah you know what the Keynes part at home leads to pretty much this whole week is indirectly about that yeah I'm just gonna mention the idea of the widening inequality the middle-class squeeze even the the general rise yeah and sort of a globalization backlash happens as I said because of domestic interventions because people don't get to feel the full benefits of free trade because of domestic intervention but the Smith Smith a broad part of the equation obviously has not been true as I've been trying to point out so far this has been on only a very limited level of trade liberalisation so far so just to kind of sum up yeah discussions about trade protection and why is it necessary and what can the government do and how they would need to approach it so you have three types of general trade policy arguments the economic arguments as I was saying have a look at professor herb iners discussion in the past on free trade in its enemies you had the infant industry argument the balance of payments theory and so on then you'll have political arguments which I'm sure you're familiar with like we need to protect our industries because they're strategic industries we need national security you know by American because America is the greatest and so on yeah America is the greatest but that's that's not the point here and obviously ethical reasons like we need to have fair trade and you saw what Mises were saying yeah it's fine to have fair trade but you need to develop you need to have trade first and foremost yeah there's people that will kind of put the cart before the horse and these kind of respects and so on and then the government's can take various roles some of them can be very active or aggressive in their trade policy are very high tariffs constantly trying to you know block competitors from entering their domestic markets very active in subsidizing the local industries and so on they can be passive in America has tended to be rather on the passive side for the past few decades so the idea of like benign neglect I mean will interfere when it's necessary to interfere but we have a general moderate level of protection we're not we're not out to get anyone yeah we're just trying to be fair sort of and kind of manage it gently and there's also the defensive approach and you may think of Venezuela here yeah the idea that we need these tariffs because other people other nations are attacking us and our welfare yeah Romanians have this mentality funnily enough yes that companies come and they make profits in Romania and they take the profits away and they're only here to steal from us yeah that's the mentality so that's where a trade policy becomes defensive in that sense and obviously you can have various ways of in which the government's can approach this so the modified market approach is when governments say well there's market failures either because it doesn't you know free trade without our intervention with leave our infant industries you know underdeveloped would endanger our national security it would not be fair and so on so these general systemic market failures and we need to target that we need to modify the market what our interventions do is they modify the market according to what we think is the most efficient or the most fair trade deal yeah the government's will take a case-by-case approach so it depends on the industry is this industry really relevant to our national security or not and so on and then you can have two very general approaches I was mentioning Venezuela yeah the idea of economic warfare so we are locked in an economic war with other nations so we need to use every tool at our disposal to protect ourselves from it or the way we use trade policy is important to the way geopolitical power is distributed you may have noticed this into discussions between the European Union and Russia or America and Russia a trade policy usually becomes a tool if there's a larger geopolitical issue at stake now every time I present this to my students they leave the class with the opinion that trade policy is something really glamorous like it must be really nice to be a trade policy maker because I mean you deal with really important issues like national security right and and you know things like geopolitical issues it's a really important job so what I like to do when they come in the next class is to show them what these trade policy committees really do and the best example to do that is to show them the kind of products and goods and regulations exist within the quagmire of bureaucracy that is trade policy it's a really fun thing to do and as we do this try to keep in mind that someone is getting paid heavily paid to classify this to update this to send countless emails to get these meetings together yet to type this these are thousands upon thousands upon thousands of pages so I'm just gonna give you example of goods and services that are being I have tariffs on them in various countries so we're starting with the US there's asparagus and sweet corn I'm not gonna read the level of terror Assad's apricots and cantaloupe are taxed brooms because they're essential and strategic and GOP important so our corsets and gloves and commercial plate we're in the UK very typical you know horse-racing is very popular there so walking sticks riding crops not including toy umbrellas are taxed now vu you know has a very overly developed section at the Commission where they deal with trade issues it's it's sort of related to the Common Agricultural Policy as well they kind of work together but they have a lot of regulations so the European Commission regulation on classification labeling and packaging which applies to foreign goods as well as within EU Goods is about 1,400 pages long that's about as long as the NAFTA trade agreement there's a regulation on the banana stabilization mechanism from banana for bananas from Colombia and Peru now what this means is that even up within a particular year the imports of bananas from these two countries rich or certain level this a quota is triggered that limits further imports and there's also been ten meetings of this of the of the Commission to discuss the regulation and the certificates of origin of garlic fresh or chilled again someone is getting paid to do this to classify garlic as fresh or chilled yeah the WTO doesn't do a better job either yeah so you know that they have that dispute settlement mechanism so if two countries can't agree on a particular issue that concerns certain goods whether they were you know subject to dumping or some sort of unfair deal the WTO steps in they can they can raise an issue there and they can discuss this and it gets settled they the ones that are ongoing trade investigations concern bicycles seamless tubes and pipes footwear with uppers of leather fish Phillips and paper is just printing paper yeah so the question is who benefits from this yeah so what's the point well the general idea would be well we have high tariffs in order to protect our domestic industries to grow them and to make sure that as a result we export yeah that's the end goal of it we do want to be part of world trade these governments will say but the way to do that is to have high tariffs and make sure that we become very productive now this is what it's called the most favored nation tariff so this is the lowest level of tariffs that the W recommends yeah so if you if you apply a tariff of 5% on the goods coming from Mexico then the WTO rule is you should not apply more than 5% on goods coming from other countries yeah the most favored nation and it's sort of a good idea to see kind of like the the level at which tariffs are accepted within the WTO and you can see here that the Western economies yeah and Europe and even Russia are somewhere in the lower band of tariffs and that the highly protectionist countries are actually here in the south yeah I was explaining to you before as I was saying there's been tremendous liberalisation here but still see the level of tariffs are comparable er right a lot higher so you can only imagine what would happen if China and India would lower their terrorists to the level of them of that of Western economies and you can see the United States leading the way here now if I were to show you a map of these countries wait in total trade you had these countries if you want commercial power normally according to the law according to which if we you protect your industries you grow you become an important global player then the color shouldn't change much yeah these should be the countries that have like the higher more developed global trade and these should be the countries that are you know to quote a famous person losing instead of winning that trade you know if you're on Twitter you must know yeah so let me just show you the map of the percentage that these countries have in world merchandise trade and I'll go back and forth so you can see what I'm trying to say you see so the the most protectionist countries have the lowest level of percent lowest percentage share and more in world exports the higher they tax their imports the less they export yeah I'll go back see it's nice again most of my time I spent on doing this preparing the lecture yeah so why do people think then that it's imports we gain from this was an answer this was a question that Mises couldn't really give an answer to but he gave an analogy that I think explains the fallacy that is contained in this idea he used to tell to his students well if it's true that in foreign trade we gain by exporting and not importing then it should be true that when you go to buy bread the advantage of get a buy of making that transaction is exporting the money paying for the bread rather than getting the bread itself yeah so it seems like a very simple idea you know when it's put this way but how do we get to the point where we lower these terrorists yeah how do we get to the point where we have global free trade cuz it's okay to disparage about it it's okay to say well look weather what's happening but I've discovered that if you tell people well what's your solution and you just say well the best trade policy is known trade policy don't become rudders deflated with that so I thought I would explain to you why what we have now doesn't work and what I think is the best way forward so multilateral agreements for me suffer from a lot of issues and not just for me a lot of theoreticians even mainstream scholars point out that they have a lot of issues yeah primarily they involve a structure of diverging interests of interest groups so I was always saying you have a hundred and sixty four members of the WTO they all get together each of those delegations have particular interest groups backing them their interests are never gonna converge yeah so it's no surprise that the WTO hasn't managed to sign an agreement the idea that the WTO is predicated on as well is the idea of reciprocity will only benefit from trade if you know we allow their imports but they also allow our exports so to use the bread selling example the only way I benefit from buying bread is that not only will they give me the bread but they will let me give them the money yeah the idea is I mean who would be upset if Walmart would say no thanks we don't want your money yeah just take the bread yeah but this idea of reciprocity is really ingrained in the way people think about trade agreements today that the only way to get the benefits is that of lowering our tariffs as if they lower their tariffs as well yeah the same thing is with the region or bilateral trade agreements these are even more dangerous if you want because with two governments they can get along again the interest groups can actually converge and actually have have a way of reaching a mutual understanding so it actually they tend to become reciprocal protectionism not reciprocal free trade most of the times when you'll hear that a trade agreement reduces tariffs it means that Mises was always warning about this but what's happening in domestic matters what's happening with the non-tariff barriers with the red tape are those staying the same are those being lowered as well or are those growing to compensate for the reduction in tariffs yeah so a lot of governments will say will reduce tariffs by 30 percent and then come up with 2,000 pages on regulations on garlic yeah that will just undercut that progress and obviously the more regulations you have the hot the larger this quagmire of bureaucracy the more rent-seeking behavior you develop as well so they're very problematic and again people are becoming really disillusioned with them in general not just Austrian economics and I think the easiest way to judge this is with all the government's you know why are the government's doing this are they really committed to free trade probably not how can we tell that well if they were really committed to free trade they would do it even in the absence of a trade agreement yeah now I've praised the Asian countries in to bear in mind and Hydra I do not praise them completely I only praise what they have done in this particular area but they've realised the importance that it would have opening up to free trade from being completely closed opening up to free trade would happen their welfare so China has really led the way so 20 years ago it had an average of 65 percent tariffs yeah it's only gone down to about 10 percent today which is still higher than a lot of the world but it's a lot lower than it used to be and a lot of East Asian countries you can see here yeah have lowered their tariffs lower than what the WTO bount was yeah so this is the this green line if you can see here is what the WTO had suggested would be their lower tariffs and you can see here in red that most of them have gone below that yeah and particularly to goods that they actually produce themselves yeah there's so they've opened up the doors to competition you know they weren't protecting the industries the local industries yeah and there have been studies done though the data is not very recent and I'm working on updating it but you wouldn't be surprised that you don't find it all collected at the World Bank or at the WTO to don't really want to collect that kind of data that if you look at the total level of tariff reduction yeah how much were tariffs reduced between 1983 and 2003 you would think that you know would have to be agreements between governments that led to that kind of tariff reduction if we are to believe this idea that it's only reciprocity that brings about the benefits from trade and it's only under reciprocity but actually 65% almost of the total tariff reduction happened unilaterally happen by countries actually if you want accidentally just even stumbling upon realizing that even when other countries are protectionist around you even when other countries clink to protection as Mises put it you're still serving your own welfare better by free trade yeah or at least by liberalizing a little bit which is what they're doing so as I said the data is not very news from 2003 maybe next year I'll bring updated information so now I was I was mentioning we're almost we're getting to the end of it so I'll be very quick yeah so what can we do strategically well first of all the key issue to understand here is that free trade cannot be accomplished top-down it's a bottom-up process you need freedom and domestic affairs you need less government intervention to no government intervention in domestic affairs and then free trade follows yeah Mises used to say that foreign policy and domestic policy are but one system yeah you cannot have keynes at home and Smith abroad you'll just have Keynes that's it yeah or Smith but it well no you'll just have kids the second thing that you need is peace yeah people say the free trade is the handmaiden of peace yeah free trade brings about peace well free trade also needs peace yeah I needs blow - nothing military spending yeah in order to enable these commercial relationships to flourish because otherwise why would you do business with a country that you're or with you know and if you don't take anything else away from this lecture but you do take this is that a reciprocal free trail I mean if all countries pursuing a completely free trade policy is obviously the idea that we're striving for but II for each individual we don't have to wait for that to happen before we lower our trade barriers yeah Bhagwati who's also a very important trade theorist agreed with Mises in the idea that lowering your tariffs first not only improves your welfare but may even beget the reciprocity of other countries yeah and to wrap up I'll go back to where we started to Cobden and chevalier and compton was fully aware of this yeah of the benefits of unilateral for the liberalisation not only in increasing the welfare of Britain Ben also in bringing about free trade in other countries and in a letter to Chevalier if I'm not mistaken he says we came to the conclusion that the less he attempted to persuade foreigners to adopt our trade principles Britain's the better for we discovered so much suspicion of the motives of England that it was lending an argument to the protectionists to take away this pretense we have out our total indifference whether other nations became free traders or not but we should abolish protection for ourselves abolish protection for ourselves and leave other countries to take whatever course they liked best thank you you

Channel: misesmedia

Views: 5,002

Rating: 4.9069767 out of 5

Keywords: Economics, Austrian School, Free Trade, Protectionism, Carmen Dorobăț, Mises, Mises University

Id: qf_fJWtY-wk

Length: 45min 21sec (2721 seconds)

Published: Thu Jul 19 2018