Free, freer, and trade…what flavor cool aid?


Trade policy and actual trade are related but different matters. This post from last year caught my eye, partly due to the discussion on tires from China. While any blog post has to be simplified due to the nature of a short post and comment format, such discussion at times seems amazingly simplified beyond recognition of what trade entails…

Cafe Hyek Don Boudreau offers a thought on tariffs, but more broadly on what is free about trade. I assume he knows something of the rules of the WTO and trade restrictions imposed by these agreements.

So, how does one deal with claims of a theoretical ‘free’ trade versus what?, ‘restricted’, ‘constricted’, ‘protectionist’ trade? Do multi-national companies not have rules? Trade always has rules.

Is there a difference between ‘free’ and ‘freer’? ‘Free’ reminds me of lunch, and who picks up the tab. And even that simple example becomes rather convoluted. Is it even a useful term, or simply propaganda?

Persons who, fancying themselves observant realists, insist that “free trade doesn’t exist” have their visions and brains distorted by political boundaries.

It is quite true that national governments almost universally erect barriers that hinder their citizens’ freedom to trade with citizens ruled by other national governments. Some governments erect higher barriers than do other governments. But, indeed, it’s rare to find a national government that doesn’t indulge the greed of politically powerful interest groups, as well as the prejudice and economic ignorance of much of its population, with trade barriers.

And yet free trade is ubiquitous. Freedom to trade generally reigns within political borders. For example, the 50 U.S. states are united on one very large and very successful free-trade zone.

Karol, Thomas, and I live in Burke, Virginia. We are free to trade not only with cabbage growers in Culpeper, Virginia, but with cabbage growers in California. We trade freely with residents of any state, from the Atlantic to the Pacific, from the U.S. border with Canada to the U.S. border with Mexico. That is, whatever taxes and burdens Uncle Sam might impose (however wisely or foolishly) on economic activity within the U.S., those burdens are nation-wide. No special space-specific burdens are placed on my and my family’s ability to trade with other Americans; no extra tariff or restriction applies to our exchanges with an Alaskan or with a Floridian simply because we do not live in those states.

Practically speaking, therefore, there is free trade throughout the United States. My family and I routinely buy wine from California and Oregon, oranges and lemons from Florida, computer software from Washington state, maple syrup from Vermont, peaches from South Carolina, television newscasts from New York and Atlanta, lumber from Alabama, spicy sauces from Louisiana, crabs from Maryland. The list is long.

On a random note, I am also reminded of Orrin Hatch’s amendment to the Baucus health bill that excludes any state beginning with the letter U from the excise tax on fancy plans. It seems government can be merely a part of a business plan. Do we ever approximate a ‘free’ market, or are there more usefull approaches and language? (Before the terms are co-opted, that is)

Update: I was reminded in comments that I should have included these links to aid discussion and definition from previous posts. There were more than I remembered.
See these posts:
and directly this one on buy America and the question of how does one do that anymore with vertical specialization, which is not a sexy title??
Vertical specialization
Trade policy for mid-terms 2010
WTO rulings
American jobs are not the same as American companies
Tariffs not for labor, but good for banks and pharma