Foreign Policy; B. B. Greaves

ALMOST everybody wants peace and prosperity. Certainly government officials profess a desire to promote peaceful cooperation among peoples and they devote much time and energy to Uinternational relations." Yet almost daily the press, radio and TV report international tensions in southeast Asia, southern Mrica, the Middle East, Latin America or the Orient. As human beings are not perfect, possibilities will always exist for mistakes, misunder standings, disagreements and dis putes that could grow into wide spread conflicts. So the task of those concerned with foreign policy is twoMrs. Greaves, a member of FEE's senior Staff, Is the author of Free Market Economics. For many years she has compiled materials for debate students. This essay deals with the subject of the 1979-80high school debate resolutions. 544 \ . ~ ./ ~f ./ fold-(l) to contain local quarrels and (2) to minimize the possibility of such conflicts in the future.

It is natural for people to trade with one another. No doubt men came to understand the advantages of voluntary transactions long be fore the dawn of written history. Persuading others to part voluntar ily with some good or service, by offering them something in ex change, was usually easier than doing battle for it. Certainly it was far less dangerous. Barring force, fraud or human error, both parties to any transaction expect to gain something they value more than what they are giving in exchange. Otherwise they would not trade. This is equally true of trades among friends or strangers, fellow coun trymen or foreigners, small enterFOREIGN POLICY 545 prises or large-whether located next door to one another or sepa rated by many miles or national borders. Trades may be complex, if intermediate transactions or differ ent national currencies are in volved, but the principle remains the same. Both parties expect to gain from a voluntary transaction.

So people who trade with one another have both good reason to remain friendly and just cause to resent interferences that hamper or prohibit their trading. Most consumers care more about the availability, quality and price of what they buy than they do about who makes it or where it comes from. If a particular gasoline works well in their cars, they don't care whether the oil came from Arabia, Alaska, Venezuela or Algeria. Con sumers will buy Taiwanese shirts, Hong· Kong sweaters, Brazilian shoes, German cars, Japanese radios, or any other foreign good, if price and quality suit them. And satisfied customers promote good will. Economic Nationalism It is governments, not consumers, that make national boundaries im portant. It is governments, not con sumers, that create national distinc tions and promote economic nation alism, often without intending to do so. A tax on U.S. citizens, not re quired for protecting lives and property or defending the country, in creases production costs unnecessar ily. Regulations and controls to Uprotect" consumers, workers, man ufacturers, farmers, miners, truck ers, the environment, or any other special interest also raise domestic production costs. Benefits to special groups-the unemployed, elderly, handicapped, minority enterprisers, or those awarded lucrative govern ment contracts-must be paid for by others, in taxes or through increases in the quantity of money which in time hurt everyone. All these pro grams increase costs and make vol untary transactions more difficult and expensive.

As production costs increase, some producers find their sales dropping so they must curtail production and reduce their work force. Many per sons then believe it even more im portant to enact special legislation, erect trade barriers or grant government subsidies, to support the injured firms and protect them and their workers from foreign com petition. But such programs only increase domestic production costs still more. This further hampers the ability of would-be traders to carry out voluntary transactions. The goal of economic nationalism is to protect domestic producers from foreign competition. Its proponents want to preserve a specific pattern of production. They do not understand the mutuality of trade. They do not 546 THE FREEMAN September realize that both parties gain from a successful voluntary transaction. Nor do they recognize the inevitabil ity of change. Nothing in·this world stands still.

People move~ The wishes of consum ers change. Their knowledge is con tinually shifting. Changes also take place in stocks of available resources and the most economical places in which to produce particular items. Producers, investors and workers should be free to move about and adjust to these many changes as best they can. Any attempt to maintain, for political reasons, some rigid pattern of production is bound to faiL Insofar as production is guided by political, rather than economic, motives, it becomes more expensive and waste ful. When government seeks to re duce dependence on imports and in crease national self-sufficiency, con sumers must get along with fewer goods and services of lower quality; and their standards of living will decline. Foreign Policy Repercussions Restricting imports by government fiat reduces exports also. How can foreigners continue to buy as much from us, if our government restricts their opportunities to earn dollars by selling goods in this country? The mutual gains that come from trad ing turn traders into friends. But when trading is hindered, ill will has. a chance to develop. Frustrated would-be traders look for someone or something to blame. Officials of for eign governments become antagonis tic to the U.S. government, for they realize their producers' sales to this country are hampered by our govern ment's interference. However, few U.S.citizens blame their government for imposing trade restrictions. Many even consider the federal govern ment a benefactor. For when im ports and exports decline the federal government often tries to make up for lost trading opportunities by of fering those who are hurt direct or indirect assistance-subsidies, re lief, new protective regulations, and so on. But such government pro grams can never compensate would be traders fully for opportunities for gone, reduced production, and the loss of individual self-respect.

The advocates of free trade pointed out more than a century ago that ttif goods do not cross borders, soldiers will." As fewer exchanges take place across national borders, individuals have fewer oppor tuni ties to know and respect one another. Antagonism, animosity and enmity among nationals may arise. We have seen this happen in recent years-in India and Paki stan, Southeast Asia, the Middle East, southern Africa, and else where. Obstacles to the path of trade made transactions across national boundaries more and more difficult, 1979 FOREIGN POLICY 547 expensive and infrequent. The common bond which could have turned their international traders into friends was weakened. Those who could have helped each other through voluntary transactions had no cause to come together. They re mained strangers and, in time, were even led to consider one another enemies. Government intervention, which begins by distinguishing between domestic and foreign goods and pro ducers, leads in time to a policy of economic nationalism which ac tively discriminates in favor of domestic products to the disadvan tage of imported goods. This hurts not only foreign producers, whose goods are excluded from the domes tic market. It also harms domestic consumers and producers. Produc tion costs rise so that fewer goods can be produced and sold. With fewer goods and services available for everyone, living standards de cline.

Localizing Conflicts The sure way to turn local dis putes into widespread conflicts is for outsiders to interfere. The first step in that direction often springs from a sincere sympathy on the part of the strong for the weak, the ttrich" for the ttpoor," the tthaves" for the tthave nots." Officials of one nation offer to help defend a weaker coun try against the threats of stronger neighboring states. But by taking sides in this way, neutrality is abandoned. No matter how well intentioned, such government-to government economic aid and mutual defense agreements show favoritism which can lead in time to military actions and wars. Through u.s. commitments such as NATO, SEATO and SALT, as well as vari ous treaties, pacts and executive agreements-relating to the Middle East, China, Russia, Panama, J a pan, various African nations, and more-we could well become em broiled in local violence or border disputes, at almost any instant, al most anywhere in the world.

U.S. involvement in the Middle East undoubtedly began with a sin cere sympathy for Jewish refugees who wanted to establish a homeland in Israel. Our involvement in Viet nam has been traced by some to a desire to help relieve France, when she was economically and finan cially strained by military opera tions in her colonial Indochinese territories, so as to persuade her to join NATO. ttWe do not plan our wars; we blunder into them" as his tory professor Henry Steele Com mager has pointed out. George Washington's advice in his Farewell Address (September 17, 1796) is still sound: u •••nothing is more essential than that perma nent inveterate antipathies against particular nations, and passionate 548 THE FREEMAN September attachments for others should be excluded, and that in place of them just and amicable feelings toward all should be cultivated ... The great rule of conduct for us in regard to foreign nations is, in extending our commercial relations, to have with them as little political connec tion as possible." And similarly, Thomas Jefferson urged cCpeace, commerce, and honest friendship with all nations, entangling al liances with none" (First Inaugural Address, March 4, 1801).

U.S. involvement in this century in two World Wars as well as Korea and Vietnam is due to the fact that U.S. foreign policy has been guided by precisely the opposite ideas from those Washington and Jefferson ad vocated. To contain local violence, a nation should avoid taking the first step toward abandoning neutrality and playing favorites. Thus, we should refuse to add to the many international commitments our country is now duty bound to honor. Then we should move toward the foreign policy recommended by our third President-upeace, commerce, and honest friendship with all na tions, entangling alliances with none." Minimizing Future Conflicts Through Free Trade To minimize conflicts in the fu ture we should aim to create a world in which people are free to buy what they want, live and work where they choose, and invest and produce where conditions seem most propi tious. There should be unlimited freedom for individuals to trade within and across national borders, widespread international division of labor, and worldwide economic interdependence. Would-be traders should encounter no restrictions or barriers to trade, enacted out of a misguided belief in economic na tionalism and the supposed advan tages of economic self-sufficiency.

Friendships among individuals liv ing in different parts of the world would then be reinforced daily WHEN the baker provides the dentist with bread and the dentist relieves the baker's toothache, neither the baker nor the dentist is harmed. It is wrong to consider such an exchange of services and the pillage of the baker's shop by armed gangsters as two manifesta tions of the same thing. Foreign trade differs from domestic trade only in so far as goods and services are exchanged beyond the borderlines separating the territories of two sovereign nations. LUDWIG VON MISES, Human Action 1979 FOREIGN POLICY 549 through the benefits they reap from buying and selling with one another. Thus a sound basis for peaceful international relations would be encouraged. Individuals should have the right of national self-determination and even to shift national political boundaries, if they so voted in a plebiscite. For practical and economic reasons, a single adminis trative unit would be sovereign within the political borders so estab lished. But this administrative unit would have to be responsive to the wishes of the people or face being ousted in the next election. It would have to do its best to protect equally the private property of every in habitant and to respect the rights of all individuals within its borders, irrespective of race, religion or lan guage. In such a world, members of racial, religious or linguistic minorities need have no fear of political oppression for being differ ent. Any nation which adopted these policies at home and in its relations with other nations would help to reduce international ten sions and so contribute to minimiz ing future conflicts. But once it began to play favorites again-to grant privileges to some to the dis advantage of others, to introduce restricti ve controls and regula tions-it would be reembarking on the path that leads to friction and conflicts among individuals, groups and nations.

World Peace To maintain peace throughout the world, the grounds for conflict should be reduced as much as possi ble. The first step in this direction must be to respect and protect pri vate property throughout the world. The ideal would also include com plete freedom of trade and freedom of movement. Political boundaries would no longer be determined under threat of military conquest or aggressive economic nationalism, but rather by legal plebiscite, Le., by vote of the individuals concerned. WAR is never a handy remedy, which can be taken up and applied by routine rule. No war which can be avoided is just to the people who have to carry it on, to say nothing of the enemy..... In the forum of reason and deliberation war never can be anything but a makeshift, to be regretted; it is the task of the statesman to find rational means to the same end. WILLIAM GRAHAM SUMNER, an essay on "War" from The Conquest of the United States by Spain and other Essays 550 THE FREEMAN In such a world, the national sovereignty under which one lived or worked would be relatively im material.

Daily news reports certainly indi cate that we are a long, long way from approaching this ideal. Pro grams intended to promote world peace often lead in the opposite di rection. The various intergovern mental institutions-the United Nations and the several regional political and economic communi ties-do little or nothing to reject economic nationalism. The debates and proposals of their representa tives reveal little understanding of the mutual advantages private traders gain from voluntary trans actions. They do not even appear to consider the possibility of leaving trade to private individuals and en terprises to arrange as they see fit. Rather they continue to delegate important powers to various governmental authorities to regu late and control quantities and qual ities of imports and/or exports, sometimes even to set minimum· or maximum prices at which certain commodities may be traded. In their desire to protect various fields of production within their newly erected borders, they foster economic nationalism over geo graphical areas larger than a single nation. Thus, although the spokes men for these multinational organi zations sometimes talk of cCfreer trade," their actions lead to less free trade.

The foreign policy that would minimize future conflicts would promote an economic climate in which voluntary trades among pri vate individuals would flourish be cause private property was pro tected worldwide. To create such a climate calls for widespread economic understanding. To main tain it would require eternal vigilance. @ -BibliographyBastiat, Frederic. Economic Sophisms. Trans lated from the French (1851) and edited by Arthur Goddard. Irvington-on-Hudson, New York 10533: Foundation for Economic Edu cation, Inc., 1964. Bauer, P. T. Dissent on Development: Studies and Debates in Development Economics. Cambridge, Massachusetts: Harvard Uni versity Press, 1972. Curtiss, W. M. The Tariff Idea. Irvington-on Hudson, New York: Foundation for Economic Education, Inc., 1953. Fleming, Harold M. States, Contracts and Progress: Dynamics of International Wealth. Dobbs Ferry, New York 10522: Oceana Pub lications, Inc., 1960.

Krauss, Melvyn B. The New Protectionism: The Welfare State and International Trade. New York, N.Y. 10003: New York Univer sity Press, 1978. Mises, Ludwig von. The Free and Prosperous Commonwealth: An Exposition of the Ideas of Classical Liberalism. Translated from the German (1927) by Ralph Raico. Edited by Arthur Goddard. Princeton, New Jersey: D. Van Nostrand Co., Inc., 1962. Reprinted 1978 as Liberalism: A Socio-economic Expos ition. Kansas City, Missouri: Sheed Andrews & McMeel, Inc.