The Plea for Exceptions

A familiar argument is: "We are willing to give up our protection if all others will give up theirs." As a political argument, this is fairly effective since it is prac tically impossible to face the combined forces of all minority groups. Economically, of course, the argument has no validity. The way to begin is to begin. The amount of human energy released by the removal of restrictions will be astounding. The Plea for Exceptions Perhaps the greatest obstacle to the removal of trade barriers is. the belief expressed by small groups of pro ducers: "Yes, but our case is different; an exception should be granted in just this one instance." Grant a single exception, and the floodgates are opened to all sorts of pressure groups. The result will be a continua tion of the political chaos which we now find in the area of trade restrictions. The long-run benefits of free trade so far outweigh the short-run inconveniences to the protected groups that it is inconceivable that sufficient understanding to bring about free trade will not someday be achieved.

73 Summary and Conclusions Basically, the issue of tariffs and other trade restric tions is a moral one. This is not to deny that it is also an economic issue. It is merely a matter of emphasis. Unless economic principles are in harmony with good moral principles, they are not good economics. Government grows strong and dictatorial by the grant ing of special favors. Trade restrictions are just another of the handouts which a government can grant, thereby increasing its power over individuals-to the detriment of all. The point of view set forth in this discussion argues neither for nationalism (isolationism) nor· for interna tionalism. Both of these terms imply a kind of design by government. And both, when implemented by gov ernmental design - force - have very serious conse quences. Instead of aiming for either of these objectives, we would argue merely to allow individuals to trade freely with one another, when and where they wish with a minimum of governmental interference.

The moral basis for free trade rests on the assumption that an individual has the right to the product of his own labor-stealing is bad because ownership is good. This involves property rights. Property rights are human rights, and to try to distinguish between them is merely to play with words-and on emotions.* *For a more complete discussion of this subject, see: Paul L. Poirot, Property Rights and Human Rights (lrvington-on-Hudson, N. Y.: Foundation for Economic Education. Inc., 1952). 74 The right to own property involves the right to use it, to keep itt to give it awayt or to exchange it. Unless this is possible, one does not own property. To lay obstacles in the path of ownershipt uset or exchange of property is a violation of the human right to own property. Economists from Adam Smith down to the present have quite generally agreed that tariffs are bad econom ics. And it is not difficult to discover why: 1. Tariffs and other trade restrictions contribute to scarcity rather than to abundance. We are sometimes fooled by the introduction of money· into trade; but basicallyt it is the abundance of goods and servicest widely distributed, that contributes to a high level of material well-being. A person who offers money in a trade is generally thought to be a buyer or consumer.

But how does one acquire the money in the first place except by producing something for sale? Each one has something to offer in exchange for what he wants. Why is one party the seller any more than the other? 2. A voluntary exchange of goods or services between two individuals results in a benefit.to each party. To say that only the seller benefits is a fallacy. Why is it so commonly believed that you confer a favor upon a per son by buying what he offers you? When you offer your money to a grocery clerk for a purchase, he usually says, "Thankyou!" Why isn't it just as appropriatefor the customer to say, "Thank you!" for the services rendered by the store? 3. There is ample evidence that a high level of living in any country cannot be achieved without a high degree 75 of division of labor-specialization. Instead of a per son's being a "jack of all trades," he is the master of one. This calls for a high degree of co-operative effort and exchange. Production by this process rests on the prin ciple of comparative advantage-of production where conditions are most favorable. Ludwig von Mises, in his book, Human Action, says: "All that a tariff can achieve is to divert production from those locations in which the output per unit of input is higher to locations in which it is lower. It does not increase production; it curtails it. ...

"Government does not have the power to encourage one branch of production except by curtailing other branches. It withdraws the factors of production from those branches in which the unhampered market would employ them and directs them into other branches.... It may subsidize openly or disguise the subsidy in enacting tariffs and thus forcing its subjects to defray the costs. . . . "While government has no power to make people more prosperous by interference with business, it cer tainly does have the power to make them less satis fied by restriction of production." * 4. A fallacy of protectionists is that employment, of itself, is a worthy economic objective. Employment, however, is merely a means to an end-and the end is production for consumption. No doubt, employment was high during the building of the Great Wall of China or *Ludwig von Mises, Human Action (New Haven: Yale University Press, 1949), p. 737.

76 the Pyramids of Egypt. A dictator can always achieve full employment. Hitler did it in Germany, and we had our leaf-raking projects. But under freedom-freedom to produce and to trade voluntarily-men will have just as much employment as they desire. Actually, tariffs have nothing to do with employment. Employment can be high or low-with or without such trade restrictions. Tariffs do not create better jobs for individuals. They simply tend to keep people working at jobs which are less productive of use ful goods and services than they would be under free trade. 5. Protectionists have claimed that wage levels can be maintained or increased by shutting out imports from areas with low real wages. Wage levels are determined by the productivity of labor. This, in turn, is determined by the investment of .capital in the tools of production. Advantage to Both Countries The exportation of American products to China-a nation of low real wages-and our importation of Chi nese products raise real wages in both countries. The products we import are more valuable to us than our exports; otherwise the trade would not be made. Rather than produce the importedproduct here, our own labor is released to produce something we are better fitted to produce.