...AND THE FREE MOVEMENT OF PEOPLES:

The US economy's well-being is never far from most Americans' minds. That is one reason why advancing the free trade case to Americans today should be heavily focused on how trade liberalization contributes substantially to bolstering America's economy: i.e., reducing import barriers, diminishing export subsidies, and limiting opportunities for the government to use economic carrots and sticks to direct trade between America and other nations. The result is greater wealth and overall economic welfare for Americans in the long term.

The evidence for this is frankly overwhelming. We know, for example, that trade liberalization accelerates GDP growth. Back in 2008, a World Bank analysis of trade's impact upon growth estimated that, between 1950 and 1998, "countries which liberalized their trade regimes experienced annual average growth rates that were about 1.5 percentage points higher than before liberalization." A more recent International Monetary Fund 2017 study of the trade-growth relationship illustrated how trade across borders significantly contributes to increases in per capita income. It estimated that "a one percentage-point increase in trade openness raises real per capita income by 2 to 6 percent."

How then does trade liberalization help deliver more growth for America? First, free trade widens the number of potential customers for American businesses while simultaneously facilitating an expanding division of labor across borders. That leads to more specialization which in turn stimulates more efficiency and productivity on the part of American businesses. This reduces prices for American consumers and incentivizes American workers to gravitate to more productive economic sectors where higher wages are invariably to be found. Moreover, under free trade conditions, the value of American workers' real wages also increases insofar as they can buy more goods and services which have, thanks to trade liberalization, become less expensive.

Second, the competition from abroad sparked by ever-expanding trade makes American businesses more resilient and adaptable. Exposure to greater foreign competition means that American companies know that their viability is perpetually open to challenges from existing and potential domestic rivals but also international competitors. This incentivizes them to evaluate over and over again what they are doing and why they are doing it. The bigger the competition, the more American businesses are subject to unrelenting pressures to innovate, reassess their comparative advantage, streamline their organization, shrink costs, find less-expensive inputs, take their products into new markets, reorganize their distribution systems, and thereby lower their prices while maintaining profit margins.

If the United States can steel itself to make trade free again, Americans as individuals and America as a nation will win in the long term.

Such competition can be unsettling for American businesses and workers alike. The alternative, however, is an America cowering behind tariff walls, pretending that people abroad aren't willing to work as hard or harder than Americans, and imagining that foreigners will somehow be magically less innovative than Americans. It also involves deluding ourselves that politicians and technocrats can know how to engineer the optimal makeup of a $26.8 trillion economy both now and into the future via tariffs and industrial policies. Lastly, it means Americans are denying that most expressions of economic nationalism are really about promoting sectional interests and have little to do with 330 million Americans' long-term economic welfare.

Free Trade with Free People

The economic case for free trade is relatively straightforward and hard to refute. At its core is Smith's key insight that people's pursuit of their private interests plus an absence of privilege advances the general welfare.

Nonetheless, the best free trade thinkers have always acknowledged that we live in a world of geopolitical rivalries and in which nations are forever trying to reinforce their security. These realities are further complicated by the fact that the same world contains many not particularly free countries. The governments of some such nations (Iran, North Korea, Russia, etc.) are hostile to America. Yet others (most notably, China) have failed to fulfill some of their WTO commitments.

No realist trade liberalization policy can ignore these facts. This is one reason why the 2023 Freedom Conservatism Statement of Principles (full disclosure: I am an original signer) underscores "free trade with free people" as part of its call for a return to greater economic liberty throughout America.

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