Free trade used to be understood as a net benefit for everyone involved. That’s increasingly not so.
Marian Tupy writes:
President Trump raised some valid concerns about America’s trade relations with the rest of the world in a speech at the Asia-Pacific Economic Cooperation Summit in Vietnam on Friday. For example, it’s true that U.S. firms are subjected to intellectual property rights violations and industrial espionage by foreign state-affiliated actors.
Unfortunately, Trump’s speech was both economically illiterate and factually incorrect. It’s likely to undermine what remains of the pro-free trade consensus and embolden those on both sides of the U.S. political spectrum who advocate in favor of prosperity-destroying protectionism.
The case for free trade has been clear for 200 years, since David Ricardo described what has come to be known as the “theory of comparative advantage.” Ricardo’s 1817 theory, which I have discussed in greater detail elsewhere, states that a country should produce and export only those goods and services which it can produce more efficiently than other goods and services, which it should import. To be fair to Trump, he did, on a number of previous occasions, note that he loves free trade. Regrettably, love does not equal understanding.
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