Trade Sequence Part 1 – Introductions and Definitions
So, I thought it might be interesting to do a post on trade theory, to give an economist’s perspective on international trade. Yesterday I realised I’d hit 4 pages and I wasn’t even finished yet. Since that would be too long even by my standards, I though I’d do something a bit different (for me anyway) – a sequence! I’ll probably post one of these per week or so until I run out of steam, but I have the first 4 parts written already so this won’t die too quickly.
Here’s my table of contents so far, this will be updated as new parts are planned or released:
- Introductions and Definitions (you are here)
- They took our Jobs!
- The tribulations of the Working Class
- The Race to the Bottom
- Getting Strategic
If you have additional topics on the subject you’d like me to address, I’m open to requests. While I’ll happily answer questions, I may put off answering some as I maybe addressing them in later posts in the sequence.
Trade has been a preoccupation of economists, since the beginning of economics. Since before the beginning really since trade was a common topic of discussion among the mercantilists, who are not considered part of economics these days.
It is also an issue that energises popular debate, especially in bad economic times. Free trade is a bugbear of the left and right in most countries, an example of either the radical neoliberal agenda of economists, or of the sort of treacherous cosmopolitanism that sacrifices the job security and well being of your fellow countrymen for the sake of foreigners.
I think of trade as a classic point of distinction between economists and everyone else. It is the area where the expert consensus is strongest, crossing through ideological lines. It is also perhaps the area where disagreement between experts and regular people is the strongest. Suggest unilaterally eliminating all tariffs and export subsidies to a group of economists and they’ll see it as good sense. Try the same thing with everyone else and they’ll think you’re insane.
Given the severity of the differences between economists and non-economists on this issue, and the fact that it was one of my specialities at university, I thought that as the League’s resident Dismal Scientist it would be worth doing my best to explain how trade looks to an economist’s eyes and why it is that we see free trade as a fundamentally good policy to pursue, even if other countries don’t reciprocate.
To discuss trade properly I need to define my terms. When I say free trade here I am speaking of an absence of legal barriers to trading with foreigners that don’t exist when trading with other people in your country. Free trade means no import tariffs (or export tariffs either, though that’s much rarer), or export subsidies or any of the “non-tariff barriers” (to use the professional lingo) like quotas or gratuitous “health and safety” requirements that somehow domestic producers don’t have to comply with. Free trade is not about how tightly the market for a good is regulated, so long as that regulation applies equally to importers and domestic producers.
So, with that beginning look out for part 1 on why liberalising trade won’t hurt the economy, and will actually help it.