Austrian Economics

The Obvious Contradictions of Politicians on Trade

By: Per Bylund
global trading

The trade policies of both the USA and the EU seem to be based on the contradictory philosophy that unrestricted trade is beneficial within its borders, even if across internal borders, but not with parties outside those borders.

But this makes no sense. From the point of view of trade, the voluntary exchange of goods, why are the borders between USA and Mexico, and Greece and Turkey, different from the borders between Missouri and Kansas, and France and Germany?

The difference is political and arbitrary.

If protectionism works, which is the policy applied on the USA’s and the EU’s ‘external’ borders, then it should work for other borders at well. But instead the ‘internal’ policy is free trade, and it’s considered as obvious for the latter as restricted trade for the former.

Protectionists may produce an argument that ‘within USA’ is different, since it is within a country. While likely based on a romantic fiction of the (federal) nation, there is significant coordination of policy that facilitate trade between states. That’s exactly the core of the European Union as a trade union between countries with different languages, cultures, and political traditions. Countries within the EU are at least as similar and dissimilar as the USA and Canada. Or as the USA and the EU. The differences that can be identified are differences that are caused by policy, which makes them highly suspect as possible rationales or reasons for (specific and different) policy. The question remains, why is protectionism good for some borders, and free trade for others?

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It really comes down only to this: politics is able to produce emotionally compelling reasons, based on simplistic identity claims and ‘us vs. them’, for completely contradictory policies for different instances of the same phenomenon (political borders).

No politician in his right mind would claim that Washington, DC, should adopt a protectionist trade policy with respect to the 50 states. He would be laughed at. But saying the same about, say, the US and Canada is considered very different. And this is the case also for the EU, where it would be political suicide (although not as much [because EU is younger and not yet as politically integrated?]) to state there should be protectionism between Germany and France or between Sweden and Denmark. But it’s the ‘obvious’ and correct policy for the waters between Greece (EU) and Turkey (not EU).

But think about it: if a trade policy is beneficial across some (political) borders, shouldn’t it be beneficial across all such borders? The answer is rather obviously ‘yes’.

Except in politics, where ‘yes’ and ‘no’ are irrelevant–what matters is that a story can be told that, for the time being, may gather support from the electorate. Often by pointing to a threat–always by some ‘them’. Canadians are not us; Turks are not us. But Midwesterners and Manhattanites are the same, just like Germans and French are the same?

Originally posted on Twitter @PerBylund


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