Free trade, also called laissez-faire, is a policy by which a government does not discriminate against imports or interfere with exports by applying tariffs (to imports) or subsidies (to exports).
A free-trade policy does not necessarily imply, however, that a country abandons all control and taxation of imports and exports.
The case for free trade
According to Adam Smith:
- "It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.. . . If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage."
Trade is profitable even if a country — say, China — can make everything, or almost everything, cheaper. Will free trade with China then lead to unemployment for American workers, who will find themselves unable to compete with cheaper Chinese labor? The answer - comparative advantage - which was provided by David Ricardo in 1810, is no.
Some lawyers are better typists than their secretaries. Should such a lawyer fire his secretary and do his own typing? Not likely. Though the lawyer may be better than the secretary at both arguing cases and typing, he will fare better by concentrating his energies on the practice of law and leaving the typing to a secretary. Such specialization not only makes the economy more efficient but also gives both lawyer and secretary productive work to do.
- ↑ Encyclopædia Britannica Online. "free trade", referenced 2011-01-11.
- ↑ Alan Blinder. "Free Trade", The Concise Encyclopedia of Economics, referenced 2011-01-11.
- Free trade at Wikipedia
- Free Trade by Alan S. Blinder at The Concise Encyclopedia of Economics
- International Trade by Arnold Kling at The Concise Encyclopedia of Economics
- International Trade Agreements by Douglas A. Irwin at The Concise Encyclopedia of Economics
- What Is Free Trade? by William Graham Sumner, 1918
- Free Trade by Ludwig von Mises (Chapter 7 from Liberalism (book))
- Physiocracy and Free Trade in 18th-Century France by Murray N. Rothbard (excerpted from An Austrian Perspective on the History of Economic Thought, vol. 1, Economic Thought Before Adam Smith)
- Protection or Free Trade: An Examination of the Tariff Question, with Especial Regard to the Interests of Labor by Henry George, 1886
- How Long Does a Free-Trade Agreement Need to Be? by Tim Swanson, July 2008
- Can Free Trade Really Prevent War? by Richard M. Ebeling, March 2002
- Capital Exports and Free Trade by Jörg Guido Hülsmann, January 2004
- Who Benefits from Free Trade, and How by Robert P. Murphy, January 2004
- Is Free Trade Really Wrecking the Union? by Robert P. Murphy, February 2006
- Is There a Libertarian Case Against Free Trade? by Robert P. Murphy, March 2006
- John Cassidy Fails in His Critique of Markets by Robert P. Murphy, December 2009
- Taxation and Domestic Free Trade (pdf) by Richard C. B. Johnsson, June 2004
- Want Peace? Promote Free Trade by Julian Adorney, October 2013