Common Sense on ‘Free Trade’

A container ship (R) docked at India's Adani Port Special Economic Zone (APSEZ) in Mundra on December 21, 2016. Arthur Wiegenfeld recommends the United States increase trade with India. SAM PANTHAKY/AFP/Getty Images

I must confess that I am a heretic on “free trade.”

I have an undergraduate degree in economics and an MBA in finance. I grew up in a small-business family and have had a business career. Nevertheless, I firmly believe that what I learned about free trade is largely wrong and that what is called “free trade” is more like a “free raid.”

Faulty Assumptions about ‘Free Trade’

1. Consumers and the economy inevitably gain from the lower prices that result from the specialization that international trade allows.
2. Businesses and citizens can rapidly adjust to the resulting dislocations that it creates.
3. We will start a catastrophic trade war by protesting unfair trade practices.
4. Trade will encourage totalitarian countries to behave better.
5. Most products are “commodities.” That is, they are indistinguishable from each other, so they can be produced anywhere.
6. We are taking care of national security issues.
7. We need to hire foreigners extensively because Americans won’t do many jobs.

Argument No. 1 provides the standard justification for trade. This is based on the theory of “comparative advantage,” which states that two countries will benefit from the specialization that trade allows.