Free Trade as Insurance

Nature has blessed humans around the world with different endowments.  Some live near water, and thus have lots of fish.  Some are good with numbers and figures.  Some live near forests and timbers.  Et cetera et cetera. Trade helps evenly distribute those gifts that Providence has bestowed upon us.  The person with lots of fish can trade it for timber.  The person with lots of clothes can trade it for jewelry.  The goods are distributed across the people, not according to the “luck of the draw” of their endowments, but by their desire to better themselves.

The same is true of nations (after all, nations don’t trade.  People do).

But trade also acts as an insurance policy.  If the US (the world’s largest supplier of many foodstuffs) were suddenly hit by a drought, and half the crop died, there wouldn’t be mass starvation in the country.  The US could import what was needed from elsewhere.  The price would be higher, to be sure, since there is no a smaller supply (globally) that needs to be distributed, but there would still be the supply.  If, however, the US were “independent,” as the protectionists wish, then such a agricultural disaster would be magnitudes worse.

Having supply lines across the world doesn’t, as the protectionists like to claim, make the US more vulnerable.  It makes us less vulnerable!

One thought on “Free Trade as Insurance

  1. “[N]ations don’t trade. People do.”

    This is perhaps the most common mistake people make when talking about international trade. International trade is not an “us vs. them” game.

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