The Ambiguity of Purpose Leads to Abuse

The case for free trade is not absolute.  There are many reasons, theoretical and practical, where an exception to the general rule of free trade may be desirable.  Reasons of national defense, of terms of trade, of national welfare, can all be justifiably given for tariffs.  As I and others have discussed elsewhere, these exceptions have high hurdles to clear and rely on some rather strong assumptions, but they remain, at least in theory, justifiable.

But it is important to note with these different justifications is they are all mutually exclusive.  The national defense justification is a tariff high enough to prevent competition into the domestic industry.  The terms of trade argument, on the other hand, is a sufficiently low tariff designed to generate welfare gains and force other countries to lower their prices.  In other words, one tariff is designed to decrease imports and the other to increase imports.  These are, obviously, at cross purposes.

Even if these justifications are intellectually impeccable, they remain tactically useless for a simple reason: when scarcityism admits multiple justifications, any number of rent-seeking firms can exploit these various justifications for personal gains.  In other words, multiple conflicting justifications can be given by various firms, and all hope of improving national welfare goes out the window; the more exceptions carved out, the more rent-seeking individuals and firms will seek to exploit them.  As rent-seeking increases, more and more resources are devoted away from satisfying consumer wants and toward rent-seeking.

The presumption of liberty, that is a tendency to allow free trade vs controlled trade, remains strong even if it is, in theory, the option that has lower welfare because of the potential of rent-seekers to exploit ambiguity in a national policy to promote welfare.

2 thoughts on “The Ambiguity of Purpose Leads to Abuse

  1. Jon, I can’t think of a moral or ethical argument against free trade, absent the violation of someone’s rights. For example, free trade in human beings or in stolen property raises obvious moral objections.

    … , these exceptions have high hurdles to clear and rely on some rather strong assumptions, but they remain, at least in theory, justifiable.

    Yes, I’ll say. The exceptions you listed must assume that someone who says “we are the government”, and acting on behalf of that government, possesses reasoning and logic superior to that of the individuals supposedly represented, and that some perceived collective good outweighs the presumption of liberty for individuals. A pretty much insurmountable obstacle, in my view.

    Like

Comments are closed.