International Trade

Just a short thought on this issue. Ian Fletcher says (accessed from huffingtonpost):

“So forget helping starving children in Africa this way [through trade]. They’re not even in the game of international trade–let alone winners of it.

Like it or not, this is perfectly logical, as increased access to the ruthlessly competitive global marketplace (which is all free trade provides) benefits only nations whose industries have something to sell which foreign trade barriers are currently keeping out. Their industries must both be strong enough to be globally competitive and have pent-up potential due to trade barriers abroad, a fairly rare combination.” [bold emphasis is mine]

This is a very common fallacy with criticisms of international trade: that the only side that benefits from try is the side that sells something. Agents engage in trade if and only if there is a something to be gained, i.e. goods and services that can either not be produced by oneself, or can be produced better (cheaper) by someone else. You and I benefit from trade when we purchase shirts that happen to be manufactured in China because we have looked at the other options available to us and decided that that shirt is best (based on whatever criteria we choose).

Another common fallacy is that nations participate in trade. Trade doesn’t happen between the U.S. and China at the national level. Trade happens when buyers and sellers agree on terms of an exchange. Trade happens when I (or you) decide to purchase a shirt at Walmart (based on whatever criteria we use). We call it international trade when it just so happens that I am in America, and the shirt was made in China.


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