Free Trade vs. Protectionism

According to Prof. Don Boudreaux, free trade is nothing more than a system of trade that treats foreign goods and services no differently than domestic goods and services. Protectionism, on the other hand, is a system of trade that discriminates against foreign goods and services in an attempt to favor domestic goods and services. In theory, free trade outperforms protectionism by bringing lower cost goods and services to consumers. In practice, the benefits of free trade can be seen in countries like America and Hong Kong. Both countries have a relatively high degree of free trade, and, as a consequence, have experienced an explosion of wealth.

11 Comments

  1. Ben Richards

    Protectionism fails and hurts foreign and domestic trading. We are suppose to be a free-trade nation.

  2. Anonymous

    Free trade has limitations, unfortunately not dependent necessarily on who wants to trade or doesn’t. It’s limits are bounded within the different needs of natural resources, fabricated products, etc. scatter around the globe.

    Anything out of this limits, have negative reactions in a country’s economy.
    TLC, NAFTA  have been a nightmare for millions of people who have lost their employment. Small economies will not and cannot compete against giants like USA. How can someone believe that free trade is good for everyone just because USA, according to this video, has a high standard of living and has growth enormously economically over these last two centuries?
    Just an an example: Lending money to poor countries, imposing laws that destabilize the agreement and imposing their own will over how to take over the resources of these nations in debt to them that they made sure cannot be repaid. 
    This is how they built America, with interest money from their illicit and corrupt interventions in foreign countries.. How?  World Bank and IMF to begin…..
  3. Tim Eagle

    That’s cool I never thought of the states as a huge free trade zone. Oh to have the world a free trade zone . The mind boggles  at the economic opportunities.

  4. Erin Shumaker

    What a fantastic, succinct explanation of these two theories/practices. His argument makes a lot of sense. The one thing I’d like to point out (in addition to his points) concerns domestic-produced goods. There has been a major push recently to purchase American-made products (see the "Made in America" campaign by ABC’s World News Tonight), and much of that push has been manufactured by imposing tariffs. Prices for American-made goods has increased, and thus demand has gone down. (Which only makes these voices shriller, but I digress.) Tariffs, as Prof. Boudreaux indirectly pointed out, raise the price of production, which may increase the supply, but lower the demand because of the higher price. Thus, the price of these goods will be higher. Removing tariffs from foreign goods allows for a competitive market, thus ensuring that prices for American-made products will likely remain lower. Funny how market forces work, isn’t it?

  5. Hunter Markson

    It’s funny how we have known that free trade is beneficial since David Ricardo but protectionist policies are still in place

  6. Ed Barton

    The argument of the US being a giant free trade zone really hits home.  That is a great fact pattern for global free trade.

  7. Matt Wavle

    Whenever there is free exchange both parties become wealthier.  Restrictions on free trade then are only poverty creating.  Why are our public policies so often filled with these, shoot-ourselves-in-the-foot type of thinking?

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