Milton Friedman, Given that we should move to free trade, how should we do so?

The method that we have tried to adopt is reciprocal negotiation of tariff reductions with other countries. This seems to me a wrong procedure. In the first place, it ensures a slow pace. He moves fastest who moves alone. In the second place, it fosters an erroneous view of the basic problem. It makes it appear as if tariffs help the country imposing them but hurt other countries, as if when we reduce a tariff we give up something good and should get something in return in the form of a reduction in the tariffs imposed by other countries. In truth, the situation is quite different. Our tariffs hurt us as well as other countries. We would be benefited by dispensing with our tariffs even if other countries did not. We would of course be benefited even more if they reduced theirs but our benefiting does not require that they reduce theirs. Self interests coincide and do not conflict.

I believe that it would be far better for us to move to free trade unilaterally, as Britain did in the nineteenth century when it repealed the corn laws. We, as they did, would experience an enormous accession of political and economic power. We are a great nation and it ill behooves us to require reciprocal benefits from Luxembourg before we reduce a tariff on Luxembourg products, or to throw thousands of Chinese refugees suddenly out of work by imposing import quotas on textiles from Hong Kong. Let us live up to our destiny and set the pace not be reluctant followers.

I have spoken in terms of tariffs for simplicity but, as already noted, non-tariff restrictions may now be more serious impediments to trade than tariffs. We should remove both. A prompt yet gradual program would be to legislate that all import quotas or other quantitative restrictions, whether imposed by us or “voluntarily” accepted by other countries, be raised 20 per cent a year until they are so high that they become irrelevant and can be abandoned, and that all tariffs be reduced by one-tenth of the present level in each of the next ten years.

There are few measures we could take that would do more to promote the cause of freedom at home and abroad. Instead of making grants to foreign governments in the name of economic aid—and thereby promoting socialism—while at the same time imposing restrictions on the products they succeed in producing—and thereby hindering free enterprise—we could assume a consistent and principled stance. We could say to the rest of the world: We believe in freedom and intend to practice it. No one can force you to be free. That is your business. But we can offer you full cooperation on equal terms to all. Our market is open to you. Sell here what you can and wish to. Use the proceeds to buy what you wish. In this way co-operation among individuals can be world wide yet free.


Facebook Comments