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July/August 2001

PolicyReport Vol. XXIII No. 4

Seven Moral Arguments for Free Trade


b y D a n i e l T. G r i s w o l d

.S. trade policy is almost always debat-

U ed in terms of economic utility: Does


free trade raise or lower incomes?
Does it help or hurt U.S. industry?
Does it create or destroy jobs? But behind
the statistics and anecdotes lie moral assump-
tions about human nature, the sovereign-
ty of the individual, and the role of gov-
ernment in a free society. Free trade may
deliver the goods and boost efficiency,
but is it morally superior to protectionism?
At the Summit of the Americas meeting
in Quebec in April, anti-capitalist pro-
testers answered with a loud no, condemning
free trade as a tool of the rich that exploits Republican governor Gary Johnson of New Mexico (left) talks with Tom Bethell of the American
the poor and undermines democracy. Some Spectator and Cato’s Timothy Lynch at a reception cosponsored by the Cato Institute and the
religious conservatives portray free trade National Organization for the Reform of Marijuana Laws. Johnson’s remarks on drug prohibi-
tion, delivered at an earlier Cato conference, can be found in After Prohibition: An Adult
as a tool of the devil. Reform Party presi-
Approach to Drug Policies in the 21st Century, edited by Lynch.
dential candidate Pat Buchanan, in his 1998
book The Great Betrayal, called the doc-
trine of free trade “a secularist faith . . . Friends of free trade should not shrink In This Issue
born of rebellion against church and crown.” from making moral arguments for their cause;
Gary Bauer, former head of the Family those arguments have deep roots in our cul-
Research Council and another failed aspi- ture. The Greek poet Homer, in his Odyssey,
rant to the White House, compares Amer- waxed poetic about the influence of trade:
ican trade with China with appeasement
of the Soviet Union. For the Cyclops have no ships with
In a speech in May before the Council crimson prows,
of the Americas, President Bush joined the no shipwrights there to build them
moral debate, telling his audience: “Open good trim craft
trade is not just an economic opportuni- that could sail them out to foreign Adam Smith and Mark Skousen, p. 4
ty, it is a moral imperative. Trade creates ports of call Boaz on magical presidents 2
jobs for the unemployed. When we nego- as most men risk the seas to trade Alan Reynolds, Chris Edwards
tiate for open markets, we are providing with other men. join Cato 3
new hope for the world’s poor. And when Such artisans would have made
Kostunica speaks at Cato 4
we promote open trade, we are promoting this island too a decent place to
National testing: a debate 6
political freedom. Societies that open to live in. . . .
commerce across their borders will open Studies on Russia, NATO,
The Judeo-Christian Bible warns against Balkans, Taiwan, Southeast Asia 8
to democracy within their borders, not
always immediately, and not always smooth- the pride that can come with riches, but it Waco: the unfinished investigation 9
ly, but in good time.” does not condemn international trade per Clinton’s regulatory legacy 10
se. In First Kings, it reports matter of Upcoming events 11
Daniel T. Griswold is associate director of factly that trade was part of King Solomon’s Cato Journal looks at China 15
the Cato Institute’s Center for Trade Pol- splendor: “The king had a fleet of trading To be governed . . . 16
icy Studies. Continued on page 12
❝A man or woman engaged in honest work
has a basic right to enjoy the fruits of his or her labor.
Protectionism is a form of stealing.❞
FREE TRADE Continued from page 1 Western moral thought provides a sol- why a small group of politicians should
id foundation for pursuing a policy of eco- decide, on the sole basis of where things
ships at sea along with the ships of Hiram. nomic openness. Drawing on that tradi- are produced, what goods and services an
Once every three years it returned, carry- tion, here are seven moral arguments to individual can buy with his earnings. By
ing gold, silver and ivory, and apes and support free trade among nations. diffusing economic decisionmaking as broad-
baboons.” In the New Testament, in the ly as possible, free trade reduces the pow-
second chapter of Matthew, we read about One: Free Trade Respects Individual er of people in high places—always falli-
the famous wise men of the East, who trav- Dignity and Sovereignty ble and subject to temptation and abuse of
eled from Arabia or perhaps as far away A man or woman engaged in honest power—to inflict damage on society.
as Persia to bring gold, frankincense, and work has a basic right to enjoy the fruits As economists have been pointing out
myrrh to the baby Jesus. (Thank goodness of his or her labor. It is a violation of my for two centuries now, the gains that pro-
they didn’t have to contend with airport right to property for the government to for- tectionism confers on a select group of pro-
customs or the Arab boycott of Israel.) bid me to exchange what I produce for ducers and the government’s coffers are
The Old Testament prophet Ezekiel does something produced by a fellow human almost always outweighed by the losses
warn the citizens of Tyre, the bustling being, whether the person I’m trading with imposed on the mass of consumers. This
Mediterranean port city, “By your great lives across town or across the ocean. dead-weight loss weakens the productive
skill in trading you have increased your Protectionism is a form of stealing, a capacity of a country as a whole compared
wealth, and because of your wealth your violation of the Eighth Commandment and to what it would be if its citizens were
heart has grown proud.” But even when other prohibitions against theft. It takes allowed to engage in free trade.
the Bible speaks harshly of the “merchants from one group of people, usually a broad Producers who seek protection are not
of the earth,” it is not international trade cross section of consumers, and gives the only robbing their fellow citizens of income
itself that comes under condemnation but spoils to a small group of producers whose and freedom of choice; they are sapping the
the intent and character of the traders. The only claim to the money is that they would economic strength of their own society. Pro-
sin is not trade but dishonest scales, greed, be worse off under open competition. tectionists are prone to wrap their agenda
indulgence in luxuries, and the temptation Free trade meets the most elementary in words of patriotism and compassion, but
to pride that can come from wealth. In this test of justice, giving to each person sov- their aim is self-centered and self-serving.
respect, trade is no more sinful than tech- ereign control over that which is his own.
nological discoveries or hard work. As Frederic Bastiat wrote in his 1849 essay, Three: Free Trade Encourages Individuals
A number of theologians and philoso- “Protectionism and Communism”: to Cultivate Moral Virtues
phers in the first several centuries A.D. con- To be successful in a free and open mar-
sidered trade among nations a gift of God. Every citizen who has produced or ketplace, producers must serve their fellow
In his 1996 book, Against the Tide: An acquired a product should have the human beings by providing goods and serv-
Intellectual History of Free Trade, Profes- option of applying it immediately to ices others want and need. And the most
sor Douglas Irwin of Dartmouth College his own use or of transferring it to economically successful will be those who
describes this early view of trade that has whoever on the face of the earth agrees provide not just for a select few but for a
come to be called the Doctrine of Univer- to give him in exchange the object of broad segment of consumers.
sal Economy. That doctrine held that God his desires. To deprive him of this In the 1991 papal encyclical Centesimus
had spread resources and goods unevenly option when he has committed no Annus, Pope John Paul II observed that a mar-
throughout the world to promote com- act contrary to public order and good ket system encourages the important virtues of
merce between different nations and regions. morals, and solely to satisfy the con- “diligence, industriousness, prudence in under-
In the fourth century A.D., the pagan venience of another citizen, is to legit- taking reasonable risks, reliability and fidelity
writer Libanius expanded the doctrine more imize an act of plunder and to vio- in interpersonal relationships, as well as courage
fully, declaring: late the law of justice. in carrying out decisions which are difficult and
painful but necessary.” On addition to such
God did not bestow all products upon Two: Free Trade Restrains character traits, trade encourages good man-
all parts of the earth, but distributed the Power of the State ners and the decent treatment of others.
His gifts over different regions, to the Free trade is morally superior to pro- In the long run, trade rewards those par-
end that men might cultivate a social tectionism because it places trust in what ticipants who act in a trustworthy manner.
relationship because one would have Adam Smith called “the natural system of A supplier who misses deadlines for ship-
need of the help of another. And so liberty” rather than in a man-centered sys- ment or a buyer whose credit is no good
He called commerce into being, that tem of centralized industrial policy. And by will soon lose business to competitors with
all men might be able to have com- doing so it allows citizens to fulfill their better reputations. In other words, there is
mon enjoyment of the fruits of earth, creative and productive potential. no inherent conflict between good business
no matter where produced. There is no compelling moral reason and good morals, and in a free and open

12 • Cato Policy Report July/August 2001


❝In the last 25 years, as the world has turned away from
centralized economic controls and toward a more open global market,
political and civil freedoms have also spread.❞
market under the rule of law the two com- distributed legally on the mainland. Free a political alternative to military or
plement each other. trade has brought new ideas and new rela- party leaders. In short, capitalist firms
tionships to China and other previously wedge a democratic camel’s nose
Four: Free Trade Brings People Together closed societies. under the authoritarian tent.
Trade opens the door for relationships
that transcend economic exchange. When Five: Free Trade Encourages Religiously motivated conservatives who
nations trade with one another, more than Other Basic Human Rights want to repeal normal trade relations with
material goods crosses borders. People and This is probably the most contentious China would undermine progress on human
ideas inevitably follow through the same open of the seven reasons, and it goes to the heart rights by removing one of the most posi-
doors. Fax machines, cellular telephones, and of the current debate about trade with Chi- tive influences in Chinese society. Grant-
the Internet are rapidly spreading as tools of na and the use of sanctions in the name ed, the Chinese government today remains
international business, but they are also tools of human rights and democracy. By rais- an oppressive dictatorship, a bad regime
of friendship and evangelism. ing the general standard of living, free trade that jails its political opponents and inter-
At a Cato Policy Forum in 1999, Ned helps people to achieve higher levels of edu- feres in the private lives of citizens. But for
Graham, son of Billy Graham and president cation and to gain access to alternative all its unforgivable faults, the Chinese gov-
of East Gates International, spoke about the sources of information. It helps to create a ernment today is not nearly as bad as the
impact of expanding trade on his organiza- more independent minded middle class that Continued on page 14
tion’s missionary work in China: can form the backbone of more represen-
tative kinds of government. The wealth cre-
Ten years ago, there was almost no ated from expanded trade can help to nur- Make your
information-exchange technology ture and sustain civil institutions that can
available to the average Chinese cit- offer ideas and influence outside of gov- nomination now for
izen. If we wanted to contact a friend ernment. The emergence of civil liberties THE MILTON FRIEDMAN
in China, we usually had to do so by and more representative government in
mail unless that individual had a pri- countries such as Taiwan, South Korea, and PRIZE FOR THE
vate phone, which was extremely rare Mexico can be credited in large part to eco- ADVANCEMENT
in the inland provinces. . . . Today, nomic development spurred by free trade
despite difficulties, much of that has and market reforms. OF LIBERTY
changed. We routinely communicate As a general rule, nations that are more
with thousands of friends all over open economically tend to enjoy other lib-
China via fax, cell phones, and email. erties as well. In the last 25 years, as the
The proliferation of information tech- world has turned away from centralized
nology has allowed us to be much economic controls and toward a more open
more effective in developing and organ- global market, political and civil freedoms
izing our work in the PRC. have also spread. In 1975 the nonprofit
group Freedom House classified only 42
Today more than 100 Western missionary countries as politically free, meaning that
groups are either working or attempting to
work openly in China to spread the faith.
Since 1992 Ned Graham’s organization has
citizens enjoy full civil and political free-
doms. Today the number has more than
doubled to 85. The percentage of the world’s
T he Milton Friedman Prize for the
Advancement of Liberty, named in
honor of the most distinguished and
legally distributed more than 2.5 million people enjoying full civil and political free- effective advocate of liberty in the
Bibles to nonregistered believers in China. dom has also more than doubled during latter part of the 20th century, will
This ministry would have been impossible that time, from 18 percent to 40 percent. be presented every other year to the
without China’s economic opening to the In his book, Business as a Calling, Michael individual who has done the most to
world that began 20 years ago and Amer- Novak explains the linkage with what he advance human freedom. The first prize
ica’s ongoing policy response of engage- calls “the wedge theory”: will be presented on May 9, 2002, at the
ment. More than 20 million Chinese are Cato Institute’s 25th Anniversary Gala.
now on the Internet, and that number has Capitalist practices, runs the theo- Nominations may be submitted to
been growing exponentially. The number ry, bring contact with the ideas and FriedmanPrize@cato.org or sent to
of telephone lines and cell phones in Chi- practices of the free societies, gener- Friedman Prize, Cato Institute, 1000
na has grown more than tenfold in the last ate the economic growth that gives Massachusetts Avenue, N.W., Washing-
decade. The works of Friedrich Hayek, political confidence to a rising mid- ton, D.C. 20001, and will be reviewed by
probably this century’s most influential dle class, and raise up successful busi- a distinguished international committee.
defender of a free society, are now being ness leaders who come to represent

July/August 2001 Cato Policy Report • 13


❝Free trade limits the power of the state and enhances the freedom,
autonomy, and self-responsibility of the individual.❞

FREE TRADE Continued from page 13 During the 1930s the industrialized and navigable rivers tend to be wealthier
nations waged trade wars against each oth- than those in more remote, inland locations.
government was during the totalitarian er. They raised tariffs and imposed quo- The most recent Economic Freedom of
rule of Mao Tse-tung, when millions were tas in order to protect domestic industry. the World study, by James Gwartney and
killed and the entire social order was con- The result, however, was that other nations Robert Lawson, found that the nations that
vulsed by the Great Leap Forward and the raised their barriers even further, choking were most open economically from 1980
Cultural Revolution. The people of China off global trade and deepening and pro- through 1998 grew nearly five times faster
do not yet enjoy the range of political and longing the global economic depression. than those that were most closed. And that
civil rights we do in the West, but they are Those dark economic times contributed to trade-related growth lifts the lot of the poor.
freer and materially better off than they the conflict that became World War II. To cite the most dramatic example of this,
were three decades ago. For that they can America’s postwar policy of encouraging the World Bank estimates that the number
thank economic and trade liberalization. free trade through multilateral trade agree- of Chinese citizens living in absolute pover-
ments was aimed at promoting peace as ty—that is, on less than $1 per day—has
Six: Free Trade Fosters Peace much as prosperity. fallen since 1978 by 200 million. Revoking
In an 1845 speech in the British House China’s normal trade status, among all its
of Commons, Richard Cobden called Seven: Free Trade Feeds and Clothes the Poor other negative consequences, would set back
free trade “that advance which is calcu- Free trade and free markets empower one of the most successful anti-poverty pro-
lated to knit nations more together in the poor people by giving them greater oppor- grams in the history of mankind. In con-
bonds of peace by means of commercial tunity to create wealth and support their trast, those regions of the world where pover-
intercourse.” Free trade does not guaran- families. By dispersing economic power ty has been the most intractable, sub-Saha-
tee peace, but it does strengthen peace by more widely, free trade and free markets ran Africa and South Asia, have been the
raising the cost of war to governments and undercut the ability of elites in less-devel- least open to trade and foreign investment.
citizens. As nations become more integrated oped countries to pillage a nation’s resources For all those reasons, trade sanctions
through expanding markets, they have more at the expense of its poor. Proof can be fall heaviest on the poor of the target nation.
to lose should trade be disrupted. found in the immigration patterns of poor Political rulers have the power to protect
In recent years, the twin trends of glob- people throughout the world. By the mil- their pampered lifestyles, while the poor
alization and democratization have pro- lions, they seek to leave closed and cen- are left to suffer the consequences of U.S.
duced their own “peace dividend”: since trally controlled economies for those that policies that were enacted in the name of
1987 real spending on armaments through- are more open and less controlled. Poor helping the very people they victimize. You
out the world has dropped by more than people themselves understand that a free can be sure that the communist leaders in
one-third. Since the end of the Cold War, economy serves their interests, even if many Cuba and the ruling junta in Burma will
the threat of major international wars has of their self-appointed intellectual advo- continue to enjoy their fine, catered meals
receded. In fact, today, virtually every armed cates in the West do not. and chauffeur-driven cars while the mil-
conflict in the world is not between nations Nations open to trade tend to be more lions of poor people they oppress are made
but within nations. prosperous, just as cities along coastlines even more miserable by U.S. trade and
investment sanctions.
When all of the arguments are weighed,

Thank you for your support it should become clear that a policy of free
trade is moral as well as efficient. Free trade
limits the power of the state and enhances

T he Cato Institute depends on the support there are many ways to include Cato in your the freedom, autonomy, and self-responsi-
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Many employers will match your gift dollar for chair, endowment, or other special gift. It undermines the authority of dictators by
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also extended to retirees. Please check to see if copy of the Institute’s Planned Giving trol. It promotes peace among nations. It
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appreciated stock rather than cash. And 4620 or cklein@cato.org. children. For which of these virtues should
we reject free trade? ■

14 • Cato Policy Report July/August 2001