The benefits of free trade

I am about to do a presentation on the benefits of international trade, which are similar to the benefits of domestic trade. Of course, you have to appreciate the structure and genius of an entrepreneurially-driven market economy first, which all of this is predicated on.

. an economy is an exchange economy – people sell to one another

. sellers, however, have to work out what buyers will want to buy

. not only do they have to work out what buyers will buy, they have to find a way to make sure that they buy from them and not their competitors

. that is why a market economy driven by private-sector entrepreneurs is superior in every way to any other set of arrangements

. sellers are a self-selecting process – entrepreneurs are just members of the community who decide they would like to earn an income from selling products to others

. government-selected sellers weaken an economy (crony capitalism)

. among sellers only those whose products most closely match the wishes of buyers will survive

. therefore:

. prices are kept down
. product quality is improved
. innovation is constant

. governments may contribute with some necessary regulation and will provide welfare, but have almost nothing to offer so far as product and product innovation are concerned

. this is how a domestic market economy works

. international trade is the same only across borders

. foreign sellers often produce better products at lower prices – better to buy from others than produce such things oneself

. comparative advantage explained

. domestic producers often wish to discourage imports but love exports

. will lower living standards to restrict imports

. government restrictions on imports is a very large mistake

. should not protect domestic industry since it does not protect the economy, helps out only a handful of producers and only in the short run

. once business understand that a government will never protect them from competitors who provide better goods and services, domestic competition becomes much more rigorous

. tough domestic competition is the best guarantee of international success

. but the politics are often very difficult for particular groups – such as those who produce primary products

. also many complaints about jobs going overseas – but full employment is more easily guaranteed in an open economy

. a government therefore needs sensible adjustment policies that allow resources to flow where they receive their highest return

. everyone must be made to understand that the best long-term strategy for the entire community is to allow free trade in all goods and services

. leads to higher incomes and more secure jobs

Politics, of course, gets in the way, but every decision maker generally understands all of the above very well.