History of Free Trade

Topics: International trade, Free trade, Tariff Pages: 12 (4840 words) Published: January 24, 2013
US History
Term Paper
America’s Free Trade Schism: A Dichotomy of Opinions
Roman philosopher Cicero once said, “Not to know what has been transacted in former times is to be always a child. If no use is made of the labors of past ages, the world must remain always in the infancy of knowledge.” At no point is this statement more relevant than today as American consumers are faced with moral decisions affecting their everyday lives. Most arguments against free trade are made by special interest groups, who believe that it will make laborers or countries worse off. People arguing against free trade will say that we need to keep jobs in the United States, we want to keep money in our country, and that our national security is at stake. The opposite side argues in favor of free trade saying it makes countries better off, and creates peace and wealth distribution. These arguments have been heard in our country, before we were a country, as angered colonial pioneers contemplated trade between their ruler, Great Britain versus domestic industrialization. Knowing the friction trade has caused throughout our relatively short history and how the world views free trade today, I ask myself, and I implore you to ask yourself the same, did free trade begin in the United States, and more importantly, is free trade a good thing? To contemplate this historic schism, I asked myself these questions, and looked at a dichotomy of opinionated sources including Eric Foner’s Give Me Liberty!, Daniel Griswold’s Mad About Trade, Ha-Joon Chang’s Bad Samaritans, and Gregory Mankiw’s Principles of Macroeconomics. The United States has had a long history of both support and opposition to free trade. Ideologies of protectionism and isolationism have all plagued America’s stance on free trade. Opposition to free trade can be found in George Washington’s Farewell Address, to which he advised the young nation at the time to avoid “entangling alliances.”1 America’s first president wanted to prevent America from creating permanent allies or enemies abroad. Today, free trade is so enter-woven into the very fabric and foundation of our nation. Consider your typical day: You wake up and drink a cup of coffee with beans from Brazil and Ethiopia. You watch for traffic and weather updates on a television made in South Korea or Japan, you put on your cloths made from cotton grown in Georgia and sent to Thailand to be sewn together. You drive your car made from parts manufactured in multiple different countries. This is just in your first hour of your day! Every day, we all rely on many people, in many different countries, to provide us with a certain quality of life. This quality of life is due in part to a system of globalization, delivering a level of goods and services through free trade. To make a trade, you need to consider what you gain or lose by making a trade. Countries don’t need to make trades however, and can opt to be interdependent, but this too is a sacrifice. What is free trade? Free trade is a system of trade policy which allows a trader to trade across national borders without interference from respective governments.2 Free trade does not mean “free of cost” and is not to be confused with free markets. In a system of Free Trade, according to the law of comparative advantage, the free trade policy permits trading countries mutual gains and advantages of goods and services. It’s not an even “trade” per say, according to the law of comparative advantage, each trade done by each country has a different relative or real cost depending on the nominal costs assigned to each good, service, and trade. Historians have traced this law back to 1815, in an essay written by Robert Torrens, who was an English economist, describing the trade of grains from Portugal to England, because it was cheaper to produce grain in England than in Portugal. This concept was actually given global recognition, when another English...

Bibliography: Foner, Eric, Give Me Liberty!, New York: Norton and Company, 2005.
Mankiw, N. Gregory, Principles of Macroeconomics 5th Edition, South Western, Cengage Learning, 2008.
Griswold, Daniel, Mad About Trade: Why Main Street America Should Embrace Globalization, Washington D.C., Cato Institute, 2009.
Chang, Ha-Joon, Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, New York: Bloomsbury Press, 2008.
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