Playing by the Rules of the Wrong Game: International Free Trade
National economies and international trade cannot operate according to the same set of rules. They are not even using the same game-board. International trade involves a whole set of considerations that local economic transactions do not. Some people try to take the principles that allow a national economy to prosper and try to apply it to international trade, and the results are disastrous.
The central issue is whether the government should have a role in manipulating prices.
Some people say it is bad idea to let the government “pick the winners and losers” because politicians are neither equipped nor motivated to make good decisions in this regard. There are too many conflicts of interest. On the national economic level, I would generally agree with this argument.
On the level of international economics, however, it is incorrect. If a politician considers manipulating international trade to be an option, he will always favour local business over foreign business because it is in his own best interest. No benefit comes to him if he favours the foreigner. This can only be a win for your country. There is no potential for conflicts of interest. It’s simply our side versus theirs.
A hands-off approach will always result in the other side winning because no one else is stupid enough to take a hands-off approach.
If you are involved in international trade and the government can help you win, it probably should. It’s a victory for your team, and victory for your team is always better than victory for the other team.
If the government can help its own people win, it should do so.
A politician cannot be reasonably expected to fairly determine which of his fellow countrymen can build a better widget, but if he has a choice between a whether his countryman or a foreigner sells widgets, he has the right to choose his countryman. For all he knows, the foreigner may be deliberately underselling widgets in order to undermine the local economy.
No matter what lofty altruistic hands-off stance you or your government might take, you can be absolutely certain that other countries are going to be manipulating the international economy for their own benefit and to your detriment. It is a relatively mild kind of warfare, but it is warfare nonetheless. International trade may be used by a foreign power to harm your fellow citizens, destroying their livelihood as effectively if they were dropping bombs, so it is your government’s responsibility to take an active role in regulating and manipulating international trade.