A few weeks ago The Cato Institute’s Dan Ikenson and Scott Lincicome, a Washington, D.C.-based trade attorney, published a new paper, “Beyond Exports: A Better Case for Free Trade” (January 31, 2011 Free Trade Bulletin no. 43). The authors argued that it’s time for free trade advocates in government and the U.S. business community to develop a new strategy for selling free trade to Americans. The authors set up their proposal by observing:

“The fact that public opinion about trade is so malleable and arguments for restricting it so resonant at times speaks to a failure of free trade’s proponents to make their compelling message stick. It is sad but true that so many Americans need to be reminded of the benefits of being free to choose how and with whom to conduct commerce. But in an atmosphere where demagogues peddle myths to mislead the public into believing that it is preferable for government to limit their choices and direct their resources to chosen ends, it is crucial that the case for free trade be made more clearly, comprehensively, and consistently than it has been in the past.”

Lincicome and Ikenson propose an alternative case for free trade:

“The most principled case is a moral one: voluntary economic exchange is inherently fair, benefits both parties, and allocates scarce resources more efficiently than a system under which government dictates or limits choices. Moreover, government intervention in voluntary economic exchange on behalf of some citizens necessarily comes at the expense of others and is inherently unfair, inefficient, and subverts the rule of law. ...

Beyond the moral case for free trade, when people are free to buy from, sell to, and invest with one another as they choose, they can achieve far more than when governments attempt to control their decisions. Widening the circle of people with whom we transact brings benefits to consumers in the form of lower prices, greater variety, and better quality, and it allows companies to reap the benefits of innovation, specialization, and economies of scale that larger markets afford. Free markets are essential to prosperity, and expanding free markets as much as possible enhances that prosperity.”

The Cato Institute is a very libertarian public policy research organization, and I myself am not sure a moral argument will “win the heart and minds of a sceptical American public.” However, Lincicome and Ikenson do highlight recent observations made by economists, and acknowledge the harm often created by arguments that emphasize passion, but are short on sense. For example, Harvard Economics Professor Edward L. Glaeser, and author of the forthcoming book, “Triumph of the City,” recently observed, “[as [Adam] Smith moved from moral sentiments to political economy, his focus changed from the perfection of private nature to the improvement of public systems. Most economic writing since then has typically shied away from offering moral advice to individuals and instead focused on improving public institutions and policies. But that shift doesn’t mean that there isn’t a deep moral tenet – a belief in the value of human freedom – at the core of our discipline.” “The Moral Heart of Economics” The New York Times (25 January 2011).

Enter Mr. Donald Trump at the Conservative Political Action Conference (“CPAC”) on Thursday, February 10, 2011. Mr. Trump delivered harsh criticism of President Obama’s leadership, asserting that the United States is “becoming a laughingstock” around the world. As for his [future Presidential nomination] platform, Mr. Trump stated, “I believe in fair trade. We don’t have free trade. I love free trade but not when China’s manipulating its currency.” He cited that as the “world’s most competitive business person,” he would decide by June whether or not to get his hands dirty (politically) and help the United States no longer be a “whipping post for the rest of the world.”

I’m curious to see how economists and trade lawyers will continue the on-going discussion as to how China’s currency policy is not the primary driver of the U.S.-China current account balance. The World Trade Organization (WTO) Director General Pascal Lamy recently discussed the problems with properly measuring international trade and noted that “made in China” discloses very little about global trade and that this misunderstanding causes greater friction between leading economies. “Made in China” The Financial Times, (24 January 2011). To help this issue, the WTO hosted a seminar from February 2-4 2011, on how to properly measure global trade (step 1, get the numbers right).

All of this confusion leads to one sharp conclusion: there has to be a better way to promote global growth and jobs and explain that it’s more than yelling out “You’re hired!” Very quickly, government investments and national competitiveness can evolve into protectionism. The debate between free trade versus protectionism certainly will not end today, and it seems both sides need better answers than pointing fingers and name-calling.