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May 17, 2016

Free Markets = Free Trade = Free Markets

 

A growing number of people who claim to believe in free markets have become skeptical of free trade. But if you believe in free markets you must support free trade because they are two sides of the same coin. 

The Barnes and Noble Dictionary of Economics defines a “free market” as, “A market in which buyers and sellers are at liberty to trade without restrictions as to prices and quantities, and in which there is no compulsion either to buy or sell.” 

Investopedia is similar: “A completely free market is an idealized form of a market economy where buyers and sellers are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation.” 

Thus a free market economy is one in which individuals, companies and governments can buy from, sell to or trade with other individuals, companies and governments with little to no government intervention. (By “little” we refer to issues such as widely understood illegal goods and services, personal information and national security.) 

That’s also a pretty good description of free trade.  

Of course, in the U.S. we don’t have absolutely free markets, so free market advocates try to move toward freer markets and resist more economic regulation.  

Neither do we have absolutely free trade. So advocates push for freer trade through trade agreements, whether through bilateral agreements between two countries or multi-lateral agreements at the World Trade Organization. 

Now, some claim they support free trade, just not some recently negotiated free trade deals, especially those negotiated by the Obama administration. It’s a reasonable concern, because even though free trade agreements are designed to reduce trade restrictions and tariffs—which are taxes imposed on those buying the goods and services—they seldom eliminate all of those hindrances to free markets. 

If a free marketer opposes a free trade agreement, it should only be because tariffs and restrictions don’t move low enough, not because it doesn’t impose enough protections.  

But if a free trade agreement makes significant progress toward the free market goal where “buyers and sellers are at liberty to trade without restrictions as to prices and quantities,” it’s worth a serious look.


 

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