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United States and Free Trade

November 03, 1985

Christopher Layne suggests in his article (Editorial Pages, Oct. 15) that America should forget about free trade. We tried that once. The result was the Great Depression, which in turn led to World War II. The consequences of abandoning free trade today, in the age of nuclear proliferation, might be even worse.

Layne contends that free trade does not work if we practice it alone. Nothing could be further from the truth. Other nations may squander their resources subsidizing inefficient industries and sheltering them with trade barriers. But we can still benefit if we have our own policies of free trade to direct our resources efficiently.

Protectionism does not create new resources. It simply redirects existing resources. This necessarily involves centralized economic control. History has shown that centralized economic planning is less efficient than free market planning. There is no way that we can become more prosperous by being less efficient.

The real reason that Japan is rapidly becoming more prosperous then the United States is that Japan practices free trade much more so than do we. The United States subsidizes selected industries more than Japan. We tax capital investment and savings much more than the Japanese (hence our pathetic savings rate).

Our laws pander to convoluted tax shelters that benefit lawyers, accountants, and salesmen, but not the economy. We impose tariffs, extensive quota systems, "anti-dumping" restraints, and numerous other barriers to free trade. These protectionist barriers are the cause of our problems, not the solution.

The world is experiencing a technological revolution that can create unimagined prosperity. However, protectionist paranoia would destroy all this. It would create poverty and inhibit the exchange not only of goods, but also of ideas.

Nothing is more damaging to world peace than the creation of artificial barriers between peoples, barriers that can only be administered autocratically with central planning. The world is at a critical juncture and the path taken by America will have enormous influence on the paths taken by other nations. Protectionist paranoia now will insure disaster in the years to follow.



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