Not Building Walls
November 20, 1998
There's a debate over trade barriers between most economists -- who think free trade brings wealth -- and political pundits on the left and right who propose raising barriers to imports.
The pro-tariff forces argue that the U.S. had high, protectionist tariffs after the Civil War, yet between 1870 and 1913 gross national product (GNP) quadrupled, and real wages jumped 53 percent between 1870 and 1900.
Opponents of high tariffs call that the post hoc, ergo propter hoc fallacy -- the rooster crowed, the sun rose, therefore the rooster's crowing made the sun rise. They argue that 200 years of evidence shows free trade benefits more people.
- Competition from foreign firms forces domestic companies to keep costs down and quality up or lose customers.
- Protectionism interferes with the process of market competition, thus undermining wealth creation.
- Raising trade barriers doesn't just cut a country's imports, it reduces its exports as well, since it encourages other countries to retaliate with their own high tariffs.
So how to explain the U.S. economy's surge after the Civil War? Most economic historians say the U.S. would have grown even faster without trade barriers. The ties that America did have with other countries helped spur growth. For example, British investors funded much of the construction of railroads, bridges and canals during the period. Another tie to other countries: millions of immigrants came to the U.S. during the period who provided the construction and factory labor.
Source: Perspective, "Bad Barriers," Investor's Business Daily, November 20, 1998.
Browse more articles on Economic Issues