Trade and the Libertarians

Ian Fletcher takes on the free trade Libertarians at WND:

I recently gave a podcast interview to Vox Day, a prominent Christian libertarian, explaining why free trade is bad for America. He followed it up with an article making many of the same points.

Finally, a libertarian gets it.

This did not go over well with some of his followers.

I’m not qualified to speak to the “Christian” aspects of free trade – whatever those are – beyond observing that globalism, of which free trade is a part, certainly looks like the Tower of Babel. But as one prominent libertarian has now seen through the free trade delusion that generally grips his fellow libertarians, this is probably a good time to explain what he got and they didn’t.

Followers? I have followers? And here I thought I merely had Ilk. Anyhow, Fletcher’s casual observation connecting Babel and globalism is one that should give any Christian, libertarian or not, food for thought.

What Fletcher is saying without specifically articulating it is a variant on a point I have previously made with regards to abortion and immigration. There is a difference between liberty of opportunity and liberty of result. But liberty, unlike equality, is a desired net outcome. It is not desirable that everyone be the same, whereas it is desirable that everyone have the maximal amount of personal freedom. This means that contrary to the way in which equality of opportunity is to be preferred to equality of result, liberty of result is to be preferred to liberty of opportunity.

Furthermore, it is no more intrinsically unjust that foreign corporations are forced to pay a tariff in order to sell their wares – or even not be permitted to sell them at all – than foreigners who are not resident in the USA are not permitted to vote for the U.S. president or collect AFDCTANF payments. The so-called moral argument for free trade to which many Libertarians appeal is not only unjust, overtly anti-American, and anti-Constitutional, it is an important tool in the service of one of the most fundamentally evil concepts in the history of humanity, a centralized international government with global authority.

Two collapses

Nouriel Roubini finally latches onto the fact of the collapsing European currency:

So given these three options are unlikely, there is really only one other way to restore competitiveness and growth on the periphery: leave the euro, go back to national currencies and achieve a massive nominal and real depreciation. After all, in all those emerging market financial crises that restored growth a move to flexible exchange rates was necessary and unavoidable on top of official liquidity, austerity and reform and, in some cases, debt restructuring and reduction.

Of course today the idea of leaving the euro is treated as inconceivable, even in Athens and Lisbon. Exit would impose big trade losses on the rest of the eurozone, via major real depreciation and capital losses on the creditor core, in much the same way as Argentina’s “pesification” of its dollar debt did during its last crisis.

Yet scenarios that are treated as inconceivable today may not be so far-fetched five years from now, especially if some of the periphery economies stagnate. The eurozone was glued together by the convergence of low real interest rates sustaining growth, the hope that reforms could maintain convergence; and the prospect of eventual fiscal and political union. But now convergence is gone, reform is stalled, while fiscal and political union is a distant dream.

Greece’s credit rating was recently reduced to CCC. Ireland and Portugal aren’t much better off. Spain is also in serious trouble. But just as Roubini has been late on the developing eurodisaster, he’s probably too generous in thinking that it’s going to take five years for nations to begin leaving the Euro.

Complicating matters is the fact that it looks like the U.S. mortgage scandal is on the verge of entering the next stage, which threatens both the banking industry and the housing market. As usual, Karl Denninger has the details at the Market Ticker:

The principal issue ripe for determination by this Court, and which was left unaddressed by the majority in Matter of MERSCORP (id.), is whether MERS, as nominee and mortgagee for purposes of recording, can assign the right to foreclose upon a mortgage to a plaintiff in a foreclosure action absent MERS’s right to, or possession of, the actual underlying promissory note. However, as “nominee,”MERS’s authority was limited to only those powers which were specifically conferred to it and authorized by the lender (see Black’s Law Dictionary 1076 [8th ed 2004] [defining a nominee as “(a) person designated to act in place of another, (usually) in a very limited way”]). Hence, although the consolidation agreement gave MERS the right to assign the mortgages themselves, it did not specifically give MERS the right to assign the underlying notes, and the assignment of the notes was thus beyond MERS’s authority as nominee or agent of the lender.

It’s only a small matter of something like 60% of all US mortgages. But the court has noted that it’s unlikely to be impressed by the “too big to fail” defense. “This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation. Nonetheless, the law must not yield to expediency and the convenience of lending institutions.” It’s about time. But the fact that the various crashes and cleanups are absolutely necessary doesn’t mean they are going to be a lot of fun for everyone.

To put in perspective the seriousness of the present situation, consider the current interest rates on various two-year government bonds, (the price of government borrowing), as of June 15, 2011. Higher interest rates indicate an anticipated increased degree of risk.

0.445 USA
0.767 USA 2010

25.628 Greece
8.637 Greece 2010

11.621 Portugal
3.090 Portugal 2010

3.402 Spain
2.946 Spain 2010

1.586 Germany
0.511 Germany 2010

92 percent Austrian

I only scored 92/100 on the Austrian quiz when answering with my own views rather than the official Austrian ones. Of course, I knew what the official Austrian answers were, I simply happen to disagree with the Mises Institute-declared Austrian positions on 1) free trade and globalization and 2) the stock market. In both cases I found that the “socialist” answer was closest to my perspective. I find it rather interesting that those two “incorrect” answers were two of the only three answers which did not come provided with a quote supporting the position from the canonical literature.

I know the issues on the free trade side and understand its logic, but I really fail to comprehend how Austrians can possibly support the idea of a government-regulated stock market in anything close to its current form. There is simply no free market to be found in the stock market; the rules and the technology are stacked in favor of insiders and merely being listed requires paying a vast quasi-tax to the government-favored investment banks.

Mailvox: The Hazlitt international trade challenge

Ampontan posed a free trade-related challenge:

When you can offer a serious critique of Chapter 11 of Hazlitt’s Economics in One Easy Lesson without using buzzwords like “bizarre”, I might begin to take this argument seriously.

I find it rather difficult to resist a direct and substantive intellectual challenge, particularly when it stems from an intelligent and knowledgeable source. Throw in the fact that Hazlitt is an economist for whom I have a good deal of respect – his demolition of Keynes’s General Theory is still one of the most thorough available – so this was practically perfect Voxbait. After reading the chapter through twice, I’ve decided that I’m not going to address the entirety of it in a single post, but will instead address Hazlitt’s core argument in a detailed manner which will not necessarily conclude the case, but should suffice to convince doubters that the anti-free trade argument at least merits being taken seriously by libertarians and Austrians alike.

(Note to self: do not use “bizarre” or other buzzwords in the process.)

Hazlitt writes: An American manufacturer of woolen sweaters goes to Congress or to the State Department and tells the committee or officials concerned that it would be a national disaster for them to remove or reduce the tariff on British sweaters. He now sells his sweaters for $30 each, but English manufacturers could sell their sweaters of the same quality for $25. A duty of $5, therefore, is needed to keep him in business. He is not thinking of himself, of course, but of the thousand men and women he employs, and of the people to whom their spending in turn gives employment. Throw them out of work, and you create unemployment and a fall in purchasing power, which would spread in ever-widening circles. And if he can prove that he really would be forced out of business if the tariff were removed or reduced, his argument against that action is regarded by Congress as conclusive.

But the fallacy comes from looking merely at this manufacturer and his employees, or merely at the American sweater industry. It comes from noticing only the results that are immediately seen, and neglecting the results that are not seen because they are prevented from coming into existence.

The lobbyists for tariff protection are continually putting forward arguments that are not factually correct. But let us assume that the facts in this case are precisely as the sweater manufacturer has stated them. Let us assume that a tariff of $5 a sweater is necessary for him to stay in business and provide employment at sweater-making for his workers.

We have deliberately chosen the most unfavorable example of any for the removal of a tariff. We have not taken an argument for the imposition of a new tariff in order to bring a new industry into existence, but an argument for the retention of a tariff that has already brought an industry into existence, and cannot be repealed without hurting somebody.

The tariff is repealed; the manufacturer goes out of business; a thousand workers are laid off; the particular tradesmen whom they patronized are hurt. This is the immediate result that is seen. But there are also results which, while much more difficult to trace, are no less immediate and no less real. For now sweaters that formerly cost retail $30 apiece can be bought for $25. Consumers can now buy the same quality of sweater for less money, or a much better one for the same money. If they buy the same quality of sweater, they not only get the sweater, but they have $5 left over, which they would not have had under the previous conditions, to buy something else. With the $25 that they pay for the imported sweater they help employment—as the American manufacturer no doubt predicted — in the sweater industry in England. With the $5 left over they help employment in any number of other industries in the United States.

But the results do not end there. By buying English sweaters they furnish the English with dollars to buy American goods here. This, in fact (if I may here disregard such complications as fluctuating exchange rates, loans, credits, etc.) is the only way in which the British can eventually make use of these dollars. Because we have permitted the British to sell more to us, they are now able to buy more from us. They are, in fact, eventually forced to buy more from us if their dollar balances are not to remain perpetually unused. So as a result of letting in more British goods, we must export more American goods. And though fewer people are now employed in the American sweater industry, more people are employed—and much more efficiently employed—in, say, the American washing-machine or aircraft-building business. American employment on net balance has not gone down, but American and British production on net balance has gone up. Labor in each country is more fully employed in doing just those things that it does best, instead of being forced to do things that it does inefficiently or badly. Consumers in both countries are better off. They are able to buy what they want where they can get it cheapest. American consumers are better provided with sweaters, and British consumers are better provided with washing machines and aircraft.

I count seven unwarranted assumptions on Hazlitt’s part that render his primary argument in support of free trade incorrect and therefore invalid. They are as follows:

1. Hazlitt assumes that manufacturers are the primary beneficiaries from barriers to trade and therefore the leading advocates of them. This may have once been true, but it is clearly no longer the case. Economics in One Lesson was published in 1946, when the U.S. balance of trade ran a 35 percent surplus and trade amounted to 6.8 percent of GDP. Free trade was operating to the benefit of most American manufacturers and workers alike; since the industrial infrastructures of Europe and Asia were in ruins, few American sectors were at a competitive disadvantage. Like Ricardo, Hazlitt clearly never imagined a scenario when jobs would not be lost to foreign manufacturing competitors, but to the new foreign factories established by the former domestic manufacturers. The additional profit provided by a $5 tariff is now of less interest to the domestic manufacturer than the opportunity to set up a factory in Bangladesh, make the sweater at a lower cost, then import it and sell it for $25. If we leave out the distribution channel which is the same for both foreign and domestic manufacturers and assume a profit margin of 50 percent, we can compare the profit margins of the various alternatives. At the 50 percent profit margin, we know that the manufacturer’s domestic costs were $15 and his profit was $15 with the protection of the $5 tariff. But Bangladesh has a wage rate that is one-thirtieth that of the USA, so if labor is one-third the cost of production and international shipping is 10 percent of the manufacturing cost, his new production and delivery cost will be $11.17. This reduction of $3.83 in costs means the offshored manufacturer can now afford to sell the imported sweater for 22.34 and still make the same 50 percent profit margin he did before; without tariffs he can compete on price with the $25 English sweaters and actually increase his profit margin by nearly six percent. At the old $30 price, his profit margin has risen to 63 percent, thereby creating a serious incentive to move production to Bangladesh even in the absence of any price pressure from the English sweater makers. Either way, the consumers benefit, the manufacturer benefits, and only the thousands of workers, who lost their $5/sweater jobs, suffer.

So, the $5 tariff not only protects the domestic manufacturer from the English competitor, but more importantly, protects the worker from the domestic manufacturer as it would reduce his potential profit margin from 63 percent to 46 percent. With the tariff in place, the domestic manufacturer has no reason to go to all the trouble and expense to relocate his factory to Bangladesh simply to lose four percent from his profit margin. It is also worth nothing that since Hazlitt was implying a profit margin much lower than the 50 percent I utilized for the purposes of comparison, the difference between going offshore and not going offshore might not be an additional 13 percent profit, but the difference between the survival of the business and its failure. Hazlitt’s error here is the result of the failure of the theory of comparative advantage to account for the international mobility of capital.

2. Hazlitt asserts that the $5 left over from the reduced import price of the sweater will go to help employment in any number of other industries in the United States. It may. Or it may not. Again, Hazlitt was writing when imports accounted for a trivial 2.9 percent of GDP. They now account for 15.8 percent, so that $5 is five times more likely to go towards helping employment in industries outside the United States than it was in 1946. Statistically speaking, what would be $5 of the tariff going towards U.S. employment must be reduced to $4.25. This error can also be traced back to Ricardo’s assumptions, although it is not one of the seven that Fletcher lists.

3. Hazlitt erroneously assumes that the British will buy more from the USA because they will be forced to buy more American goods due to their possession of dollars. This is untrue because the dollar is the world’s reserve currency and is often utilized for trade between foreign countries; the British are no more forced to buy American goods due to their possession of dollars than the Thebans were forced to buy from Athenian goods due to their possession of silver talents.

4. Hazlitt assumes that foreign dollar balances cannot remain perpetually unused. (By “unused” he means unspent in the USA). But there are $610 billion in Eurodollars in foreign banks that will never be used, which is more than the entire amount of annual U.S. exports as recently as 1990! Furthermore, the U.S. has been running a continuous and growing balance of trade deficit in goods since 1976. The $9 billion that went overseas has not only not returned to be spent here, but has increased to $646 billion.

35 years and counting is a long time to wait for this postulated inevitable return, and is unlikely to do any good for the worker who lost his job more than three decades ago.

5. Hazlitt assumes that an American worker who loses his job in one sector will automatically find it in another sector. This is Ricardo’s sixth false assumption identified by Fletcher: “Production factors move easily between domestic industries.” There is no reason to assume that the loss of a job in one sector will create any additional demand in another sector, indeed, to the extent there is worker mobility between industries, all the loss of the job in the one sector will do is create downward pressure on wages in the other sector. There is a hidden and implicit appeal to James Mill here, (or alternatively, to Keynes’s critical formulation of Say’s Law), in the idea that supply somehow magically creates demand. While this can be true in a technological sense, as there was no demand for CD players prior to their invention, it is not an economic law as the excess supply of U.S. housing or the dead inventory stock of any business will demonstrate.

6. Hazlitt assumes that American employment on net balance will not go down and that American and British production on net balance will go up. This is not necessrily true, being an erroneous conclusion based on the previous false assumption. The American worker may well remain unemployed on a permanent basis, as have one-quarter of the once-employed male workers since 1948.

7. Hazlitt assumes that consumers in both countries are better off because they are able to buy what they want where they can get it cheapest. But this is a false assumption because most consumers are also workers or are dependent upon workers. The consumer who is employed can better afford the $30 sweater than the unemployed consumer can the $25 one. Free trade does work to the minor advantage of some Americans as well as to its foreign beneficiaries, but at an inordinately heavy short-term cost to around 25 percent of Americans and a severe long-term cost to the entire American economy.

I shall leave it to Ampontan to determine whether this response justifies taking the argument seriously in the future. I freely admit that I have not yet addressed the entire chapter, only one-third of it, but I expect to do so in another post or two in the reasonably near future.

WND column

Free Trade Harms America

One of the more onerous aspects of being a superintelligence is the way in which many critics have a tendency to erroneously assume one is operating at the same level of near ignorance that they are. In response to the inaugural Voxic Shock podcast, in which I interviewed economist Ian Fletcher about his book, “Free Trade Doesn’t Work,” a number of free-trade champions actually attempted to appeal to David Ricardo’s theory of comparative advantage, which utilizes an example of trade between two countries in two products to argue that trade is intrinsically beneficial to a national economy.

I am never sure whether to be more amused or insulted when I am met with a critical response of this kind. Possessing a B.S. in economics, having published a book on economics and the current economic depression and being one of the millions of college-educated Americans who have passed an Econ 101 class, I am, as it happens, familiar with the theory. Furthermore, I have actually read Ricardo’s 1817 book, “On the Principles of Political Economy and Taxation,” which contains the theory and what passes for the reasoning behind it. This does not appear to be the case with most of the free-trade enthusiasts who appeal to it.

Note to the column: This column contains the promised empirical evidence that Felix was demanding. On a related note, if you have not yet heard my interview with Ian Fletcher on the subject of international trade, it is on the Voxic Shock #1 podcast. And further to the subject, a critique of Hazlitt’s chapter 11 will be posted tomorrow.

George Will fails to follow the logic

This is what happens when you mindlessly assume that free trade is intrinsically beneficial in all circumstances:

Since 1974, Trade Adjustment Assistance (TAA) has provided 104, and then 156, weeks of myriad financial aid, partly concurrent with the 99 weeks of unemployment compensation, to people, including farmers and government workers, and firms, even whole communities, that can more or less plausibly claim to have lost their jobs or been otherwise injured because of foreign competition. Even if the injury is just the loss of unfair advantages conferred, at the expense of other Americans, by government protectionism. And even if the injury results not from imports but from outsourcing jobs. TAA benefited 50,000 people at a cost of $500 million in 2002. In 2010, it cost $975 million for 234,000 people. Its purpose is to purchase support for free-trade policies that allow Americans to benefit from foreign goods and services, and from domestic goods and services with lower prices because of competition from imports…. It is unjust to treat some workers as more entitled than others to protection from the vicissitudes of economic dynamism.

Consider a hypothetical Ralph, who operated Ralph’s Diner until Applebee’s and Olive Garden opened competitors in the neighborhood. With economies of scale and national advertising budgets, those two franchises could offer more choices at better prices, so Ralph’s Diner went out of business. Should he and his employees be entitled to extra taxpayer subventions because they are casualties of competition?

Why should someone be entitled to such welfare just because he or she is affected negatively by competition that comes from abroad rather than down the street? Because national trade policy permits foreign competition? But national economic policy permits — indeed encourages, even enforces — domestic competition.

In 2001, when approximately 80,000 people worked in 7,500 music stores, the iPod was invented. Largely because of that and other technological changes, today only about 20,000 people work in 2,500 music stores. Should those 60,000 people be entitled to extra welfare because they are “victims” of technology? Does it matter if the 60,000 have found work in new jobs — perhaps making or selling electronic devices?

In 2008, Americans bought 1.4 billion books made of paper and 200 million e-books. Soon they will buy more e-books than paper books, and half the nation’s bookstores will be gone. Should the stores’ former employees be entitled to special assistance beyond unemployment compensation?

Will has omitted to take three salient facts into account. First, he fails to note that 234,000 people receiving benefits from the program – up from only 50,000 – do not have any jobs. Therefore, it makes no sense to ask if the 60,000 people who no longer work in music stores have now found work in making or selling electronic devices, especially when none of those electronic devices are made in the USA. It’s a bizarre and uncharacteristically inept attempt at a rhetorical point.

Second, the reason that one could make a case for compensating those who lose their jobs to foreign competition rather than to domestic competition is because a) the former is a direct result of federal trade policy whereas the latter is not, and, b) whereas the worker who loses a job to a domestic competitor can reasonably move elsewhere domestically to find another job, potentially with that very competitor, the worker who loses a job to an overseas competitor cannot.

Third, the advance of technology tends to create new jobs even as it destroys old ones. (This is not always true, an assumption that needs to be examined at some other time.) So the loss of a job in one sector is counterbalanced by the addition of a job in another. However, the loss of a job to overseas competition is a net loss for the national economy and it is not counterbalanced by the addition of a job.

The oxymoronic aspect of free trade in a modern economic system is this. It makes no sense to even attempt managing any aspect of a national economy if national employment is to be left to the vagaries of international competition. This is why “free trade” is not, as many on the right believe it to be, a step towards freedom, it is rather an significant step towards global tyranny and the destruction of the United States Constitution.

Now, I am not defending the Trade Adjustment Assistance program or any other form of welfare or government income redistribution plan. I am simply pointing out that it is totally absurd for George Will and other free traders to complain about the cost of free trade-related welfare to a nation rendered bankrupt, at least in part, by the government’s international free trade policies.

Given that the federal government used to fund itself through the use of tariffs on international trade, it is most strange to argue that direct income taxes and payroll taxes on its citizens are either more liberating or more to the material benefit of those very citizens.

A failure to grow

Susan Walsh notices that median male income hasn’t kept pace with GDP growth:

WHY? Economists can’t explain it, it’s still a matter of conjecture. Alex Tabarrok’s thoughts:

The big difference between female and males as far as jobs, of course, has been labor force participation rates, increasing strongly for the former and decreasing somewhat for the latter. Most of the female change, however, was over by the mid to late 1980s, and the (structural) male change has been gradual.

Female education levels have increased dramatically and male levels have been relatively flat.

Females are also more predominant in services and males in manufacturing: plumbers, car mechanics, carpenters, construction workers, electricians, and firefighters, for example are still 95%+ male.

The primary factor is no mystery and is connected to the labor participation rates, but not for the reason suggested. Both male and female participation rates did most of their changing prior to 1973. That was the year that the number of older men leaving the labor force finally stopped compensating for the number of young women entering it. So, that is the point when wages finally began feeling the effects of the oversupply of labor from the increase in women entering the work force from the 33.9 percent who had always worked.

The secondary factor is the mass transfer of income that takes place from productive private sector men to unproductive public sector women that has been made possible by the mass borrowing in the public sector. More details on this later.

WND debuts Voxic Shock

Thanks to Vidad and Markku, I was able to offer the idea of a weekly podcast to Joseph Farah and Mr. Farah was more than willing to give it a try.  If Voxic Shock is of sufficient interest to WND readers, it will be appearing on Thursdays in addition to my Monday column.  Some work still remains to be done, as I don’t have the proper equipment yet and so was using my Logitech gaming headset in lieu of a proper microphone and so forth.  But those who have heard the old Voxonomics podcasts will definitely hear the difference that having an audio professional doing the editing makes.

For the inaugural Voxic Shock podcast, I interviewed economist Ian Fletcher.  We discussed David Ricardo, Adam Smith, the limits of the theory of comparative advantage, and the seemingly ironic concept of creating American jobs and growing the economy through the use of trade barriers.  So tune in and feel free to leave your comments here after you’ve listened to it.  I’ve already recorded next week’s interview with Karl Denninger of the Market Ticker and as those who read the Ticker can probably imagine, it’s a lively one.

However, Voxic Shock is not going to be an economics-only podcast.  I’ve contacted Herman Cain to see if he’s interested in being interviewed – no response yet – and having heard rumors that Mighty Cthulhu might be throwing his tentacles into the presidential ring again, I’ve been trying to locate his campaign manager.  Unfortunately, the only contact I had for him appears to have been devoured in 2008.  I’m also going to be talking to one of my favorite living historians, John Julius Norwich.  If there is anyone in particular you are interested in hearing interviewed for future podcasts, please go ahead and email me your suggestions, preferably with contact information.

UPDATE: WND is working on a RSS feed and direct download link. The next cast will be Friday, June 17th. In the meantime, here is an alternative Voxic Shock feed.

Employment and depression

One thing that most people probably don’t realize is that in the pre-Samuelsonian era, depressions were generally viewed in terms of the supply and demand for labor rather than a via a money metric of consumption. One of the more remarkable things for a young economics student reading Keynes’s General Theory today is discovering how it reads more like an Austrian logic-based text than a modern macroeconomics statistical digest. Today, the employment level doesn’t even factor into the modern determination of whether the economy is growing or not. Hence the new economic oxymoron of “a jobless recovery”.

But by the older perspective, it is obvious that the USA is still in the same depression that it was in 2008. Consider the following labor report:

About 6.2 million Americans, 45.1 percent of all unemployed workers in this country, have been jobless for more than six months – a higher percentage than during the Great Depression.

Moreover, another little known fact is that the unemployment numbers provided for the Great Depression on an ex post facto basis by post-WWII economists were overstated because the BLS economist responsible, one Stanley Lebergott, counted many government workers as being unemployed. Michael Darby corrected for this and came up with the following numbers:

Year L D
1929 3.2% 3.2%
1930 8.7% 8.7%
1931 15.9% 15.3%
1932 23.6% 22.9%
1933 24.9% 20.6%
1934 21.7% 16.0%
1935 20.1% 14.2%
1936 16.9% 9.9%
1937 14.3% 9.1%
1938 19.0% 12.5%
1939 17.2% 11.3%
1940 14.6% 9.5%

Note that by this corrected measure, even the woefully misleading U3 unemployment measure is presently at the same level as 1937, and worse than 1930. At 15.8, the more relevant U6 measure is worse than 1931 and every year except 1932 and 1933, the absolute nadir of the Great Depression. It may be worth noting that adding the current 20.3 million government workers to the ranks of the unemployed, as per Lebergott, would increase the current U3 rate to 22.3 percent and the U6 rate to 29 percent, which exceeds even Lebergott’s calculation for 1933.

Given the slide in housing prices, the unemployment rates, and the length of joblessness, two things should be readily apparent. First, the economic contraction has not ended. Second, the GDP figures notwithstanding, it is a larger scale event than the Great Depression.

A fallacious free trade argument

Mark Perry omits a key factor in attempting to defend international free trade:

Bottom Line: To argue against free trade among countries, one would also have to object to free trade among American states, counties, cities and individuals, see my edits below of Fletcher’s article that hopefully make this point.

That simply is not the case. In fact, Perry misses a vital point, which is that in order to argue FOR free trade among countries, one has to accept a similar free flow of labor between countries as presently exists between American states, counties, and cities. And how sizeable is that free flow?

In 2009, 4.7 million Americans moved from one state to another. Keep in mind that the entire American employed labor force is only 140 million. If we conservatively divide the number of domestic migrants by the average household size of 2.6, we’re looking at 1.8 million workers, 1.3 percent of all American workers, who moved intrastate.

This suggests that if the world were to adopt international free trade, more than a million Americans would need to move to China, Mexico, Japan, Germany, and Canada in order to find employment on an annual basis. It would be necessary to know the amount of intrastate trade vesus international trade to provide a precise estimate of how many Americans would need to emigrate every year, (53% of them to China), under a free trade regime, but I find it unlikely that many Americans are likely to prove supportive of a trade system that would require them to move to places like India and Bangladesh as freely as it now forces residents of Detroit and Minneapolis to move to Scottsdale and Naples.

Being an American expatriate myself, I know much better than most that it is possible to change one’s international residence. And due to my extensive, long-term international experience, I can say that I find this particular aspect of the free trade argument to be naive to the point of absurdity. Most American expats to even first-world European countries don’t last two years due to the significant language and cultural differences. The concept is a complete non-starter and therefore the equivalence is false.