Conclusion: The Defence of Free Trade

In his recent book, Fair Play, economist Steven Landsburg writes that "a national refusal to trade is a national refusal to prosper" (1997: 12). Among economists, this is not a controversial statement. Since the time of David Ricardo, economists have always known that a policy of free trade works to raise economic welfare in all countries. However, the idea of comparative advantage, as Krugman notes in the quotation cited at the beginning of this study, "conflicts directly with both stubborn popular prejudices and powerful interests" (1987: 131) and, in spite of the efforts of economists, popular discussion about the effects of free trade—in particular, the impacts of NAFTA or the FTA on the Canadian economy—are almost invariably negative. According to economic nationalists and protectionists, free trade is the cause of almost every conceivable economic "evil" ranging from unemployment to the destruction of the natural environment. That these claims are spread about with so little scrutiny reveals the extent to which they have become part of the "conventional wisdom." According to this conventional wisdom, trade and economic exchange are a zero-sum game: if Mexican incomes rise, then Canadian incomes must fall; if jobs are created in the United States, jobs are lost at home; if firms move south of the border, then there will be fewer good jobs at home. There can be no benefit to trade if it is a zero-sum game; trade and exchange are equivalent to mugging.

But trade is not a zero-sum proposition. It is positive sum. An understanding of the principles of basic economics and, in particular, the principle of comparative advantage shows that it must be positive sum. No country loses as a result of free trade; this is true for precisely the same reason that no individual loses as a result of voluntary exchange. Once this idea is understood, it becomes clear that the claims made by the opponents of free trade are either absurd or completely false.

In this paper, we consistently apply the "tried and true" principles of free trade and comparative advantage to popular criticisms about NAFTA and the FTA and show that these popular criticisms do not withstand logical scrutiny. We also find that they are inconsistent with the empirical facts. Jobs have not been lost as a result of free trade. Firms are not queuing up to leave Canada for the lower costs of Mexico. Wages in Canada and the United States have not and will not fall to Mexican levels. Trade and economic growth have not caused environmental devastation. Hence, the claims made by critics of free trade have neither a theoretical nor an empirical foundation. They have no scientific basis whatsoever and this must be pointed out emphatically.

In the introduction to this paper, we remarked that the tenth anniversary of the Canada-United States Free Trade Agreement provides an important opportunity for reflection about the merits of free trade. It is our hope that this exercise will make the public defence of free trade over the next 10 years a much simpler and far less controversial task.