2 Responses to “Free Trade Isn’t Really Free”

  1. Nitin Reddy Katkam

    December 15, 2011 @ 1:50 am

    Free trade does not mean that the government cannot impose taxes on the imported goods. Governments regulate the prices of imports through the use of taxes. If China can make goods for cheaper and it is severely affecting the importing nation’s industry, the government imposes taxes. It’s the government’s job and some governments do it rather well.

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  2. Mike

    December 15, 2011 @ 9:49 am

    The problem with that strategy is that the importing partner can retaliate with tariffs of their own on your exports. And then we have higher prices, reduced demand, and higher unemployment for everyone, from the Chinese to the American citizen, and that’s not a good strategy to pursue for anyone.

    The tradeoff to the reduction of trade barriers, such as tariffs, is that in the long run you’ll be shuffling around resources in such a way as to create the most optimal flow of goods and reduce prices for everyone, but in the short run that can disrupt the current economic order. This will cause unemployment while resources, industries, and individuals are making the switch to something that fits the new economic order. The switch is painful, as the above study would indicate, but it is ultimately better for everyone.

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