Dubious Assumption #2: There are no externalities.

[tangent4ronpaul]

An externality is a missing price tag. More precisely, it is the economists' term for when the price of a product does not reflect its true economic cost or value.

The classic negative externality is environmental damage, which reduces the value of natural resources without raising the price of the product that harmed them. The classic positive externality is technological spillover, where one company's inventing a product enables others to copy or build upon it, generating wealth that the original company can't capture.

If prices are wrong due to positive or negative externalities, free trade will produce suboptimal results.

For example, goods from a nation with lax pollution standards will be too cheap. So its trading partners will import too much of them. And the exporting nation will export too much of them, overconcentrating its economy in industries that are not really as profitable as they seem, due to ignoring pollution damage.

Positive externalities are also a problem. If an industry generates technological spillovers for the rest of the economy, then free trade can let that industry be wiped out by foreign competition because the economy ignored its hidden value. Some industries spawn new technologies, fertilize improvements in other industries, and drive economy-wide technological advance; losing these industries means losing all the industries that would have flowed from them in the future.

http://www.ronpaulforums.com/showthr...92#post3202492

[BrendenR]

I think this much is certainly true. If you've got slave labor producing a product (via force) then there is no way you can price your product to compete if you are respecting people's human rights.

I'd be very interested to hear a defense of free trade with a producer who is exploiting their workers, I can't imagine there is one.

[low preference guy]

I'd be very interested to hear a defense of free trade with a producer who is exploiting their workers, I can't imagine there is one.

There is and it's very obvious. Americans shouldn't be restricted from trading with Cubans because it violates the rights of Americans.

[BrendenR]

There is and it's very obvious. Americans shouldn't be restricted from trading with Cubans because it violates the rights of Americans.

I don't see that as obvious. I'll have to disagree. For the same reason that someone using slave labor within the US should not be allowed to operate that business, someone outside the US should not be allowed to either.

They are operating an illegal enterprise and they should be shut down (or trade restricted as it were).

[low preference guy]

I don't see that as obvious. I'll have to disagree. For the same reason that someone using slave labor within the US should not be allowed to operate that business, someone outside the US should not be allowed to either.

Are you saying that whenever an American buys a products from a foreigner, the U.S. government should verify that the product wasn't made with what you call slave labor?

[BrendenR]

Are you saying that whenever an American buys a products from a foreigner, the U.S. government should verify that the product wasn't made with what you call slave labor?

No, I wouldn't say that.

The problem I have is that I believe the rights of men to be inalienable. That does not apply just to Americans.

Therefore, if the rights of someone are being abused, we should not turn a blind eye to that.

I honestly don't know what the solution should be, but to simply ignore that seems quite anti-liberty to me.

[low preference guy]

I think this much is certainly true. If you've got slave labor producing a product (via force) then there is no way you can price your product to compete if you are respecting people's human rights.

Comparative advantage applies regardless of the reason a product costs less. If it's due to technology or low wages, it still holds that you should shift your production to those things in which you have a comparative advantage. That's what happens naturally when the government doesn't intervene.

[axiomata]

Strawman.

Who said there are no externalities?

Externalities are dealt with by internalizing them into the price structure not by regulations on trade. If Chicago reverses the Chicago river and sends its sewage to St Louis and the Mississippi the solution is not to prohibit trade between Illinois and Missouri. The solution is to sue Chicago for polluting St Louis, hence internalizing the externality.