Free Trade

Ron Paul is a proponent of free trade and rejects protectionism, advocating “conducting open trade, travel, communication, and diplomacy with other nations.” He opposes many free trade agreements (FTAs), like the North American Free Trade Agreement (NAFTA), stating that “free-trade agreements are really managed trade” and serve special interests and big business, not citizens.

He voted against the Central American Free Trade Agreement (CAFTA), holding that it increased the size of government, eroded U.S. sovereignty, and was unconstitutional. He has also voted against the Australia–U.S. FTA, the U.S.–Singapore FTA, and the U.S.–Chile FTA, and voted to withdraw from the WTO. He believes that “fast track” powers, given by Congress to the President to devise and negotiate FTAs on the country’s behalf, are unconstitutional, and that Congress, rather than the executive branch, should construct FTAs.

Buy American, Unless… (February 12, 2001)
Members of Congress often encourage us to “buy American” during their speeches on the House floor. Some members regularly place a “buy American” clause in various trade-related bills, seeking to protect domestic jobs by encouraging the purchase of American goods. Ironically, however, many of these same legislators vote to prohibit American companies from gaining access to new markets overseas. They do so by supporting our senseless embargo policies, which simply help our foreign trading competitors at the expense of American companies.

Of course most politicians claim that they support free trade. Intuitively, most Americans understand that access to foreign markets provides significant benefits to US citizens and American-based corporations. However, we continue to pursue a policy of denying or restricting domestic companies from selling to Cuba, Iraq, Iran, China, and other countries. This inconsistency is especially evident when we consider “export financing,” which really is foreign aid designed to help other countries buy American goods. Most Washington politicians support the practice of export financing, arguing that access to foreign markets benefits American companies, and not just foreign consumers. However, the opposite argument is made with regard to our embargo policies. Suddenly, increased trade with countries some want to label as unworthy only benefits sinister foreign consumers, and not domestic producers. This nonsensical position is maintained by many in government who favor government-managed trade which benefits certain chosen special interests.

Conflicting and inconsistent views on trade policy result largely from a lack of understanding of basic economic principles. Free trade is not a zero-sum game where some countries benefit and others inevitably suffer. On the contrary, true free trade by definition benefits both parties. Free trade is the process of free people engaging in market activity without government interference such as tariffs or managed-trade agreements. In a true free market, individuals and companies do business voluntarily, which means they believe they will be better off as a result of a transaction. Tariffs, taxes, and duties upset the balance, because governments add costs to the calculation which make doing business less attractive. Similarly, so-called managed trade agreements like WTO favor certain business interests and trading nations over others, which reduces the mutual benefit inherent in true free trade.

Free Trade With All, Entangling Alliances With None (September 21, 2001)
Free trade with all and entangling alliances with none has always been the best policy in dealing with other countries on the world stage. This is the policy of friendship, freedom and non-interventionism and yet people wrongly attack this philosophy as isolationist. Nothing could be further from the truth. Isolationism is putting up protectionist trade barriers, starting trade wars imposing provocative sanctions and one day finding out we have no one left to buy our products. Isolationism is arming both sides of a conflict, only to discover that you’ve made two enemies instead of keeping two friends. Isolationism is trying to police the world but creating more resentment than gratitude. Isolationism is not understanding economics, or other cultures, but clumsily intervening anyway and creating major disasters out of minor problems.

Free trade makes sense (June 7, 1999)
[…] if someone says they are for “free trade,” one must look carefully what they really mean, for the classic (and common sense) definition does not apply.

All to often in Washington, free trade is used when one really means “subsidized trade,” or, tax dollars being funneled to foreign governments to buy American products. Similarly, the phrase can mean to use tax dollars to bail-out American firms for risky overseas ventures, or managed trade by the World Trade Organization to serve powerful special interests.

On the other hand, those of us who oppose using the taxes of American citizens to prop-up foreign governments or American corporations are derisively called “isolationists.” There are indeed some people who are isolationists. They call themselves “fair traders,” though. Exactly what this means is open to debate. All too often it involves letting the government determine what is and is not “fair” in the private trading between individuals who live in different countries.

Sadly, these definitions all hinge on the assumption that there are essentially only two options: tax dollars being used to subsidize corporations/foreign governments, or no trade whatsoever without the rubber stamp of government bureaucrats and special interest groups.

The bottom-line of both options, of course, is higher taxes for Americans. Higher taxes to finance the subsidies, or higher taxes on incoming products (and make no mistake, a tariff is a tax, paid by the American consumer).

There is another way. Free trade and free markets are, without a doubt, the best guarantor of peace. But this requires something all too few in Washington want: less government intervention.

It is indisputable that individuals know better how to provide for their families than government. It is also indisputable that a company is better equipped to know what its market will tolerate than a bureaucrat in Washington. In this way, a person is able to determine what goods best meet their individual needs, weighing numerous factors in their decision. But when government intervenes, it no longer becomes possible for an individual to provide for their family and business in the most expedient fashion. This is the antithesis of liberty.

The World Trade Organization (March 20, 2000)
The economic argument for free trade should be no more complex than the moral argument. Tariffs are taxes that penalize those who buy foreign goods. If taxes are low on imported goods, consumers benefit by being able to buy at the best price, thus saving money to buy additional goods and raise their standard of living. The competition stimulates domestic efforts and hopefully serves as an incentive to get onerous taxes and regulations reduced.

If one truly believes in free trade, one never argues a need for reciprocity or bureaucratic management of trade. If free trade is truly beneficial, as so many claim, unilateral free trade is an end in itself and requires neither treaties nor international management by politicians and bureaucrats. A country should promote free trade in its own self-interest — never for the benefit of someone else.

Those not completely convinced of the benefits of free trade acknowledge a “cost” of lower tariffs for which they demand compensation and fair management. Thus, we have the creation of the WTO. By endorsing the concept of managed world trade through the World Trade Organization, proponents acknowledge that they actually believe in order for free trade to be an economic positive, it requires compensation or a “deal.”


  • Keith Roban

    I’m still not convinced that free trade is a good thing. And I mean either “free trade” as it is now or unfettered trade free from tariffs and regulations. I admit my opinion is not as well informed as it could be but to me another word for free trade is asset stripping as it encourages manufacturers to move those jobs to lower-wage countries. Say what you will but look at what a growing manufacturing base has done for China. It has propelled China from a backwater economy to the number 2 economy in the world. Why do we want a trade policy that is slowly stripping our country of our manufacturing base? Free trade? This is one area where Ron Paul, I believe, is dead wrong.

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  • int19h

    True free trade is only possible when there’s not only freedom to shop around for workers for businesses, but also freedom to shop around for jobs for the labor. Otherwise you get this situation where Chinese workers crank out shiny iGadgets that they are never able to buy, which are sold on U.S. markets – because Apple can and does move manufacturing to China while still selling in U.S., while your average Chinese worker can’t move to U.S. to look for a well-paid job here.

    So, either it’s down with borders altogether, or – if for some reason you don’t feel like it’s a good idea – then protectionism is necessary to even out the playing field that is skewed by countries having different conditions for their workers (which cannot otherwise even out by said workers voting with their feet).

  • logical solutions

    Free trade is good as long as the country you’re trading with has the same exact labor and environmental standards as your own. This includes wages, hours, safety, workers rights etc.

  • dgatlin

    You guys are all wrong about free trade. Have any of you bothered to look at the unemployment numbers after NAFTA was passed? Stop using your stupid uninformed emotions and look at the consequences of the policies you support/oppose. I highly recommend the book “Basic Economics” by Thomas Sowell. At bare minimum pick up the book in the store and read the chapter on free trade. Your emotions are causing you to vote in a way that is harming the people you think you’re protecting.

  • Sjanoe

    All of you need to read an economics book

    • Sjanoe

      Otherwise you are all invalid. Lol and “fair trade” you have to be kidding me might as well stay in the same system we are in today. Yes, china is devaluing its currency it called “Competitive Currency Devaluation” I wrote a paper on it. China is trying to run a trade surplus in the hopes to raise their GDP in the short run. However, this causes the us to run a trade deficit. Which isn’t really a bad thing it just increases our imports while decreasing our exports. I know this may seem like a decrease in GDP however this trade deficit allows for other factors in the Keynesian GDP equation to rise. Chinas trade surplus only hurts the purchasing of its domestic consumers and will eventually reach a limit of devaluation for the yuan to where the only way left for the yuan to go is up bringing back a balance of trade. Also china does compete in the free market other wise they wouldnt be trading with us.

      We also should allow for free trade and outsourcing because this actually creates more jobs for Americans through growth. If firing one person allows you to hire two people a month later. That one person is gone in my book. There is no fairness in a efficient competitive market otherwise it would be a equal in efficient let every take advantage of you market.

      We shouldn’t open up the oil reserve just read on the rybcynski theorem and you will have an epiphany to stop complaining about dang oil.

      You also should look into microfinance and how we can replicate it in the united states f you really are concerned about job creation.

      Lol honestly, like the government could really effect the economy… Bs

  • Chris M.

    So if as Rand Paul says, the average American Family saves $900 per year, what does he make of the fact that $2,500 per capita is lost in trade deficit per year? That’s money no longer circling through the economy. It goes into China’s economy (as well as all the others like it), whose government siphons it off their laborers (more or less slaves) and then those dollars are not used to buy American goods. The government takes them and uses them to invest in treasury bills thereby allowing the U.S. government to run budget deficits, or they may purchase raw materials as they are fond of doing and cause inflation in those commodities. We subsist by devaluing our currency while China tries to sustain it while taking advantage of their reserves while they last. Both countries are stupid, but in my opinion it could have been avoided if we never started trade with them in the first place. I support free trade on the condition that (therefore fair trade rather) workers within a country are protected from wage exploitation and allowed to form labor unions in order to bargain with their labor more effectively so that laborers in two different countries are not competing themselves into squalor (which if that happened would also mean there wouldn’t be a market for their own goods anyway… reminds one of Henry Ford doesn’t it).

    • Phil

      Oh no, china is manipulating their currency to give us their goods at a cheaper price, omg what ever will we do?

      • Spudwrench

        Ask the millions of people who have lost their jobs if that lower price of goods is a fair trade. You could be next. Over a billion people, I’m pretty sure someone over there can do YOUR job cheaper, too. College educated? Wait a few more years and China will flood the educated occupations as well.

        • Citizen


          China has more graduate engineers than the US has college students.
          Apple Computers built their plant in China BECAUSE they couldn’t find the necessary engineering talent HERE!

          Our GOVERNMENT has added so much OVERHEAD costs by regulation and taxation over the past 70 years, that we simply can’t “Make it Here” anymore.

          When government’s add so much overhead to American products, we can’t sell those products to anyone, business either close their doors or they move out.
          Most businesses have moved off shore to stay competitive AND get better educated workers.
          Tiawan, Sinapore, Phillipines, South Korea, India, China etc. ALL have higher student test scores and better educated workers AND their governments don’t tax businesses forcing them to leave their countries.

          It’s simple…
          And NO, it isn’t slave labor or environmental sweat shops.
          America just isn’t competitive anymore and our Government is the primarily cause!

  • The WTO is owned by the European. They allow European countries to have double protectionism (European federalist taxes + local national taxes) and allow more subsidies from their countries.

    I agree with free trade as in no governmental restrictions on our borders, but that doesn’t mean everyone should buy crap from other countries.

  • Big V

    How in the world can one have free trade with a country that does not partipate in the free market? China does not do “free” anything. They opress their people’s wages and devalue their currency on purpose. They peg it to the dollar.

  • Jonathan

    I’m uncomfortable with unilateral free trade, although I understand it in principle. Ever since Alexander Hamilton, tariffs are a Constitutionally valid way to protect industries and raise revenue. Using Ayn Rand’s interpretation of “initiation of force” by democracies against non-democracies, the US government is within its rights to impose tariffs and bans against the goods of authoritarian nations.

    The most palatable argument for unrestricted free trade that can be made to protectionists like myself is Hume’s Price-Specie Flow Mechanism. So in theory, if every nation adopt a gold standard and didn’t devalue their currencies against that standard by running the printing presses, it would be very costly to engage in mercantilism or currency manipulation. Unfortunately the theory falls flat when governments and banks drop the gold standard and generate dollars out of thin air.

    This may explain why Ron Paul says he’s for free trade but still voted against NAFTA and WTO. So far I haven’t heard anyone in Paul’s campaign make the Humean balance-of-payment argument.

  • Ace81