Trade is Cooperation, Not War

First, I will admit that this was probably a throwaway line, but it does represent the worldview of a lot of Americans.  In an article showing a funny story about poor preparation of college students, Kevin Drum ended with this:

This does not bode well for our coming economic war with China, does it?

Trade is not war.  Trade is cooperation, exactly the opposite of war.   By definition, it benefits both parties or it would not occur, though of course it can benefit one more than the other.

Treating trade like war is a very dangerous game engaged in by some politicians.  At best, it leads to protectionism that makes the country poorer.  At worst, it can lead to real war.

Consider two examples of a country treating trade like war, both from Japan.  In the 1930's, Japan developed an imperial desire to directly control all the key resources it needed, rather than to trade for them.  The wealthy ports of China and iron-rich Manchuria were early targets.   This desire was compounded when the US used trade embargoes as a policy tool to protest Japanese invasions and occupation of China.  This eventually led to war, with Japan's goal mainly to capture oil and rubber supplies of southeast Asia.  Obviously, this effort led to Japan essentially being left a smoking hole in the ground by late 1945.

The second example was in the 1980's, as Japan, via MITI, actively managed its economy to promote trade.  The "trade as war" vision was common among Japanese leaders of the time.  The results was a gross, government-forced misallocation of resources and bubble in the real estate and stock markets that led to a couple of lost decades.



  1. Dale:

    Trade between individuals is not the same thing as trade between nations.

    First world economy’s competing against each other in fair trade is one thing, however, a first world economy competing against second or third world economys is something wholly different. In that case you have first world workers being forced to compete against basically slave labor.

    I have never bought into the argument that all protectionism is bad.

  2. blokeinfrance:

    Thoreau (the original poster) was asked how many atoms were in a cubic centimetre of water. So dissed the student.
    Can anyone on this blog answer that question to one order of magnitude?
    And yet it's considered a stupid question.
    Sure, it's x molecules divided by 3, so let's concentrate on atoms not H2O and we'll correct for temperature and pressure...

    I was rather hoping that American professors would give my boys a good start in life if I saved and paid up. Not any more. Sorry kids, you can go to crappy French facs and sink or swim and American universities can stay complacent.

  3. Not Sure:

    "Trade between individuals is not the same thing as trade between nations."

    What does the government of the US trade with the government of China?

  4. John Moore:

    China views trade as a weapon of war, and China views itself as being at war with the United States. Not a shooting war (yet), but a war nonetheless. China has reverted to historical form, which is strongly nationalist and xenophobic.

    Remember, China is not libertarian, liberal, or free. China is a fascist state. It is run for the benefit of the fat cats in the party hierarchy. For example, it uses political prisoners for organ harvesting (to the benefit of those fat cats). It is capable of extreme brutality without remorse.

    This means that China "cheats" by any and all means. It steals information using espionage (which is a dirty business involving extreme coercion at times). It violates intellectual property rights. It has monopolized the rare earth supply chain and used that directly to harm competitors by denying them supply. It would have no qualms about using military force in furtherance of both its imperial and economic goals.

    Over 50% of Chinese manufacturing is by state owned enterprises (which, not surprisingly, aren't as efficient as others).

    Economic theory says that the Chinese will harm themselves by this behavior, and this is largely true. But they also harm us and the rest of the world (e.g. rare earths action). Their foolishness may be our pain.

    If we act in a protectionist manner, we will likely hurt ourselves. But it is important to understand the nature of our trading partner and geopolitical and economic adversary.