Here we see the view, commonly held by the media and non-economists in our universities, that international trade is a competition, analogous to sports or military competition (sometimes, “trade competition” is compared to the Cold War). If the playing field is not level, then the trade is not fair. Economists, and this view is not limited to Austrians, understand that international trade is the fruit of cooperation, not competition. America and China are not trade competitors. Paul Krugman thoroughly demolishes this fallacy in “The Illusion of Conflict in International Trade” (reprinted in Krugman’s Pop Internationalism). Krugman explains that in international trade “it is the illusion of economic conflict, which bears virtually no resemblance to the reality, that poses the real threat.”
There are two main fallacies in this paragraph. The first is that of a false dichotomy. The second is the blatant ignorance of domestic economic policy as it relates to trade policy.
Regarding the former, it is wholly fallacious to say that trade is either analogous to competition or to cooperation. The truth is that there are elements of both. An automobile manufacturer, for example, must cooperate with its suppliers, distributors, and customers. It must also compete against other automotive manufacturers, as well as any company that manufactures substitute goods. Both comparisons can be correct, depending on how they’re applied, and it is thus fallacious to claim that trade is comparable to one or the other when it can be comparable to both.
Regarding the latter, it is quite fallacious to ignore reality when discussing policy. The fact of the matter is the US economy is quite hindered by regulations in ways that many foreign countries are not. It is not at all fair or free to allow foreign companies to compete with domestic companies when domestic companies have been hamstrung by the federal government. I’ve written extensively on this before, so I will not repeat myself here.<
In all, the case for free trade is often predicated on focusing on theory at the expense of reality, and building arguments on obvious fallacies. If this is the best free-traders have to offer, in the way of argumentation, perhaps they should reconsider their position.