In late 2023, I compared the world’s top-10 free trade jurisdictions and the world’s top-10 protectionist nations.
The numbers were shocking.
- Average per-capita economic output in the 10 ultra-free trade jurisdictions was more than $46.5 thousand.
- The ultra-protectionist nations, by contrast, had average per-capita GDP of only about $3.2 thousand.
I acknowledged in that column that there are many reasons why free-trade jurisdictions are far more prosperous than protectionist countries (fiscal policy, regulatory policy, monetary policy, etc).
But differences in trade policy surely must be part of the reason that some places are much richer than other places.
Today, let’s do something similar. We’ll start with this chart from Professor Russ Roberts (formerly of George Mason University, now with Shalem College in Israel).
I added (in green) a line showing the long-run trend. As you can see, trade taxes have been declining in America over the past 200 years.
At the risk of understatement, moving from trade taxes of 50 percent to trade taxes of about 5 percent is a giant decline.
If Trump and other protectionists are correct, the shift to free trade should have been bad news for American prosperity.
So now let’s go to Our World in Data at Oxford University to look at inflation-adjusted per-capita GDP in the United States.
Lo and behold, I don’t need to add any lines. The data is abundantly clear. Americans have become amazingly richer.
What does this mean?
Professor Roberts wrote that “the US has become more open to trade over time. The standard of living for the typical American over this time is 20-30 times higher, if not more. Correlation is not causation. But freer trade didn’t coincide with economic hardship.”
In other words, he’s not claiming that lower trade taxes caused living standards to climb 20-30 times. But he is suggesting freer trade played a role.
More important, I think he is indirectly putting forth a challenge to our protectionist friends: Can they show any evidence of protectionism producing prosperity? Don’t hold your breath expecting an accurate answer (Trump misrepresents and misunderstands the 1800s, so that’s not a legitimate response).
