Adam Smith on the US trade war against China
We all know the novel in which the issue of the trade war between the two great world powers has become. There have been numerous obstacles to trade between the two nations and to understand better because nobody wins with these decisions we are going to interview Adam Smith, the author of The Wealth of Nations and considered the father of free trade and the modern economy:
- Let’s start with the basics, what is your position on the idea of the trade balance?
The reality is that there is nothing more absurd than this whole doctrine of the trade balance, on which all the restrictions and regulations that affect trade are based. This doctrine scattered by mercantilists around the world who aspire to monopolize the offer in their country of origin means that when two places trade and the balance is balanced, then nobody wins or loses, but if the balance tilts to one side then one wins and the other loses in proportion to that deviation from the balance.
This is totally false because the trade that takes place naturally and regularly between two nations, without coercion or restriction, is always advantageous for both, although not always the same proportion.
I want to clarify that the benefit obtained in trade with another nation is not the increase in dollars, but in the exchange value of the annual product of the land and labor of a country, that is to say: the increase in the annual income of their habitants.
- And why is this doctrine absurd?
Let me give an example of everyday life: during the whole year the supermarket does not give me any money, so the trade balance between the company and me is totally tilted for its side, but in exchange for my money it always gives me the goods necessary to survive.
- Why do you think this commercial war started?
Because the advisers of President Trump have tried to teach that his interest, and therefore that of their nation, consists in ruining all their neighbors. They have tried to make the general population look with envy on the prosperity of any of the nations with which they trade, and consider that benefit as their own loss. Trade, should be between nations in the same way as between individuals, that is: a bond of union and friendship, but by this doctrine has become a fertile field for disagreement and animosity.
- And as in every issue of the economy, the injured is always the same…
Without a doubt, because in any country the interest of most people is and should be to buy everything they need from those who sell it cheaper. This is so obvious that it seems ridiculous to bother to prove it, and it would never have been questioned if it were not because the interested group of industrialists and manufacturers fused the common sense of the people. In this sense, their interest is directly opposed to that of the majority of the people.
Trade, should be between nations in the same way as between individuals, that is: a bond of union and friendship, but by this doctrine has become a fertile field for disagreement and animosity.
- And how would the US benefit from free trade with China?
Trade between people and nations is identical in many ways: A rich man will probably be a better client than a poor man for the industrious people of his neighborhood, and the same happens with a rich nation. It is true that a rich man who is also an industrialist turns out to be a dangerous neighbor for all those who work in the same field. But all the other neighbors, and undoubtedly represent a much larger number, benefit from the wide market that their spending brings them.
People who want to amass a fortune do not even think of retiring to the poor provinces of the country, but they go to the capital or to one of the big commercial cities. They know that where little wealth circulates, little can be obtained, but where a colossal volume is set in motion, a part of it can touch them.
This reasoning that in this way would direct the common sense of one, ten or twenty individuals, should regulate the judgment of one, ten or twenty million, and make the whole nation see the riches of the neighbors as a probable cause and occasion for accumulate riches herself.
A nation that can be enriched by foreign trade is much more likely to succeed when its neighbors are commercial, wealthy, and laborious nations.
- What is the path that these two nations should take?
As a consequence of this indoctrination, trade between the US and China has been subject to numerous obstacles and restrictions. If these countries took care of their true interests, devoid of commercial suspicion or national animosity, US trade would be more profitable for China than that of any other country, and for the same reason China’s trade for the United States.
- Thank you, Mr. Smith.
