THE FREE TRADE PLANK: COMPETITIVE
(published in The Vancouver Sun, June 19, 1986)
by Marco den
... who edits
Wings of Freedom,
the newsletter of the Libertarian Party of Canada.
Frederic Bastiat, the great economic pamphleteer and champion of free
trade, tells a story about Robinson Crusoe in his classic
Crusoe was about to cut down a tree to make a board when he noticed a
plank cast up on the beach. A lucky break, one would think. But Crusoe
squelched his initial enthusiasm and reasoned:
"If I go to get that plank it will cost me only the exertion of
carrying it, and the time needed to go down to the beach and climb back
up the cliff.
"But if I make a plank with my axe, first of all I shall assuring
myself of two weeks labor; then, my axe will become dull, which will
provide me with the job of sharpening it; and I shall consume my
provisions, making a third source of employment, since I shall have to
"Now, labor is wealth. It is clear that I shall only be hurting my
own interests if I go down to the beach to pick up that piece of
driftwood. It is vital for me to protect my personal labor, and, now
that I think of it, I can even create additional labor for myself by
going down and kicking that plank back into the sea!"
Bastiat then explains that that absurd line of reasoning is exactly
the one followed by nations with protectionist policies. Such a nation
"kicks back the plank that is offered it in exchange for a little labor,
in order to give itself more labor."
There is more than little irony in the fact that the United States
proceeded to scuttle U.S.-Canadian free trade talks in kicking cheap
Canadian planks back into the sea by putting a 35 per cent tariff on
Canadian shakes ands shingles.
The rationale behind this move is the charge that Canada unfairly
subsidizes its lumber industry through low stumpage fees. Most forests
are on crown land and Canadian forest companies pay their provincial
governments a set fee for each tree logged. In contrast, the American
forest companies bid competitively for the right to log government land.
If the Canadian system is unfair to anyone, it is not to the
Americans, but to Canadian taxpayers, who have to pay higher taxes to
make up for revenue the government could get for the crown's trees but
doesn't. The Americans, far from being victims, are beneficiaries of
Canadian government largesse to the forest companies.
The problem is that neither side in the trade talks understands what
are the benefits of a free-trade area. Each sees free trade as beneficial
only if it helps domestic industry.
The Americans fear their lumber industry is jeopardized by cheap
Canadian imports. Canadian fruit growers and other agricultural
producers worry lest their industry be harmed by cheap Yankee produce.
But both sides want expanded markets for what they produce at lower
cost. Both sides calculate whether their increased exports outweigh
their increased imports.
In fact both sides are looking at the issue from the wrong
perspective. Free trade is beneficial not because it provides greater
opportunity for increased exports, but rather because it provides
cheaper goods for domestic consumers. Labor is not wealth. Goods are.
But what of the threat to domestic industry presented by cheap
foreign goods? Bastiat answers by postulating that Crusoe could devote
the time saved by retrieving the free plank to doing something else.
Crusoe, "with incredible blindness, confused labor with its result, the
end with the means."
In the case of the United States, while it is true that a certain segment
of its population may become temporarily unemployed as a result of an
influx of cheap Canadian wood, it won't have any less wood available. "A
little circumstance that makes all the difference in the world," as Bastiat puts it. And into the bargain, the U.S. will have additional
labor to produce other goods and services.
Free trade is beneficial because it benefits consumers. Labor may be
temporarily unemployed, but not at the cost of any real wealth. And in
the long run wealth will be greatly increased because the labor saved by
importing cheap goods will go to creating more wealth.
That the U.S. blundered in putting a tariff on our
lumber ought not to alter Canada's stand. Compounding U.S. stupidity by
throwing cheap U.S. computers and books into the sea only shows the
Canadian government can be as stupid as the American.
The best position our government could take would be to unilaterally
abolish all tariffs and restrictions on foreign goods. If foreigners
(including Americans) want to hurt their own populations by depriving
them of cheaper goods, let them. But let's not punish the Canadian
consumer for American shortsightedness!
This article appeared as an Op-Ed piece in The Vancouver Sun on
June 19, 1986. The original piece can be