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The U.S. has dramatically reduced trade barriers since the Great Depression. In 1932, (after the
enactment of the Smoot-Hawley Tariff in 1930) the average tariff rate on dutiable imports was
almost 60%. Today the average tariff rate on dutiable imports is less than 3%. The resulting
increase in international trade, especially after World War II, has greatly benefited the U.S.
economy.
Example 14: According to research by Bradford, Grieco, and Hufbauer, the reduction of trade
barriers since World War II has added between $800 billion and $1,400 billion annually to the
U.S. economy. Removal of remaining U.S. trade barriers would add between $400 billion and
$1,300 billion annually to the U.S. economy.
Still, there will always be domestic producers who would like to see increased restrictions on
imports. And there will always be elected officials willing to sacrifice economic efficiency for
political gain.
Appendix: “Petition of the Candlemakers”
In 1845, French economist Frédéric Bastiat published “Economic Sophisms”. Included in Chapter
7 of the First Series was a satirical attack on trade restrictions in the form of a fictitious petition of
the candlemakers for protection from unfair competition. The petition, abridged, is below:
“A Petition from the Manufacturers of Candles, Tapers, Lanterns, Candlesticks, Street
Lamps,…and Generally of Everything Connected with Lighting
To the Honorable Members of the Chamber of Deputies.
Gentlemen:
You are on the right track. You reject abstract theories and have little regard for abundance
and low prices. You concern yourselves mainly with the fate of the producer. You wish to free
him from foreign competition, that is, to reserve the domestic market for the domestic industry.
We are suffering from the ruinous competition of a rival who apparently works under
conditions so far superior to our own for the production of light that he is flooding the domestic
market with it at an incredibly low price; for the moment he appears, our sales cease, all the
consumers turn to him, and a branch of French industry…is all at once reduced to complete
stagnation. This rival…is none other than the sun…
We ask you to be so good as to pass a law requiring the closing of all windows, dormers,
skylights, inside and outside shutters, curtains…in short, all openings, holes, chinks, and
fissures through which the light of the sun is wont to enter houses…”
Appendix: Comparative Advantage versus Absolute Advantage
In the comparative advantage example on page 16-2, Country X has a comparative advantage in
producing wheat (can produce wheat at a lower opportunity cost than Country Y). Country X also
has an absolute advantage (greater productivity than Country Y) in producing wheat.
Country Y has a comparative advantage in producing bananas (can produce bananas at a lower
opportunity cost than Country X). Country Y also has an absolute advantage (greater productivity
than Country X) in producing bananas.
Is it necessary for a country to have an absolute advantage in producing a good in order to have
a comparative advantage? No. A country can be at an absolute disadvantage (less productivity)
in producing all goods and still have a comparative advantage in producing some goods.
FOR REVIEW ONLY - NOT FOR DISTRIBUTION
Let’s alter the comparative advantage example from page 16-2 to put Country X at an absolute
disadvantage in producing both wheat and bananas. We will do this by assuming that Country X
International Trade 16 - 8