Mainstream commentators and analysts taut how the notion of having a trade deficit hurts the economy of the nation receiving the imports. They cite stats and these stats are never given any explanation or rational support. Next, the presuppose that the stats, can provide axiomatic proof that trade deficits are harmful for the economy. As I have previously stated, the notion of a trade deficit is fallacious. The notion of free trade benefits all parties involved, as it is a net benefit for the participants in the trade.
Free Trade is a Benefit
Free Trade is determined as a benefit, not based on a posteriori, or empirical evidence, is determined by a priori analysis. It is a benefit for both parties involved in the trade. As previously stated on this blog, free trade action is rooted in the law of marginal utility. Both parties improve based on this unequal exchange of value. The accounting of the exchange is equal, despite the false claims by the critics of free trade, but the items traded have varying values respective to the two parties’ individual utility ranking of goods. However, since humans are constantly seeking to serve their self interest, both parties are trading for their benefit. It is not a zero sum game, or to wit: trade does not comprise a winner vs a loser in the exchange.
Critics of Free Trade are incorrect in stating that one party does not benefit from trade. This can be proven with a priori analysis. While using empirical evidence is helpful, it is limited in its use to debunk the benefits of trade. Trade, at its core, is between two parties, as both parties voluntarily seek to improve their situation with the end results of the trade. Placing restrictions, barriers, and additional regulation on that exchange, simply makes it more difficult for both parties to win. In short, trade is a win/win for all parties involved.