Imports, we’re told (ad nauseam) by President Trump and his nationalist supporters, “rip off” the importing country. They substitute for domestic production and destroy domestic jobs—again, according to this line of thinking. And, if we follow this nationalist-protectionist viewpoint to its logical conclusion, exports are also bad because they use domestic resources to produce goods for foreigners.

We should therefore conclude that blockading Iran is helping Iranians—making Iran great again, so to speak. It delivers them from the curse of imports. In addition, because foreign trade is generally bad, blockading Iranian oil exports is also good for everybody else in the world. The reduction of oil trade partly delivers “us” from the curse of imports, if only because of the higher price of the stuff. (Note that a blockade, contrary to an embargo, directly hits both exports and imports of the targeted country, and needs to be imposed militarily.) A global golden age is coming, apparently.

At least, that’s what a protectionist should claim. So, what is, or was, all the fuss about closing the Strait of Hormuz?

Liberals strike back / Economics takes a decidedly different view: Free international trade is beneficial for the same reasons that free domestic trade is. Voluntary exchange is good.

Worldwide mercantilism is, of course, an impossibility. (Protectionism is the belief that imports must be restrained; mercantilism adds that exports must be promoted.) All countries cannot only export. Perhaps the mercantilists believe, in a sort of Marxist way, that importers and buyers are exploited by capitalist exporters and sellers, and the mercantilists want to be on the side of the exploiters. Ultimately, they would want to produce all the oil that consumers want. Under those conditions, it is true, blockading Gulf oil is good for the blockader’s oil producers, who might gain new customers and, more importantly in a world market, get a higher price for their own product. But the exploitation argument is difficult to justify morally and is certainly not an argument for peace in the world. (“There goes my Nobel Peace Prize,” could say a believer in the exploitation argument.)

A clear analysis of these issues requires an understanding that countries do not trade. Those who trade are individuals and the private entities that act as their intermediaries (as merchants or as purchasers of inputs in production). Of course, public bodies can also legitimately trade, but they are often illegitimate traders that have coercively closed trading opportunities to private actors except for their cronies.

Free-market exporters are those producers who have a comparative advantage in the sense that they can produce some goods (or services) at lower cost than producers in other countries. A blockade of oil exports from Iran thus harms both exporters there and foreign consumers. Importers are those who buy some goods because their fellow countrymen cannot offer them on better terms. A blockade harms would-be importers because prices of the blockaded goods will be bid up on world markets. Autarky and bans (total or partial) are detrimental to nearly everybody because everybody must pay more and suffer a lower standard of living as a result, except government cronies protected from competition.

The monopolization of oil production and export in a country like Iran throws a wrench in trade, but the wrench hits primarily the subjects of such a state. Other private parties in the world can continue trading.

War and peace / Outside the case of war, it is true that domestic producers who try to produce goods or services that their countrymen can get at lower cost elsewhere are harmed by free trade, although they are otherwise benefited as consumers. It is possible that some producers—individuals too old to switch jobs or shareholders who have invested in inefficient industries—lose more as producers than they gain as consumers. But rare are those who do not—in general and over their whole lives—benefit from living in a free society, which necessarily includes free trade. With rare exceptions, the only ones who lose from living in a free society are those who, with the help of their protectionist government, would have exploited their fellow citizens.

War, of course, throws a wrench in free trade. But this is not a reason to throw the same wrench in peacetime. As Henry George noted, protectionism teaches us “to do to ourselves in time of peace what enemies seek to do to us in time of war.” Except if one is a collectivist or believes that individuals are merely cells in big state organisms, it is very difficult to be a coherent protectionist or mercantilist.

All that seems impossible to understand for interventionist and protectionist governments of the left or the right. Public choice theory explains why the rulers don’t try to understand: The concentrated and organized interests of producers provide more support to politicians than the dispersed and less vocal interests of consumers. Said differently, control of the economy personally benefits the rulers. As Lord Acton wrote, “Power tends to corrupt and absolute power corrupts absolutely.”

Readings

• Dalberg-Acton, J.E.E. (Lord Acton), 1906, Letter to Archbishop Creighton, April 5, 1887, in Lectures on Modern History, Macmillan, 1906 (available on Econ​lib​.org).
• George, Henry, 1886, Protection or Free Trade: An Examination of the Tariff Question, with Especial Regard to the Interests of Labor, Double, Page & Co. (available on the Online Library of Liberty).
• Lemieux, Pierre, 2018, “Putting 97 Million Households through the Wringer,” Regulation 41(1): 8–11.