13 April 2008

Trade, agriculture and Wealth of Nations

After looking at the problem in Mexico due to NAFTA, namely that Mexico has seen its traditional bottom rungs of the economic ladder removed first by the exposure to highly automated US agricultural goods, then to the industrialization/de-industrialization happening on the US/Mexican border as US companies first stood up industries in that corridor and then shifted production to even lower cost China and the Far East, and then getting the final whammy of skyrocketing corn prices as US ethanol production began to surge.  To be considered a stalwart friend and ally, these are not things a nation should encourage its industries to do, nor should treaties be signed to target the very poorest of a Nation.  Free trade has its limits, and while the long-term may be somewhat brighter, the immediate short-term indicates a rising criminal insurgency as those organizations able to exploit low cost labor do so:  organized crime.  This is not the traditional Mexican organized crime cartels, as they have been liquidated by the rising drug gangs first along the border and then deeper into Mexico.  These gangs are fueled by multiple sources, as I cited in the last article:  FARC, S. American drug kingpins and gangs, Red Mafia groups, and a small but troubling presence of Islamic terrorist organizations like HAMAS, Hezbollah and al Qaeda.  This is not their order of danger, however, as that would be relatively reversed, and it is not their order of financial ability to back an insurgency, where the Red Mafia would be supreme.

What has fueled this is the notion that 'free trade' as it applies to agriculture is a 'boon' to all involved.  And the typical first citation for free trade comes from those on the Right who point to Adam Smith and his work An Inquiry into the Nature and Causes of the Wealth of Nations, available at Project Gutenberg, normally addressed as Wealth of Nations (WoN).  This is the first of the great economic inquiries into why and how industrial production of the individual function allotted to an individual in a production schema yields higher output for the entire system.  As such it is groundbreaking and highly insightful into what would become the production line and is an essential blueprint for it.  Further the recognition of the absolutely key factor of overseas trade as a lynchpin for increased economic activity is as applicable to today's world as it was to Smith's world.  Indeed, the entire description of distributed and specialized production described in WoN, almost perfectly, today's computer industry where parts from Ireland, Germany, India, Thailand, Malaysia, Singapore, Taiwan, China, Japan and the US allow for the PC platform, as a whole, to be driven downwards in price and upwards in capacity at a truly awe inspiring rate.  These technologies, in turn, are transforming societies across the globe and establishing a new and distributed form of thinking and approaching technology and trade.

WoN is one of many seminal works that came from the latter part of the 18th century, and is the same lineage as the work by Emmerich de Vattel on The Law of Nations, available at constitution.org).  These two works, taken as a whole, describes a system of nation states that is the full and foundational basis for the modern world: without these two works and the seminal understandings of nations and economies, there would be no founding for the entire set of discussions that would happen thereafter to better create, regulate and regularize that system of nations and trade between nations.  On the more amusing flip-side, that same system, without description or backing by rational discourse and understanding would *still* come about, although it would be necessary to describe it and then derive LoN and WoN to accurately understand what was going on and *why* it was happening.

The only thing that could be seen as lacking from that era, was an understanding that the derived products of that described system would form a feed-back loop into the entire economic cycle from top to bottom.  The only place that Adam Smith would fall down is the one we are now living with as it was a trifling oversight at the time, and yet has extreme ramifications for our modern era.  Now if any writer beyond myself needed a copy editor it is Adam Smith who, perhaps, wrote with a density of ideas that made the normal paragraph wither in its draftiness, so I will need to try and break out ideas from within longer paragraphs, which will do some violence to the overall host paragraph, but I will do my best to address that as I go along.

When looking at the nature of industrial piecework, that is the subdivision of a job into many smaller job functions, each performed by a dedicated individual, the first problem that strikes the modern eye is this, from Chapter I, Part I, and this is an *excerpt*:

The nature of agriculture, indeed, does not admit of so many subdivisions of labour, nor of so complete a separation of one business from another, as manufactures. It is impossible to separate so entirely the business of the grazier from that of the corn-farmer, as the trade of the carpenter is commonly separated from that of the smith. The spinner is almost always a distinct person from the, weaver; but the ploughman, the harrower, the sower of the seed, and the reaper of the corn, are often the same. The occasions for those different sorts of labour returning with the different seasons of the year, it is impossible that one man should be constantly employed in any one of them. This impossibility of making so complete and entire a separation of all the different branches of labour employed in agriculture, is perhaps the reason why the improvement of the productive powers of labour, in this art, does not always keep pace with their improvement in manufactures. The most opulent nations, indeed, generally excel all their neighbours in agriculture as well as in manufactures; but they are commonly more distinguished by their superiority in the latter than in the former. Their lands are in general better cultivated, and having more labour and expense bestowed upon them, produce more in proportion to the extent and natural fertility of the ground. But this superiority of produce is seldom much more than in proportion to the superiority of labour and expense. In agriculture, the labour of the rich country is not always much more productive than that of the poor; or, at least, it is never so much more productive, as it commonly is in manufactures. The corn of the rich country, therefore, will not always, in the same degree of goodness, come cheaper to market than that of the poor. The corn of Poland, in the same degree of goodness, is as cheap as that of France, notwithstanding the superior opulence and improvement of the latter country. The corn of France is, in the corn-provinces, fully as good, and in most years nearly about the same price with the corn of England, though, in opulence and improvement, France is perhaps inferior to England. The corn-lands of England, however, are better cultivated than those of France, and the corn-lands of France are said to be much better cultivated than those of Poland. But though the poor country, notwithstanding the inferiority of its cultivation, can, in some measure, rival the rich in the cheapness and goodness of its corn, it can pretend to no such competition in its manufactures, at least if those manufactures suit the soil, climate, and situation, of the rich country. The silks of France are better and cheaper than those of England, because the silk manufacture, at least under the present high duties upon the importation of raw silk, does not so well suit the climate of England as that of France. But the hardware and the coarse woollens of England are beyond all comparison superior to those of France, and much cheaper, too, in the same degree of goodness. In Poland there are said to be scarce any manufactures of any kind, a few of those coarser household manufactures excepted, without which no country can well subsist.

Here the main ideas are as follows: agriculture is not easily labor divisible due to seasonal timing and instancing of labor types, and, increased cultivation does not necessarily mean increase in bounty of harvest or to a better product, overall.  The major inventions up to that point in time, in agriculture were ones that seemed incredibly stable for production of farm goods.  The plough, first seen in 4000 BC, had caused the first and greatest upheaval of mankind as one individual could now produce more food goods than were required for himself or his family.  What that did was attach individuals to a plot of land to attend to, and would cause the rise of towns and trade centers.  Soon afterwards the use of animal and human waste as fertilizer and irrigation, would spur on agriculture in the fertile crescent while the Nile would provide a similar boon to Egypt.  Adam Smith does a splendid job recounting these changes across a diverse set of areas from Egypt to India in looking at the basis for agriculture as he knew it.  WoN is a deeply historical work, drawing on historical knowledge and precedents to offer insight into modern reasoning on economics, which also makes it a fantastic history text for economics.

By the time of the 18th century, the oxen or horse pulled plough, use of canals for transport and the need to put permanent buildings down for agriculture is centuries old.  While the iron and steel plough would replace wooden and copper ones, the actual business of farming remained unchanged.  And, until the start of larger cultivators drawn by animals and the first animal drawn combines in the early 19th century, the ability to see any end to this basic system of agriculture  was not apparent.  Even to this day, the modern farm often has a farmer of workman doing many unrelated tasks during a working day, that are not amenable to piecework.  But even this is changing as the entire business of agriculture is seeing the first prototype Robofarm being set up in California that requires a grand total of one individual to run it.  In less than 250 years modern technology has transformed agriculture like no other business on the planet, allowing far fewer individuals to produce more goods than ever before.

In the US the stand-down of the need for a large agricultural workforce and the need for a growing industrial workforce went in tandem.  The demographic shift from the first steam driven combines dovetailed neatly at the end of the 19th century with the stand-up of the factories to produce the raw materials for a new and industrialized nation.  In less than 50 years from the end of the 19th century to 1940, the US went from a majority agricultural labor force to a majority manufacturing labor force, and yet farm production grew because of this.  To accomplish this, however, agriculture went from humans performing many disparate tasks to machines doing that and then, as the name implies, combining multiple tasks into one machine and now having multi-purpose, multi-task machines that can change tasks as needed.

Adam Smith was cognizant of these things, however, and addressed them:

The establishment of any new manufacture, of any new branch of commerce, or of any new practice in agriculture, is always a speculation from which the projector promises himself extraordinary profits. These profits sometimes are very great, and sometimes, more frequently, perhaps, they are quite otherwise; but, in general, they bear no regular proportion to those of other old trades in the neighbourhood. If the project succeeds, they are commonly at first very high. When the trade or practice becomes thoroughly established and well known, the competition reduces them to the level of other trades.

Secondly, this equality in the whole of the advantages and disadvantages of the different employments of labour and stock, can take place only in the ordinary, or what may be called the natural state of those employments.

Which brings us to the Third World, poor capital investment and the inability of poor nations to get regularized, liberal economies that actually are of benefit to the greater society of those nations.  Part of the problem of the modern day world is that all nations do not adapt nor cope equally to change, nor have societies that see a need to adopt new and better methods of employment, manufacturing or agriculture.  Those who press 'free trade' as the universal panacea and then take up the view 'well their societies will adjust over decades' take a very patronizing view of this most reasonable view on the efficacy of trade and increased manufacturing as a result of it.  Even worse, in not recognizing that the underpinnings at the lowest level of the 'free trade' argument are based upon a relatively fixed view of the lowest and most needful type of work, that of agriculture,  the profession of 'free trade' to economies where large percentages of the population are *still* in subsistence agriculture means an uprooting of a vast swath of the population as older and less efficient means of agricultural production are exposed to the most modern and capital intensive forms of agribusiness the planet has to offer.

This is, in many respects, a Faustian bargain, where the supposed greater good of removing trade barriers for agriculture means that social unrest on a vast scale is not only likely but probable.  And it is this bargain that runs straight into the other work, Law of Nations.  In Book I, starting at paragraph 12, the object of a nation is its own preservation and perfection, that is to render government to the ends of civil society and to have government that will achieve accord with the society that it is beholden to.  That societal view is summed up in this paragraph:

§ 15. What is the end of civil society.

The end or object of civil society is to procure for the citizens whatever they stand in need of for the necessities, the conveniences, the accommodation of life, and, in general, whatever constitutes happiness, — with the peaceful possession of property, a method of obtaining justice with security, and, finally, a mutual defence against all external violence.

It is now easy to form a just idea of the perfection of a state or nation: — every thing in it must conspire to promote the ends we have pointed out.

Nothing overly complex in overview, and echoed years later as 'life, liberty and the pursuit of happiness'... you didn't think that was original with Jefferson, did you?  Vattel then goes through, piece by piece on constitutions (or lack of same) civil law, and onwards to the responsibility of the sovereign (or ruling organization) of a nation.  Starting at Chapter VI, looking at good government... you do know that there is an actual, real, definition of good government that pre-exists the US, right?... there is this most wonderful of juxtapositions that ties two things together:

§ 72. The object of society points out the duties of the sovereign.

AFTER these observations on the constitution of the state, let us now proceed to the principal objects of a good government. We have seen above (§§ 41 and 42) that the prince, on his being invested with the sovereign authority, is charged with the duties of the nation in relation to government. In treating of the principal objects of a wise administration, we at once show the duties of a nation towards itself, and those of the sovereign towards his people.

A wise conductor of the state will find in the objects of civil society the general rule and indication of his duties. The society is established with the view of procuring, to those who are its members, the necessaries, conveniences, and even pleasures of life, and, in general, every thing necessary to their happiness, — of enabling each individual peaceably to enjoy his own property, and to obtain justice with safety and certainty, — and, finally, of defending themselves in a body against all external violence (§ 15). The nation, or its conductor, should first apply to the business of providing for all the wants of the people, and producing a happy plenty of all the necessaries of life, with its conveniences and innocent and laudable enjoyments. (25). As an easy life without luxury contributes to the happiness of men, it likewise enables them to labour with greater safety and success after their own perfection, which is their grand and principal duty, and one of the ends they ought to have in view when they unite in society,

§ 73. To take care that there be a sufficient number of workmen.

To succeed in procuring this abundance of every thing, it is necessary to take care that there be a sufficient number of able workmen in every useful or necessary profession. (26) An attentive application on the part of government, wise regulations, and assistance properly granted, will produce this effect without using constraint, which is always fatal to industry.

§ 74. To prevent the emigration of those that are useful.

Those workmen that are useful ought to be retained in the state; to succeed in retaining them, the public authority has certainly a right to use constraint, if necessary. (27) Every citizen owes his personal services to his country; and a mechanic, in particular, who has been reared, educated, and instructed in its bosom, cannot lawfully leave it, and carry to a foreign land that industry which he acquired at home, unless his country has no occasion for him, (27) or he cannot there obtain the just fruit of his labour and abilities. Employment must then be procured for him; and, if, while able to obtain a decent livelihood in his own country, he would without reason abandon it, the state has a right to detain him. (28) But a very moderate use ought to be made of this right, and only in important or necessary cases. Liberty is the soul of abilities and industry: frequently a mechanic or an artist, after having long travelled abroad, is attracted home to his native soil by a natural affection, and returns more expert and better qualified to render his country useful services. If certain extraordinary cases be excepted, it is best in this affair to practise the mild methods of protection, encouragement, &c., and to leave the rest to that natural love felt by all men for the places of their birth.

§ 75. Emissaries who entice them away.

As to those emissaries who come into a country to entice away useful subjects, the sovereign has a right to punish them severely, and has just cause of complaint against the power by whom they are employed.

In another place, we shall treat more particularly of the general question, whether a citizen be permited to quit the society of which he is a member. The particular reasons concerning useful workmen are sufficient here.

§ 76. Labour and industry must be encouraged.

The state ought to encourage labour, to animate industry, (29) to excite abilities, to propose honours, rewards, privileges, and so to order matters that every one may live by his industry. In this particular, England deserves to be held up as an example. The parliament incessantly attends to these important affairs, in which neither care nor expense is spared. (30) And do we not even see a society of excellent citizens formed with this view, and devoting considerable sums to this use? Premiums are also distributed in Ireland to the mechanics who most distinguish themselves in their profession. Can such a state fail of being powerful and happy?

Where 'free trade' runs into the LoN, it is nations that govern, not the beauty of trade.  We can speak of the lack of wisdom of other governments that do not seek the prosperity of trade or that prevent it outright, but an enticement to more and better trade must be done within the bounds of what is good and right for the nations involved.  Indeed, in LoN an entire chapter is devoted to Commerce (Ch. VIII) and this is the context of trade in which Adam Smith is talking about, starting from the beginning of Ch. VIII in LoN:

§ 83. Of home and foreign trade.

IT is commerce that enables individuals and whole nations to procure those commodities which they stand in need of, but cannot find at home. Commerce is divided into home and foreign trade. (34) The former is that carried on in the state between the several inhabitants; the latter is carried on with foreign nations.

§ 84. Utility of the home trade.

The home trade of a nation is of great use; it furnishes all the citizens with the means of procuring whatever they want, as either necessary, useful, or agreeable; it causes a circulation of money, excites industry, animates labour, and, by affording subsistence to a great number of people, contributes to increase the population and power of the state.

§ 85. Utility of foreign trade.

The same reasons show the use of foreign trade, which is moreover attended with these two advantages: — 1. By trading with foreigners, a nation procures such things as neither nature nor art can furnish in the country it occupies. And secondly, if its foreign trade be properly directed, it increases the riches of the nation, and may become the source of wealth and plenty. Of this the example of the Carthaginians among the ancients, and that of the English and Dutch among the moderns, afford remarkable proofs. Carthage, by her riches, counterbalanced the fortune, courage, and greatness of Rome. Holland has amassed immense sums in her marshes; a company of her merchants possesses whole kingdoms in the East, and the governor of Batavia exercises command over the monarchs of India. To what a degree of power and glory has England arrived! Formerly her warlike princes and inhabitants made glorious conquests, which they afterwards lost by those reverses of fortune so frequent in war; at present, it is chiefly commerce that places in her hand the balance of Europe.

§ 86. Obligation to cultivate the home trade.

Nations are obliged to cultivate the home trade, — first, because it is clearly demonstrated from the law of nature, that mankind ought mutually to assist each other, and, as far as in their power, contribute to the perfection and happiness of their fellow-creatures: whence arises, after the introduction of private property, the obligation to resign to others, at a fair price, those things which they have occasion for, and which we do not destine for our own use. Secondly, society being established with a view that each may procure whatever things are necessary to his own perfection and happiness — and a home trade being the means of obtaining them — the obligations to carry on and improve this trade are derived from the very compact on which the society was formed. Finally, being advantageous to the nation, it is a duty the people owe to themselves, to make this commerce flourish.

§ 87. Obligation to carry on foreign trade.

For the same reason, drawn from the welfare of the state, and also to procure for the citizens every thing they want, a nation is obliged to promote and carry on a foreign trade. Of all the modern states, England is most distinguished in this respect. The parliament have their eyes constantly fixed on this important object; they effectually protect the navigation of the merchants, and, by considerable bounties, favour the exportation of superfluous commodities and merchandises. In a very sensible product,1 may be seen the valuable advantages that kingdom has derived from such judicious regulations.

This is the framework of trade that a sovereign government must attend to.  Foreign trade is not done for the benefit of the other nation involved, it is done for the benefit of one's own nation.  That is the theory, at least, but the object of dangling impossible to get at riches to societies that cannot support the means to acquire the money to trade for them is, perhaps, not the wisest of all routes to take when exciting trade with foreign nations.  In theory all nations need to look after their own welfare and it is THAT which the US should be cultivating abroad FIRST and FOREMOST, not trade agreements.  This is our understanding of the world as passed down through us and is a reasonable view to have based on nation states, from which this is a natural outgrowth. 

This is not only an attack on wealthy industries and individual using government to get trade agreements, for those who decry this offer NOTHING to put in its place to explain *why* trade *alone* is a dangerous thing to promulgate without the necessary understanding of how it operates as an underpinning.  That is old style liberalism of the school of Smith, Vattel, Grotius, Jefferson, Washington and a host of others.  Liberal trade agreements means that other nations must first understand what it is that nations do and why they do them.  And when the US presses 'free trade' agreements dangling riches out that *might* result from it, and then utilizes other agreements to leave those nations poorer, may I suggest that is a very, very illiberal thing to do?

After addressing the rights of buying and selling, and the need to support such rights and liberty, Vattel moves to this exact topic:

§ 90. Prohibition of foreign merchandise.

Every state has consequently a right to prohibit the entrance of foreign merchandises; and the nations that are affected by such prohibition have no right to complain of it, as if they had been refused an office of humanity.(37) Their complaints would be ridiculous, since their only ground of complaint would be, that a profit is refused to them by that nation who does not choose they should make it at her expense, It is, however, true, that if a nation was very certain that the prohibition of her merchandises was not founded on any reason drawn from the welfare of the state that prohibited them, site would have cause to consider this conduct as a mark of ill-will shown in this instance, and to complain of it on that fooling. But it would be very difficult for the excluded nation to judge with certainty that the state had no solid or apparent reason for making such a prohibition.

§ 91. Nature of the right of buying,

By the manner in which we have shown a nation's right to buy of another what it wants, it is easy to see that this right is not one of those called perfect, and that are accompanied with a right to use constraint. Let us now distinctly explain the nature of a right which may give room for disputes of a very serious nature. You have a right to buy of others such things as you want, and of which they themselves have no need; you make application to me: I am not obliged to sell them to you, if I myself have any occasion for them. In virtue of the natural liberty which belongs to all men, it is I who am to judge whether I have occasion for them myself, or can conveniently sell them to you; and you have no right to determine whether I judge well, or ill, because you have no authority over me. If I, improperly, and without any good reason, refuse to sell you at a fair price what you want, I offend against my duty: you may complain of this, but you must submit to it: and you cannot attempt to force me, without violating my natural right, and doing me an injury. The right of buying the things we want is then only an imperfect right, like that of a poor man to receive alms of the rich man; if the latter refuses to bestow it, the poor man may justly complain: but he has no right to take it by force.

If it be asked, what a nation has a right to do in case of extreme necessity, — this question will be answered in its proper place in the following book, Chap. IX.

§ 92. Every nation is to choose how far it will engage in commerce.

Since then a nation cannot have a natural right to sell her merchandises to another that is unwilling to purchase them, since she has only an imperfect right to buy what she wants of others, since it belongs only to these last to judge whether it be proper for them to sell or not; and finally, since commerce consists in mutually buying and selling all sorts of commodities, it is evident that it depends on the will of any nation to carry on commerce with another, or to let it alone. If she be willing to allow this to one, it depends on the nation to permit it under such conditions as she shall think proper. For in permitting another nation to trade with her, she grants that other a right; and every one is at liberty to affix what conditions he pleases to a right which he grants of his own accord.(38)

§ 93. How a nation acquires a perfect right to a foreign trade.

Men and sovereign states may, by their promises, enter into a perfect obligation with respect to each other, in things where nature has imposed only an imperfect obligation. A nation, not having naturally a perfect right to carry on a commerce with another, may procure it by an agreement or treaty. This right is then acquired only by treaties, and relates to that branch of the law of nations termed conventional (Prelim. § 24). The treaty that gives the right of commerce, is the measure and rule of that right.

§ 94. Of the simple permission of commerce.

A simple permission to carry on commerce with a nation gives no perfect right to that commerce. For if I merely and simply permit you to do any thing, I do not give you any right to do it afterwards in spite of me: — you may make use of my condescension as long as it lasts; but nothing prevents me from changing my will. As then every nation has a right to choose whether she will or will not trade with another, and on what conditions she is willing to do it (§ 92), if one nation has for a time permitted another to come and trade in the country, she is at liberty, whenever she thinks proper, to prohibit that commerce — to restrain it — to subject it to certain regulations; and the people who before carried it on cannot complain of injustice.

Let us only observe, that nations, as well as individuals, are obliged to trade together for the common benefit of the human race, because mankind stand in need of each other's assistance (Prelim. §§ 10, 11, and Book I. § 88): still, however, each nation remains at liberty to consider, in particular cases, whether it be convenient for her to encourage or permit commerce; and as our duty to ourselves is paramount to our duty to others, if one nation finds herself in such circumstances that she thinks foreign commerce dangerous to the state, she may renounce and prohibit it. This the Chinese have done for a long time together. But, again, it is only for very serious and important reasons that her duty to herself should dictate such a reserve; otherwise, she could not refuse to comply with the general duties of humanity.

§ 95. Whether the laws relating to commerce are subject to prescription. (39)

We have seen what are the rights that nations derive from nature with regard to commerce, and how they may acquire others by treaties: let us now examine whether they can found any on long custom. To determine this question in a solid manner, it is necessary first to observe, that there are rights which consist in a simple power: they are called in Latin, jura meræ facultatis, rights of mere ability. They are such in their own nature that he who possesses them may use them or not, as he thinks proper — being absolutely free from all restraint in this respect; so that the actions that relate to the exercise of these rights are acts of mere free will, that may be done or not done, according to pleasure. It is manifest that rights of this kind cannot be lost by prescription, on account of their not being used, since prescription is only founded on consent legitimately presumed; and that, if I possess a right which is of such a nature that I may or may not use it, as I think proper, without any person having a right to prescribe to me on the subject, it cannot be presumed, from my having long forborne to use it, that I therefore intend to abandon it. This right is then imprescriptible, unless I have been forbidden or hindered from making use of it, and have obeyed with sufficient marks of consent. Let us suppose, for instance, that I am entirely at liberty to grind my corn at any mill I please, and that during a very considerable time, a century if you please, I have made use of the same mill: as I have done in this respect what I thought proper, it is not to be presumed, from this long-continued use of the same mill, that I meant to deprive myself of the right of grinding at any other; and, consequently, my right cannot be lost by prescription. But now suppose, that, on my resolving to make use of another mill, the owner of the former opposes it, and announces to me a prohibition; if I obey his prohibition without necessity, and without opposition, though I have it in my power to defend myself, and know my right, this right is lost, because my conduct affords grounds for a legitimate presumption that I chose to abandon it. — Let us apply these principles. — Since it depends on the will of each nation to carry on commerce with another, or not to carry it on, and to regulate the manner in which it chooses to carry it on (§ 92), the right of commerce is evidently a right of mere ability (jus merae facultatis), a simple power, and consequently is imprescriptible. Thus, although two nations have treated together, without interruption, during a century, this long usage does not give any right to either of them; nor is the one obliged on this account to suffer the other to come and sell its merchandises, or to buy others: — they both preserve the double right of prohibiting the entrance of foreign merchandise, and of selling their own wherever people are willing to buy them. Although the English have from time immemorial been accustomed to get wine from Portugal, they are not on that account obliged to continue the trade, and have not lost the liberty of purchasing their wines elsewhere. (40) Although they have, in the same manner, been long accustomed to sell their cloth in that kingdom, they have, nevertheless, a right to transfer that trade to any other country: and the Portuguese, on their part, are not obliged by this long custom, either to sell their wines to the English, or to purchase their cloths. If a nation desires any right of commerce which shall no longer depend on the will of another, she must acquire it by treaty. (40)

§ 96. Imprescriptibility of rights founded on treaty.

What has been just said may be applied to the rights of commerce acquired by treaties. If a nation has by this method procured the liberty of selling certain merchandises to another, she does not lose her right, though a great number of years are suffered to elapse without its being used; because this right is a simple power, jus merae facultatis, which she is at liberty to use or not, whenever she pleases.

Certain circumstances, however, may render a different decision necessary, because they imply a change in the nature of the right in question. For instance, if it appears evident, that the nation granting this right granted it only with a view of procuring a species of merchandise of which she stands in need, and if the nation which obtained the right of selling neglects to furnish those merchandises, and another offers to bring them regularly, on condition of having an exclusive privilege, — it appears certain that the privilege may be granted to the latter. Thus the nation that had the right of selling would lose it, because she had not fulfilled the tacit condition.

This is plain and solid understanding of the nature of foreign trade as happening ONLY under treaty for it to be legal.

[A further note to the Law of the Seat Treaty folks:  jura meræ facultatis rules for nations in this area, and just because a power is not exercised does not mean that it does not exist.  Just because the US does not exercise her Privateering power does not mean it 'goes away', as it is an intrinsic part of the nation to have it.  Nations, unlike the mere civil or ordinary laws, do not have powers die from not being used.  Nor, indeed, do individuals nor society, and the militia power of individuals within society to adhere to the laws and yet still exercise together to form a militia to protect their State does not die over time, either, as Iraq has demonstrated.  Letting any body outside of a nation determine the use of the sea for that nation is contrary to the inherent rights of nations.  It cannot be given away by treaty, nor any other organization allowed to rule upon it for any nation.]

Of all the things heard about 'free trade', that it is the best way to do things, that it enriches all involved, that it cures poor government and creates liberty, this is perhaps the most messianic part of it:  that it is somehow a right outside of treaties and of the obligation of nations to their own people to decide this for themselves via their government.  If one complains about a nation NOT wanting that, as Vattel said, the complaint is ridiculous.  If a nation does not want a 'free trade' treaty with us and says so, then so be it.  To complain otherwise, and that 'free trade' is the best, etc., etc. is to turn economics and trade into a religion.  Trade and commerce are simple things governed by treaties put in place by nations for the benefit of their nations and, with a bit of luck, that is a non-zero sum game and it is mutually beneficial.

Heading into Ch. VI of WoN, Adam Smith starts with this:

When a nation binds itself by treaty, either to permit the entry of certain goods from one foreign country which it prohibits from all others, or to exempt the goods of one country from duties to which it subjects those of all others, the country, or at least the merchants and manufacturers of the country, whose commerce is so favoured, must necessarily derive great advantage from the treaty. Those merchants and manufacturers enjoy a sort of monopoly in the country which is so indulgent to them. That country becomes a market, both more extensive and more advantageous for their goods: more extensive, because the goods of other nations being either excluded or subjected to heavier duties, it takes off a greater quantity of theirs; more advantageous, because the merchants of the favoured country, enjoying a sort of monopoly there, will often sell their goods for a better price than if exposed to the free competition of all other nations.

Such treaties, however, though they may be advantageous to the merchants and manufacturers of the favoured, are necessarily disadvantageous to those of the favouring country. A monopoly is thus granted against them to a foreign nation; and they must frequently buy the foreign goods they have occasion for, dearer than if the free competition of other nations was admitted. That part of its own produce with which such a nation purchases foreign goods, must consequently be sold cheaper; because, when two things are exchanged for one another, the cheapness of the one is a necessary consequence, or rather is the same thing, with the dearness of the other. The exchangeable value of its annual produce, therefore, is likely to be diminished by every such treaty. This diminution, however, can scarce amount to any positive loss, but only to a lessening of the gain which it might otherwise make. Though it sells its goods cheaper than it otherwise might do, it will not probably sell them for less than they cost; nor, as in the case of bounties, for a price which will not replace the capital employed in bringing them to market, together with the ordinary profits of stock. The trade could not go on long if it did. Even the favouring country, therefore, may still gain by the trade, though less than if there was a free competition.

The very first thing that Adam Smith looks at is not 'free trade' but gaining a MONOPOLY on trade of an item or set of goods or entirely for a nation and then points out why it is bad.  That said he does not deal with why it may be necessary for nations to impose restrictions for vital national interests.  The general concept is good, but, when founded on differentials between nations that have adopted modern means of production and those that have not, the idea that the less modern nation may want to take time in adjusting its trade practices so as to keep its people employed and happy even with a slow dislocation over time is something that should not be talked against at treaty negotiations.  Openness of markets is not a good thing if it causes large scale social upheaval and dislocations of individuals and families due to resultant poverty and lack of having an economic basis for support of their family.  To continually press wanting 'free trade' when other nations have indicated that the boon of trade leads to the bane of societal upheaval, the answer from the US should not be: well, free trade will take care of that.  It should be:  we agree that your concerns are vital and respect them, and shall not speak of this again until your nation feels ready to address it.

This has a word in social parlance.


When the US promises the boon of trade and increased industrial commitment to a foreign nation via a treaty, and then allows its industry to make purely temporary gains and then shift elsewhere leaving societal unrest and upheaval on OUR BORDERS may it be suggested that the US has been disingenuous on how it has treated our neighbor to the south and that, if we have commitment to helping their nation via the grand benefits of trade, that we then put in place legislation that DOES THAT?  And if Mexico is unable to adhere to a treaty because its government signed it unwisely and our national sovereignty is being threatened by a criminal and terrorist insurgency that is taking lives on a scale equivalent to that of Iraq these days, that we may have to address this issue before the next deployment for US COIN capability is just over the southern border?

Or do we not mean to back our words and treaties with our money and skills?

Because if we don't do that, it is the blood of our sons and daughters that will pay for 'free trade' that just hasn't worked out to the lovely ideals put forward for it.

This is not a question of 'leaving NAFTA', although that is bound up with it: it is a question of honoring our agreements and commitments via treaty and then expecting the EXACT, SAME, THING from our treaty partners.  Because if we aren't going to do that, then NAFTA and every other single treaty the US ever signs is *worthless* because we do not mean what we say and will not back that up with our actions.

And there is no national honor in that, from any part of the political spectrum.

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