Question 1: Free Trade What are the positions on free trade that are expressed by Jean Baptiste Colbert, Adam Smith, and Ito Hirobumi? How do you explain the differences between the trade policies they favoured? Assignment Answer the two questions on the topic of your choice by using quotes from the primary source(s). It is […]
Adam Smith, Jean-Baptiste Colbert, and Ito Hirobumi’s economic theories delve into the principle of laissez-faire in international trade. While Smith believes that countries working together to promote free commerce create wealth for all, Colbert and Hirobumi argue that free trade hinders a nation’s prosperity. Smith, Colbert, and Hirobumi take different positions towards free trade, and each offers a different philosophy of international commerce.
Smith’s The Wealth of Nations systematically analyzes the effect of a free market on international trade. He argues that laissez-faire results in the best market outcome for the countries involved. According to Smith, “If a foreign country can supply us with a commodity cheaper than we can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.” (Mifflin 172). In other words, nations can specialize their production. By trading with others for products they can make more easily, a nation’s surplus resources and labour can be redirected to more rewarding endeavours (Mifflin 172). Adopting Smith’s ideas on free trade will theoretically result in wealth creation through this idea of comparative advantage.
On the other hand, Colbert argues that economic growth in France depends on material prosperity gained through the expansion of international trade and the maintenance of a favourable trade balance. In his memorandum to King Louis XIV, Colbert argues “that material prosperity would raise the yield of taxes but that this prosperity would grow only with a managed economy: that is, with the mercantilistic encouragement of native industries and exports and the discouragement of imports from abroad” (Mifflin 1). Therefore, Colbert advocates for promoting the domestic industry through government regulation of markets. He wants France to maximize its exports at the expense of other countries. Colbert believes a nation must exploit the market rather than engage in free trade.
Hirobumi, a Japanese economist, is also critical of free trade. He seeks to foster domestic growth by imposing import tariffs. He argues that customs tariffs depend on whether goods are locally produced and the importance of a product to the people. He claims, “One reduces import tariffs on goods that one’s own people need to help keep their prices down. In the case of goods produced at home and abroad one ensures as far as possible that one’s own people use the domestic products.” (Mifflin 14). He is focused on enhancing his nation’s position while ensuring it has access to the products it needs. Finally, Hirobumi points at Britain’s call for free trade as deceptive, noting that the country’s wealth originated from protective tariff practices. He thus believes that tariffs are a useful tool.
Smith, Colbert, and Hirobumi take different approaches regarding laissez-faire and trade policies. While Smith advocates for free market trading to promote globalization, his approach fails to protect a country’s domestic industry from cheaper imports. On the other hand, the Colbert trade theory protects local production at the expense of the mutually-beneficial advantages of comparative advantage offered by laissez-faire. This approach may lead to trade wars, resulting in reduced growth and trade. Hirobumi’s strategy does not incorporate free commerce but focuses on fostering domestic growth and international trade. The three theories’ differences are irreconcilable, yet all approaches have contributed significantly to contemporary foreign trade policies.
The economic outlooks of Smith, Colbert, and Hirobumi vary significantly. The three theorists have contributed to contemporary economic theory, with complex economic international trade policies resulting from their proposed fundamentals. Therefore, their approaches remain relevant in understanding different outlooks toward international trade.
Mifflin, Houghton. The Human Record: Since 1500. Houghton Mifflin, 2001.
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Published On: 01-01-1970