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What Is Free Trade? By Frédérick Bastiat Characters: 10178

Updated: 2017-12-06 00:03

This is but a new wording of the Sophism before noticed. The demand made is, that the foreign article should be taxed, in order to neutralize the effects of the internal tax, which weighs down domestic produce. It is still then but the question of equalizing the facilities of production. We have but to say that the tax is an artificial obstacle, which has exactly the same effect as a natural obstacle, i.e. the increasing of the price. If this increase is so great that there is more loss in producing the article in question at home than in attracting it from foreign parts by the production of an equivalent value of something else-laissez faire. Individual interest will soon learn to choose the lesser of two evils. I might refer the reader to the preceding demonstration for an answer to this Sophism; but it is one which recurs so often, that it deserves a special discussion.

I have said more than once, that I am opposing only the theory of the protectionists, with the hope of discovering the source of their errors. Were I disposed to enter into controversy with them, I would say: Why direct your tariffs principally against England, a country more overloaded with taxes than any in the world? Have I not a right to look upon your argument as a mere pretext? But I am not of the number of those who believe that prohibitionists are guided by interest, and not by conviction. The doctrine of Protection is too popular not to be sincere. If the majority could believe in freedom, we would be free. Without doubt it is individual interest which weighs us down with tariffs; but it acts upon conviction. "The will (said Pascal) is one of the principal organs of belief." But belief does not the less exist because it is rooted in the will and in the secret inspirations of egotism.

We will return to the Sophism drawn from internal taxes.

The government may make either a good or a bad use of taxes; it makes a good use of them when it renders to the public services equivalent to the value received from them; it makes a bad use of them when it expends this value, giving nothing in return. To say in the first case that they place the country which pays them in more disadvantageous conditions for production, than the country which is free from them, is a Sophism. We pay, it is true, so many millions for the administration of justice, and the maintenance of order, but we have justice and order; we have the security which they give, the time which they save for us; and it is most probable that production is neither more easy nor more active among nations, where (if there be such) each individual takes the administration of justice into his own hands. We pay, I grant, many millions for roads, bridges, ports, steamships; but we have these steamships, these ports, bridges, and roads; and unless we maintain that it is a losing business to establish them, we cannot say that they place us in a position inferior to that of nations who have, it is true, no budget of public works, but who likewise have no public works. And here we see why (even while we accuse taxes of being a cause of industrial inferiority) we direct our tariffs precisely against those nations which are the most taxed. It is because these taxes, well used, far from injuring, have ameliorated the conditions of production to these nations. Thus we again arrive at the conclusion that the protectionist Sophisms not only wander from, but are the contrary-the very antithesis-of truth.

As to unproductive taxes, suppress them if you can; but surely it is a most singular idea to suppose, that their evil effect is to be neutralized by the addition of individual taxes to public taxes. Many thanks for the compensation! The State, you say, has taxed us too much; surely this is no reason that we should tax each other!

A protective duty is a tax directed against foreign produce, but which returns, let us keep in mind, upon the national consumer. Is it not then a singular argument to say to him, "Because the taxes are heavy, we will raise prices higher for you; and because the State takes a part of your revenue, we will give another portion of it to benefit a monopoly?"

But let us examine more closely this Sophism so accredited among our legislators; although, strange to say, it is precisely those who keep up the unproductive taxes (according to our present hypothesis) who attribute to them afterwards our supposed inferiority, and seek to re-establish the equilibrium by further taxes and new clogs.

It appears to me to be evident that protection, without any change in its nature and effects, might have taken the form of a direct tax, raised by the State, and distributed as a premium to privileged industry.

Let us admit that foreign iron could be sold in our market at $16, but not lower; and American iron at not lower than $24.

In this hypothesis there are two ways in which the State can secure the national market to the home producer.

The first, is to put upon foreign iron a duty of $10. This, it is evident, would exclude it, because it could no lon

ger be sold at less than $26; $16 for the indemnifying price, $10 for the tax; and at this price it must be driven from the market by American iron, which we have supposed to cost $24. In this case the buyer, the consumer, will have paid all the expenses of the protection given.

The second means would be to lay upon the public an Internal Revenue tax of $10, and to give it as a premium to the iron manufacturer. The effect would in either case be equally a protective measure. Foreign iron would, according to both systems, be alike excluded; for our iron manufacturer could sell at $14, what, with the $10 premium, would thus bring him in $24. While the price of sale being $14, foreign iron could not obtain a market at $16.

In these two systems the principle is the same; the effect is the same. There is but this single difference; in the first case the expense of protection is paid by a part, in the second by the whole of the community. I frankly confess my preference for the second system, which I regard as more just, more economical, and more legal. More just, because, if society wishes to give bounties to some of its members, the whole community ought to contribute; more economical, because it would banish many difficulties, and save the expenses of collection; more legal, because the public would see clearly into the operation, and know what was required of it.

But if the protective system had taken this form, would it not have been laughable enough to hear it said: "We pay heavy taxes for the army, the navy, the judiciary, the public works, the debt, &c. These amount to more than 200 millions. It would therefore be desirable that the State should take another 200 millions to relieve the poor iron manufacturers."

This, it must certainly be perceived, by an attentive investigation, is the result of the Sophism in question. In vain, gentlemen, are all your efforts; you cannot give money to one without taking it from another. If you are absolutely determined to exhaust the funds of the taxable community, well; but, at least, do not mock them; do not tell them, "We take from you again, in order to compensate you for what we have already taken."

It would be a too tedious undertaking to endeavor to point out all the fallacies of this Sophism. I will therefore limit myself to the consideration of it in three points.

You argue that the United States are overburdened with taxes, and deduce thence the conclusion that it is necessary to protect such and such an article of produce. But protection does not relieve us from the payment of these taxes. If, then, individuals devoting themselves to any one object of industry, should advance this demand: "We, from our participation in the payment of taxes, have our expenses of production increased, and therefore ask for a protective duty which shall raise our price of sale:" what is this but a demand on their part to be allowed to free themselves from the burden of the tax, by laying it on the rest of the community? Their object is to balance, by the increased price of their produce, the amount which they pay in taxes. Now, as the whole amount of these taxes must enter into the Treasury, and the increase of price must be paid by society, it follows that (where this protective duty is imposed) society has to bear, not only the general tax, but also that for the protection of the article in question. But, it is answered, let everything be protected. Firstly, this is impossible; and, again, were it possible, how could such a system give relief? I will pay for you, you will pay for me; but not the less still there remains the tax to be paid.

Thus you are the dupes of an illusion. You determine to raise taxes for the support of an army, a navy, judges, roads, &c. Afterwards you seek to disburden from its portion of the tax, first one article of industry, then another, then a third; always adding to the burden of the mass of society. You thus only create interminable complications. If you can prove that the increase of price resulting from protection, falls upon the foreign producer, I grant something specious in your argument. But if it be true that the American people paid the tax before the passing of the protective duty, and afterwards that it has paid not only the tax but the protective duty also, truly I do not perceive wherein it has profited.

But I go much further, and maintain that the more oppressive our taxes are, the more anxiously ought we to open our ports and frontiers to foreign nations, less burdened than ourselves. And why? In order that we may share with them, as much as possible, the burden which we bear. Is it not an incontestable maxim in political economy, that taxes must, in the end, fall upon the consumer? The greater then our commerce, the greater the portion which will be reimbursed to us, of taxes incorporated in the produce which we will have sold to foreign consumers; whilst we on our part will have made to them only a lesser reimbursement, because (according to our hypothesis) their produce is less taxed than ours.

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