Arguments for Free Trade

[Purple State]

Simplifying economic theory... Every country has comparative advantage in the production of some good. While the US may have absolute advantage, that is, the capacity to create more of any one thing than any other nation (hypothetical), it cannot have comparative advantage in everything.

This is a pretty simple concept when you put it down like so: Assume there is a two-good market, Guns and Butter. The US requires 10 hours of labor per unit of Gun and 2 hours of labor per unit of Butter or any linear combination of the two. Canada requires 15 hours per unit of Gun and 5 hours of labor per unit of Butter. Also assume each country has 100 hours of labor to work with.

The US has absolute advantage on each good, as if it focuses wholly on Guns it can create 10 units or on Butter it can create 50 units, while Canada can create 6.66 units of Gun or 25 units of Butter. The problem is there is a trade-off. The US wants both Guns and Butter. If the US decides to focus on Guns, it has to give up 5 units of Butter for every unit of gun (uses 10 hours for Guns it could have used for butter). Meanwhile, if the US focuses on Butter it gives up one-fifth of Gun to create a unit of Butter. The reverse is true for Canada. For every unit of Guns it wants Canada must give up 3.75 units of Butter, while it must give up 0.266 (a little over one-fifth) units of Gun for every Butter it creates.

Looking at these simple numbers, the US has comparative advantage in Butter (requires 0.20 Guns per Butter, less than Canada's 0.266 Guns per Butter) while Canada has comparative advantage in Guns (only gives up 3.75 units of Butter compared to the 5 units the US gives up per Gun). In fact, it would be in everyone's interest for the US to focus predominantly on Butter, Canada to focus predominantly on Guns, and then both sides trade. This allows for the consumption of goods beyond the usual means of a nation in isolation.

Hence, free trade good.

[Purple State]

People should be allowed to trade with whoever they want, no matter where they are located. If we are going to restrict trade between countries then why not restrict trade between states? California could try and protect its orange industry from Florida's. Or Michigan could try to protect its car industry from competitors in Kentucky and Alabama. Overall trade leads to more efficient use of resources, which is good for everyone involved.

Lets just stick with my slightly more reasoned argument in favor of free trade.

[Purple State]

People should be allowed to trade with whoever they want, no matter where they are located. If we are going to restrict trade between countries then why not restrict trade between states? California could try and protect its orange industry from Florida's. Or Michigan could try to protect its car industry from competitors in Kentucky and Alabama. Overall trade leads to more efficient use of resources, which is good for everyone involved.

Lets just stick with my slightly more reasoned argument in favor of free trade.

I was just trying to point out how ridiculous it would be if states had restrictions on trade within the states( obviously done in a horrible way). All the obvious reasons had already been stated.

Well yes. And thank god for the Constitution that prohibits that. This was perhaps one of the biggest problems of the Articles of Confederation. All the states stuck large tariffs up and trade restrictions. Had their own currencies. Bad stuff.