Adam Smith and Free Trade

In this excerpt from the Wealth of Nations, Adam Smith focuses on the division of labor, as well as nations’ restraints on importation.(1) He first illustrates the high efficiency of the division of labor by using the pin-making example. He argues that there are three ways in which dividing labor enhances work performance. First, workers will become well-trained in their jobs because they perform the same tasks. Second, they don’t waste time passing between projects. Last, the invention of machineries facilitates production. Smith explained that the division of labor resulted from humans’ propensity to exchange goods. After that, Adam Smith proceeds to argue against government’s’ restrictions on importations. He claims that importing cheaper products from foreign country is usually beneficial to a state’s economy, and that restrictions on the free market will be harmful.

    An article from the New York Times highlights the tariff war between China and the U.S.(2) After President Trump issued 200 billion dollar tariff, China retaliated back with 110 billion tariff on goods produced in the U.S. Specifically, China targeted states in the Midwest. For example, it placed tariffs on whisky, because Senate majority leader, Mitch McConnell’s home state, Kentucky, is dependent on whisky. There was also tariff on cranberries because Paul Ryan is from Wisconsin, which is a leading producer of cranberries. In addition to China, Mexico, Canada, and the E.U., all took aim at whisky.

Is relying on the free market an optimal decision in all circumstances?

Adam Smith seems to think that to maintain positive economic development, the market should be kept free from governmental control at all times. However, the trade war between China and the U.S. shows that sometimes sacrificing the freedom of the market can yield political-economic results that may benefit states in the long run.

1.Smith, Adam. “The Wealth of Nations” Hackett Publishing Company, 1993.

2.Eduardo Porter, and Karl Russell. “Firing Back at Trump in the Trade War With Tariffs Aimed at His Base.” The New York Times, 3 Oct. 2018, www.nytimes.com/interactive/2018/10/03/business/economy/china-tariff-retaliation.html.

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