gardening, cooking and cleaning? No one believes that a rich person
gains nothing by trading with those who are less rich.
Why, then, must a rich group of people lose when they trade with a poor
group? “Well,” some may say, “the poor group will price its goods too
cheaply.” Consumers in rich countries gain, however, when they can buy
the same goods at a lower price. If Vietnamese, Mexican, or Indian
workers earn low wages and the goods they produce are sold at low
prices, all Canadian consumers will gain by obtaining imports at a low
cost in terms of the goods that must be exported in return. The cheaper
our imports are, the better off we are in terms of the goods and services
available for domestic consumption.
As we said earlier in this chapter, some Canadians may be better off if
Canada places high tariffs on the import of goods from Mexico or India or
other developing nations. In particular, if the goods produced in these
countries compete with goods made by unskilled Canadian workers, then
those unskilled workers will be better off if a Canadian tariff protects their
firms and thus their jobs. But Canadian income overall—that is, average
per capita real income—will be higher when there is free trade.
Exports Are Good; Imports Are Bad
Exports create domestic income; imports create income for foreigners.
Surely, then, it is desirable to encourage exports by subsidizing them and
to discourage imports by taxing them. This is an appealing argument, but
it is incorrect.