Reading about the poor condition of free trade agreements, including that they don’t mention “free trade” anymore, one may be forgiven to believe that trade—exchanging x units of good X for y units of good Y or currency Z—is the most complicated thing in the world. (This post was inspired to me by reading “In New World of Trade Diplomacy, Free Trade and Tariffs Take a Back Seat,” Wall Street Journal, May 7, 2023.)

To cut the Gordian knot, consider two general theories of free international trade. One starts with the admission that your own government may prevent you from importing or exporting as you wish, and so can foreign governments against their own subjects. In this perspective, a “free trade agreement” is a treatise between two or more governments to allow their subjects to trade together under certain well-defined conditions. This has become more complicated as political clashes between the ambitions of national governments (or customs union) have deepened. “Free trade agreements” between governments have become rarer, more restrictive, and only remotely concerned with what merchants call trade.

The other general theory is that a free trade agreement is simply an agreement between two parties, an importer and an exporter, to exchange something (good or service or money) over an international border. Whether you are an exporter or an importer, what matters is not so much, or not really, whether foreign tyrants prevent their subjects from trading with you, but whether your own national government will interfere in any contract you are willing to conclude with another voluntary and capable party. This second theory is the essence of what classical economists, in the wake of Adam Smith, David Hume, or David Ricardo, considered free trade. It is not that complicated—if you live in a free country.

I neglect a third theory, not very credible, that implicitly claims that nations or states are big biological organisms or superindividuals, and are the subjects of the verb “to trade.”

The objection that free trade requires everybody in the world to be as free as you are, or as you should be, is not realistic. The world is full of obstacles, man-made or not, surmountable or not, which get baked in what we call “comparative advantage.” The prosperity of the country you live in depends mainly on your freedom and that of your fellow citizens (“fellow residents” is a more proper expression) to adapt to the world without further constraints from your own government.

To paraphrase Joan Robinson, it is not because your customers have rocky coasts that your own government is justified to throw rocks in your harbour. To use another analogy, protectionism is like if, confronted wit a foreign tyrant prohibiting his subjects to travel to visit you, your own Leviathan retaliated by forbidding you to travel to meet them.

The main, if not the only, justification for a “free trade agreement” between your government and the government of somebody else is to tie the hands of your own Leviathan and limit its “state capacity.” In this, you stand in solidarity with your fellow human of the other country who wishes to defrang his own Leviathan. When nobody, or at least nobody in power, believes in that goal, no wonder that such protective free trade agreements have become unpopular. (See also my 2017 EconLog post “Taking Comparative Advantage Seriously.”)