The Case For NAFTA

Policy Backgrounders | Trade

No. 130
Monday, November 15, 1993
by Edward L. Hudgins, Ph.D.

Lessons From History

In light of the history of free trade versus protectionism, Americans should be eager to open markets in Mexico and the rest of the hemisphere.

Lessons From Free Trade With Britain. In the 19th century, Britain became the world's dominant economic power. This was in part because it progressively opened its markets to imports. It realized that a country prospers if it allows the individuals most efficient in producing given goods and services to do so - and to trade for the things they cannot produce as efficiently.

"American trade protectionism helped to precipitate and prolong the Great Depression."

Lessons From America's Free Trade Continent. While the United States kept trade barriers relatively high in the 19th century, it was free trade - that is, the opening of the interior - that helped to make ours the richest country in the world. The American national enterprise in that century was settling the vast territory of the West. America was a huge free trade area, stretching from the Atlantic to the Pacific, the same distance as between Madrid and Moscow.

Lessons From the Great Depression. American trade protectionism in the 1920s and early 1930s helped to precipitate and prolong the Great Depression. American exports dropped from $7 billion in 1929 to $2.4 billion in 1933, while imports during that period fell from $5.9 billion to $2 billion. Unemployment went from 3.3 percent in 1929 to 25 percent in 1933. Gross Domestic Product (GDP) was cut in half during that period, from $103.4 billion to $55.8 billion. Per capita income fell from $850 per year to $445.

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