Free Trade, Protection, and God’s Law

On July of 2019, Baptist Press released an article entitled Trade war could disrupt Bible supply, publishers warn. It reported that Trump’s 25% tariff on all books made in China would effectively act as a “Bible Tax.”[1] Because of a Bible’s complex features (e.g. thin pages, small print, and special illustrations), most publishers have them produced in China where these unique production capabilities are located. Although there are many book manufacturers in the global market, China has the skill and ability to produce Bibles at a lower cost than anywhere else in the world. For this reason, Bible Press was worried Trump’s trade war could have caused the cost of printing Bibles to soar and potentially spark shortages.

Trump’s term is now over, however, his trade war is likely to continue under the Biden administration. On his campaign website, Biden promises to “use taxpayer dollars to buy American and spark American innovation, stand up to the Chinese government’s abuses, insist on fair trade, and extend opportunity to all Americans, many of the products that are being made abroad could be made here today.”[3] Not exactly laissez faire language from the new Democratic President. It is doubtful that liberty in international trade will be restored anytime soon.

Until the last few years, the topic of trade wars and the use of protective tariffs have not been a conversation that Christians typically want to have. Some just don’t think it fits in any theological category. Others, particularly in Republican circles, don’t want to have a biblical discussion on trade for fear that it might lead them to disagree with the political tribe they love so much.

But the threat of a “Bible tax,” a hindrance to the spreading of God’s word is more than enough reason for the church to reassess the extend of her mission. Does Christ’s commission to disciple and teach the nations to observe all he has commanded (Matt 28:18-20) include moral ethics of international trade?

Emphatically, yes! The gospel message is not limited to a few spiritual propositions; rather it’s meant to govern all areas of life, including how countries trade with one another. Cornelius Van Til once said, “The Bible is thought of as authoritative on everything of which it speaks. Moreover, it speaks of everything.”[2] This is certainly true in the realm of international trade.

Just what is the biblical stance on trade? Does God condone a “Bible tax” or any other import tax through protective tariffs? Are trade wars a product of sin? Does God want his creatures to trade freely without government interference? The answer to these questions can be derived from the second reading of the law — Deuteronomy 2:2-7. In this passage, Moses recalls Israel’s wilderness days:

2Then the LORD said to me, 3“You have been traveling around this mountain country long enough. Turn northward 4and command the people, ‘You are about to pass through the territory of your brothers, the people of Esau, who live in Seir; and they will be afraid of you. So be very careful. 5Do not contend with them, for I will not give you any of their land, no, not so much as for the sole of the foot to tread on, because I have given Mount Seir to Esau as a possession. 6You shall purchase food from them with money, that you may eat, and you shall also buy water from them with money, that you may drink. 7For the LORD your God has blessed you in all the work of your hands. He knows your going through this great wilderness. These forty years the LORD your God has been with you. You have lacked nothing.’” (Deut 2:2-7). 

In this passage, God encouraged the Israelites to trade their money for food and drink from the Edomites even though they would be long-term enemies (Psalm 83:5-8; Amos 1:11). God’s people depended on international trade as a means of survival. As Gary North describes, “Israel began its post-Egyptian existence as a trading nation on the move.”[4] No tariffs or quotas were imposed. They were free to trade for what they needed. This economic freedom would continue in the promised land where they would enjoy periods of great prosperity.

One principle that can be derived from Duet 2:2-7 is that free trade is protected under God’s law. Free trade is the absence of government interference with imports and exports through protective tariffs, quotas, or subsidies.

God never allowed civil government to interfere with international trade. Its role is strictly limited to carrying out God’s wrath on the wrongdoer (Rom 13:4). Matters of civil crimes are the only legitimate use of the sword that God has delegated to the state. International trade is off limits to it. Any attempt by the state to intervene in international trade through coercive measures is an act of rebellion against God’s law and infringes on the rights He gives to individuals to trade with whomever they wish.

It is hard to imagine this level of liberty in international trade for the reason that we are so used to the state intervening in just about every area of life. But what would it look like if our nation repented and adopted the Biblical principle of free trade?

The blessings of free trade

When people are left alone to freely subdue the earth and work the land just like God created them to do (Gen 1:28), unfettered by government restraints, it is their tendency to gravitate toward labor they are skillful at. Adam Smith, the father of modern economics himself called this “the division of labor” which leads to individuals and firms alike “specializing” in what they’re efficient in producing. For example, those who are skilled in mathematics tend to gravitate toward engineering jobs, much like those who are graphically minded tend to seek art-related career fields.

We don’t have to worry about deciding who specializes in what. God has already sorted that out by designing each one of His human creatures with unique skills. Just as the body of Christ has many members with special gifts (Rom 12:4; 1 Cor 12:12), every person has a special skill. And so, Smith argued it is better to specialize in a particular skill set and trade what one is efficient in producing for other goods or services.  

Classical economist David Ricardo took Smith’s idea even further and developed a sophisticated model that mathematically shows how two countries can both benefit from trading with each other. The model demonstrates that if two countries trade something in which they have a comparative advantage in producing (i.e. lower opportunity cost than the other nation), then both countries can experience gains from trade, even if one country is less developed then the other. And in the case a country can produce both goods, by trading what it has the comparative advantage in producing, that country can experience a more prosperous outcome than if it had produced both goods itself. 

This was Smith and Ricardo’s big idea: it is better to trade than not to trade. Both parties of a trade can benefit from it; not always equally but still benefit nonetheless. The mutual gains from trade is why a buyer and a seller exchange THANK YOUs as they transact. The double “thank you” shows that trading does not mean someone has to lose if someone else gains. Trading is not a zero-sum game. Both parties can leave a trade better off than they were before.

Through specialization and free trade, resources are appropriately allocated. This causes production to increase, global prices to fall naturally, and the standard of living to rise. Who benefits? Any country involved in trade.

Free trade is a pivotal tool in discipling foreign nations. Back in 1999, Ned Graham, president of East Gate International and son of evangelist Billy Graham, once reported on the impact the expansion of trade had on his organization’s missionary work in China:

Ten years ago, there was almost no information‐exchange technology available to the average Chinese citizen. If we wanted to contact a friend in China, we usually had to do so by mail unless that individual had a private phone, which was extremely rare in the inland provinces. Today, despite difficulties, much of that has changed. We routinely communicate with thousands of friends all over China via fax, cell phones, and email. The proliferation of information technology has allowed us to be much more effective in developing and organizing our work in the PRC.[5]

Free trade also acts as a deterrent for war. Looking back in history, we see countries that either trade with each other or fight with each other. Rarely have we ever seen two countries do both. War becomes more costly to a country that fights a nation where they have invested economic interests in. With Integrated economies, fighting is the exception, not the rule. Free trade is a catalyst for peace.

The curses of protectionism

When man apposes God’s will, it does not generally go well for them (Eccles 8:12-13). Intervening in free trade through protective tariffs is no exception. Protectionist policies have been a destructive force to prosperity and only adds to the problem of scarcity.

Protectionism is the practice of shielding a nation’s domestic industries from foreign competition by taxing imports. Many foreign companies are willing and able to sell their goods to American consumers for a much lower price than those within the US. By doing so, some American industries lose business because they are not as efficient as their foreign competitors.

To fix this problem, other American industries are penalized in such a way as to deter them from buying goods overseas. Consequently, they are pressured into seeking the alternative which is buying domestically at a higher price. The most common way this is done is when political leaders overburden American importers with protective tariffs (i.e. taxes on imports).  

One of the biggest problems with protectionism is that it creates an inefficient economy. This is because the “protection” only helps a small selection of people at the expense of many others. Admittedly, it does protect some domestic producers by blockading overseas competition, but what about all the industries who benefit from the low prices our foreign friends have to offer?

In 2018, Trump imposed a 25% tariff on imported steel and a 10% tariff on imported aluminum.[6] How many American industries use those resources to produce their products? Quite a few! Such a tariff could potentially shut them down and would then have to lay off their employees.

But what do the policy makers care? The people they promised to protect, namely, US steel and aluminum industries are banking. See how this works? Protectionism helps one group at the expense of another, and so even if one group benefits from a tariff, the country has a whole is worse off.

Another problem is that protectionism raises prices. Economist, Milton Friedman had a saying which pointed out the self-defeating function of protectionism: “We call a tariff a protective measure. It does protect; it protects the consumer very well against one thing. It protects the consumer against low prices. And yet we call it protection.”[7] 

Protective tariffs always raise prices because they pressure the importer to buy from another country at a more expensive cost. This hurts the home country’s consumers by making goods more expensive for them, especially the poor. Just think of the most impoverished consumer. Such an increase in prices could be financially brutal for them. One of the only things lifting such people out of poverty are importers who ship in inexpensive goods which makes the poor’s living expenses more affordable. Yet, they are being prevented through protective tariffs. Economist, Henry George cleverly describes this insanity:

Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same—to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.[8]

All these problems that come with protectionism can be easily avoided. The solution is real simple: turn back to God’s law so that free trade can be practiced.

What about the trade deficit? 

When proponents of protectionist policies are confronted with these drawbacks, they often counter using the scare phrase — “trade deficit.” Politicians use this term quite often as a scare tactic, usually to gain voter support for their protectionist policies. But what does that term even mean? A trade deficit means country X has imported more goods from country Y than they have exported to it. In other words, they bought more than they sold. So, the fear is that the home country’s deficit will result in their wealth being transferred to the foreign country. This is the same fear that prompted the mercantilism of the late renaissance period. 

The term “trade deficit” sounds bad, just as the term “trade surplus” sounds good, right? However, neither of these are a sign of economic health or weakness. One of the reasons is that, in the long run, trade deficits and surpluses are self-correcting. Scottish philosopher, David Hume recognized this. In one of his essays entitled On the Balance of Trade, Hume pointed out that a surplus county will acquire specie and as a consequence to an influx of coined money, they will experience an increase in the price of their goods. This makes the price of goods within the deficit country look competitive and become an attractive investment opportunity for the surplus country.[9] Therefore, trade surpluses and deficits between two countries tend to balance out in the long run global economy. 

Okay, but what if Hume is wrong and a deficit and surplus does not balance out in a bilateral trade? No problem! There’s always trilateral trade, quadrilateral trade, and multilateral trade!

Take a trilateral trade for instance, suppose the US has a trade deficit with China, but maybe China has a trade deficit with Malaysia, and Malaysia has a trade deficit with the US. Now flip it around. Malaysia has a trade surplus with China, China has a trade surplus with the US, and the US has a trade surplus with Malaysia. So trade can still be balanced, it just might be between three countries, or four, or five… etc. In the real world, countries always have a plethora of trading partners. The components of the cell phone alone come from a multitude of countries.

Good economics cannot focus on only two countries in the short run economy and expect to make accurate assessments. It needs to look at the economy as a whole over the long run to fully understand international trade. 

Trade deficits are not a bad thing and we all can understand just from the purchases we make daily. I’ll use myself as an illustration. I’m a Reformed Christian and fit the stereotype as a pipe smoker. There is an older lady who sells tobacco in my hometown who has made a killing off of me. I see her at least once a month to stock up on some very-cherry tobacco. My trade deficit with her is frightening; too high to calculate. Judging by the way politicians talk about how bad trade deficits are, you’d expect the tobacco lady to have most of my wealth. But that’s obviously not the case because my personal trades are spread out among more than just the tobacco market. I don’t need her to buy from me if I’m receiving income elsewhere. The same applies at a national level.

Since trade deficits are not indicative of economic weakness anymore than trade surpluses are indicative of economic strength, one cannot use it as a reason to impose protectionist policies which are themselves loaded with social costs (e.g. increase in prices).

Conclusion

Protectionism is in clear opposition to the liberty prescribed in God’s law regarding international trade. God allowed His people to trade freely with other nations (Deut 2:2-7), even if they were enemies. Civil rulers were never given the right to interfere with the free enterprise of individuals and their trade agreements. Their role is limited to punishing wrongdoers (Rom 13:4). When people are left to trade freely according to God’s will and design, things go generally well for both parties of a trade. Through free trade, we have seen prosperity reach the most impoverished countries, the spread of Christian culture and ideas, and a restrain on war. Free trade is a blessing and gift from God.

Because man is hostile toward God’s law, civil rulers have taken it upon themselves to usurp His authority and prevent people from trading freely through the use of protective tariffs as well as other means. The curses of preventing free trade are easily observable. Protectionism creates an inefficient economy by raising prices and cutting off cheap resources offered over seas. Businesses who produce with these resources are hurt as well as the poor who rely on low prices. Protectionism is destructive and adds to the problem of scarcity.

Ending the trade war and protectionism overnight is not within the church’s immediate power, however, renewing our own minds to think the way God does about trade is. We can’t expect the world to submit to the rule of Christ unless we do in our hearts and minds first. Then, as we preach the gospel, can we clearly teach the nations to observe all Christ has commanded, even in the realm of international trade.


References:

[1] Thornton, Grace. “Trade War Could Disrupt Bible Supply, Publishers Warn,” July 11, 2019. https://www.baptistpress.com/resource-library/news/trade-war-could-disrupt-bible-supply-publishers-warn/. 

[2] Til, Cornelius Van, and William Edgar. Christian Apologetics. Phillipsburg, NJ: P & R Pub., 2003.

[3] “The Biden Plan to Ensure the Future Is ‘Made in All of America’ by All of America’s Workers,” October 7, 2020. https://joebiden.com/made-in-america/.

[4] North, Gary. Christian Economic. 2. Teacher’s ed. Vol. 2. Dallas, Georgia: Five Point Press, 2018.

[5] Graham, Ned. “US-China Trade Relations and Its Impact on Religious Activity in the PRC,” January 22, 2021. https://www.cato.org/commentary/us-china-trade-relations-its-impact-religious-activity-prc.

[6] Swanson, Ana, and Peter Eavis. “Trump Expands Steel Tariffs, Saying They Are Short of Aim,” January 27, 2020. https://www.nytimes.com/2020/01/27/business/economy/trump-steel-tariffs.html. 

[7] Friedman, Milton. “Free Trade: Producer Versus Consumer.” Landon Lecture Series on Public Issues. Lecture presented at the Landon Lecture, April 27, 1978. https://www.k-state.edu/landon/speakers/milton-friedman/transcript.html.

[8] George, Henry. Protection or Free Trade: an Examination of the Tariff Question, with Special Regard to the Interests of Labor. Robert Schalkenback Foundation, 1962.

[9] HUME, DAVID. ON THE BALANCE OF TRADE. S.l.: KRILL PRESS, 2015. 

Published by Ben Moore

Hi, I'm Ben Moore, a Christian worldview writer. This site is committed to seeing Christ's kingdom permeate throughout all of life, including the social institutions that God has designed; family, church, and civil government. While Christian churches have been focused on applying the Bible to the heart of the individual, its application to society is often neglected, lost, or even rejected. The content of this site predominately speaks into these issues and wants to discover how God's word applies beyond the life of the individual Christian and to the public square.

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