We can all agree that Matarbari Port is a terribly exciting addition to the Bangladesh economy. It will be possible for the really big ships, the globe-spanning enormous container ships, to export our goods to the world. It will also be possible for those same ships to bring to us the glories made by everyone else that we can enjoy. Better, cheaper trade is good for us.
Except we should actually take the big and important lesson from this. Better, cheaper, trade is good for us. So, let's have more of that better, cheaper trade because we like things that are good for us.
Everyone who's been watching the news knows that Donald Trump, the US president, has been threatening everyone with tariffs. These are taxes which make trade less cheap. The people who benefit from tariffs are domestic capitalists. If they don't face competition from all those other capitalists out there around the world, they can charge higher prices, make larger profits. Those higher prices do not benefit us, the consumers. So, capitalists love tariffs and everyone else should hate them. Which is why every economist -- well, every one not working for a capitalist -- opposes tariffs.
It is actually true that most economists are rather left wing. They all want to make the poor better off. That's the whole idea of having an economy, a civilization even. The difference between an economist and a left-wing politician is that the economists actually know how to make everyone -- including the poor -- better off. More trade, free trade, is one of those ways.
But leave that politics aside for a moment. Think just about this new, big, efficient port. We all agree it will make us all richer, better off. Ok, maybe only a little at first but reducing the costs of imports and exports by reducing the costs of moving them around really does make us all richer.
But if we all agree upon that then why would we ever have tariffs? They deliberately make trade more expensive. That's what they're for. But if a new port which makes trade cheaper is a good idea then why is a tax which makes trade more expensive a good idea? One obvious answer is that tariffs aren't a good idea.
But it's also possible to see where the idea comes from. After the American Civil War, in the 1870s, tariffs on imports into the US were raised. A lot. A lot, like double or more. But the US economy kept on growing. Also, trade into the US -- imports -- kept growing too. So, say people today, well, that proves it then. You become the world's largest economy and manufacturer by having tariffs -- see, it worked for them.
Except, at the same time, the US had the ocean-going steamship. This reduced the costs of trading with Europe -- or Latin America and so on -- by more than the costs of the extra tariffs. The total costs of trade went down even as the taxes on trade went up.
For that is the thing that restricts trade -- trade being that thing that makes us richer. It's all the costs of trade, not just the taxes on them. A big and efficient port makes trade cheaper. Bigger and faster ships make trade cheaper. Jet liners so buyers and sellers can meet make trade cheaper. Email makes trade cheaper -- Zoom does too. Just as 150 years ago the telegraph, steamships made trade cheaper.
This is the thing to grasp about this new port story. If a new, bigger, more efficient, cheaper per piece of trade port is something that makes us richer, then we've all just agreed that more trade is what makes us richer. So, we've also just all agreed that tariffs -- taxes which deliberately make trade more expensive -- are a bad idea which make us poorer.
Now, it's obviously true that Donald Trump doesn't understand that but the rest of us should. We'll be richer if we do.
Tim Worstall is a senior fellow at the Adam Smith Institute in London.
