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Trade is conducted by people, not by nations

A few weeks back, my wife and I were in Astoria when we stumbled across a shop selling salty licorice.

Guest Writer

Eric Schuck serves as a professor of economics at Linfield College. He also heads the school’s Environmental Studies Program. A specialist in agricultural economics, he holds a doctorate in the field from Washington State University. He is entering his 13th year on the Linfield faculty. The views expressed here are his own.

To be honest, salty licorice — basically black licorice flavored with an ammonia salt — is somewhat of an acquired taste. Some research suggests liking it is akin to a genetic quirk — my kids would argue brain damage — but it’s a Scandinavian delicacy. And I love the stuff.       

Salty licorice is a niche product. Outside IKEA stores, not many places sell it.

I was ecstatic to find it, so bought a $5 bag and promptly consumed the whole thing. And no, I regret nothing.

Now, as a practical matter, my salty licorice traveled to Astoria from a Dutch factory by way of a Swedish import/export firm. As an economist, I have no doubt government statisticians in Washington, Amsterdam and Stockholm have duly recorded the exchange of $5 worth of salty licorice among the United States, the Netherlands and Sweden.

But here’s the funny thing about international trade:

We act as if it occurs among nations, but that’s not really what happens.

And it’s not what happened in this case. The United States didn’t buy the bag of licorice from the Netherlands.

A middle-aged American of questionable taste bought it from a shop in Astoria. The shop bought it from a Swedish candy company that paid a Dutch factory to produce it.

In short, a guy paid a shop that paid a company that hired a factory, each happening to be located in different countries. 

Ultimately, trade occurs between people, not nations. So while we may record international trade as part of our national accounts, individual parties actually do the buying and selling. We’re missing the point when we fixate on where they are located.

That’s not to say countries don’t have a really important role to play in trade.

Nations set the rules and issue the currencies that determine when and how trade can occur. Their governments can make trade easy or hard, cheap or expensive, through the rules they establish.

In my case, candy tends to fall into a weird spot.

On the one hand, U.S. duties on candy, expressed as import taxes, tend to be comparatively steep. So my licorice probably ran about 12% more in Astoria than it would have in Stockholm.

Conversely, the purchasing power of my dollar, relative to the Swedish Krona or Dutch Euro, is pretty high. So it’s possible my licorice was actually cheaper, thanks to the strength of the dollar.

Unfortunately, absent a lot more time and math sorting this out, I’ll default to the one universal economic answer: It depends. 

Even that uncertainty contains a lesson: Trade is influenced by many, many things. While the effects of one policy, such as tariffs and duties, may be clear, how that policy intersects and interacts with other policies can become pretty convoluted.

Where that leaves us, then, is a return to examining how our policies affect the people actually doing the buying and selling. If we do that, things quickly become simpler. And as a general rule, people are better off when we make trade easier and clearer. 

That’s not what the United States has been doing of late. By constantly enacting or threatening to enact tariffs, we are taking actions that create uncertainty. And confusion imposes a cost in its own right.

Focusing on international trade balances, like they represent some kind of score card between countries, loses sight of the fact that it’s people, not nations, who are responsible for world trade. And those people don’t have a clue what is going on, when we keep foolishly fiddling with the rules.

We would all be better off if we returned to the steady, certain and predictable international trade system we had before our current multi-front trade wars broke out.

On that note, I’m going shopping for salty licorice. I’ve run out, and I know a place in Astoria that carries it. Here’s hoping the shop has some on hand.