Via Mark Thoma we get Thomas Palley:
"The logic behind classical free trade is that all can benefit when countries specialize in producing those things in which they have comparative advantage."
The logic behind classical free trade is not dependent upon countries specializing. The logic works whether you are talking about people, companies, towns, tribes, cities, regions, countries or continents. To insist on the artificial barriers of the nation state as being a crucial part of the logic is to sell the pass.
The same point comes up in Roberto Unger\’s new book, Free Trade Reimagined (which Palley is riffing off I think):
If countries specialize in what they produce, the whole world can reap the benefits. It is a simple message of enormous power promising both greater riches and more freedom.
I haven\’t finished Unger (he comes up with some excellent points: there\’s one part where by implication he attacks the EU\’s insistence upon standardisation) so I don\’t know what his final solution is. However, if you start by insisting that the logical unit to study trade is the nation state then you end up with the possibility of reaching some very unwelcome solutions. That, for example, Governments have a part to play in creating comparative advantages (something Unger does say). That perhaps they should "manage" trade, that, in short, perhaps the Man in Whetehall does know best.
If you accept the real case for trade, that voluntary exchange benefits (at least in the minds of those doing it) all participants, that is allows the division of labour, there\’s nothing special about countries and nation states as being the unit required to make it work, nor the unit we should consider in our analysis. In fact, once you have accepted the case for trade all you\’re then arguing about is the unit over which it should be free: and there\’s nothing special about countries there at all.
As the once separate countries that now make up the US show, as the currently still sovereign nations of Europe in the EU show.