Moffatt on free trade

Mike Moffatt at About.com: Economics writes that

I am a lot less of a "free trade evangelist" than I was 5 years ago. However, my difficulty with free trade differ greatly from Driskill's [see here for a summary of Driskill's points]. Two major points:

1. There is no such thing as a free trade agreement. As Landsburg has pointed out, a true free-trade agreement could be written on the back of a napkin - "We won't put quotas or tariffs on your products if you won't put quotas or tariffs on our products". But no trade agreement in the history of the world has been like that. Have any economists actually read the Canada - U.S. Free Trade Agreement? The thing runs 230 pages and contains a raft of exemptions and restrictions. I deal with these issues every day (I work for a company that provides international regulatory compliance to the chemical industry) and trade between Canada and the U.S. is hardly free. The term managed trade agreement is more apt. So the big question must be "Is Trade between the U.S. and Canada freer than it was before the agreement?" It may or may not be, the study DID THE CANADA - U.S. FREE TRADE AGREEMENT. AFFECT ECONOMIC INTEGRATION? showed that the agreement had at best a modest impact on the economy of either country.

2. But are tariffs, necessarily, if they are used as a revenue source by the government? That is, how economically damaging are tariffs to the economy relative to other taxes, such as corporate income taxes? It may be the case that raising tariffs and lowering corporate income taxes may be welfare-improving. The biggest drawback to tariffs is that they may be expensive to enforce and collect (I would love to see data on this). Tariffs are a essentially a sales tax (one targeted to foreign products) and in general sales taxes are far more economically efficient than income taxes. I do not know for sure if raising tariffs and lowering income taxes would be welfare-improving (when also taking into account that other countries would likely respond by raising tariffs on your products) but I certainly cannot rule it out. I would love to see a study on this, but I am not aware of any.

Both points are interesting. As to 1. I would say that what economists defend is true free trade, the "back of a napkin" version. So what I think 1. says is we need better written free trade agreements that really do move us towards true free trade. I too would like to see a study on 2. However for a given amount of revenue raised, the general sales tax would be lower, since it covers a greater range of goods, than the tariff. This would mean a lower deadweight loss from each good.