Questioning free trade

Interesting points being made on free trade at Vox’s.


Free trade advocates are very often dishonest and attempt to claim that while they support the free movement of capital and goods, they do not support the free movement of people. But this is nonsense, because the free movement of people is intrinsically necessary for free trade in both labor and services. Furthermore, observe that the European Union’s “Four Freedoms” are explicit on this point:

One of the “Four Freedoms” of the Single Market is free movement of persons – along with free movement of capital, goods and services. Having a Single Market means having free movement of products (goods and services) and factors of production (capital and labour). Saying the UK wants to restrict free movement of persons but stay in the Single Market makes precisely as much/little sense (and for precisely the same reasons) as would saying “The UK wants to impose tariffs on imports from Germany and France but remain in the Single Market” or “The UK wants to impose capital controls on investment into Italy but remain in the Single Market”.

And one of his commenters:

As a matter of reality, you are always going to have some controls on international trade. Even the freest possible trade regime must have rules of reciprocity and contract enforcement. In the international space, there are simply too many opportunities to cheat, and too few ways to enforce contracts.

In my own industry, I will not even talk to contract recruiters that are not based in the US, after watching my brother have to write off 6 months of pay due to a dishonest contracting agency in India ripping him off.

So the question, which lately in the US has been “how can we best approach the magical utopia of absolutely Free Trade?” becomes “which aspects of free trade most benefit the American populace.”

And then:

But, regardless, it doesn’t take much to take apart a claim that free trade contributes to income equality, unless perhaps one measures only working classes. The past 20 years of free trade policies offer vivid evidence of what happens. Free trade results in the off-shoring of businesses from wealthy countries to poor ones. To compete against larger businesses that are able to offshore, domestic economies slash wages, in part by importing a lot of cheap labor from poor countries.

There may be, of sorts, a leveling of income between the working classes in the rich countries and poor countries. Those in poor countries see their incomes rise sightly; those in rich countries see their incomes stagnate. But this analysis only carries for the poor classes. Overall, free trade primarily benefits the very largest corporate interests, who profit wildly from reduced wages.

In my brief few years inside the trade ministry offices in Russia, the buzzword was Thomas Friedman. When the Min said he’d been ‘reading Friedman’, I thought he meant Milton but in fact he was referring to a publication by Thomas, a Washington and New York ‘useful idiot’ and the latest buzzword was Free Trade, which in Russian terms resulted in these ‘free economic zones’ which essentially said – if you invest here, you’ll go to one of these decentralized zones and be subject to less of our strictures than we would ordinarily drop on you.

In Russian terms, that was no idle offer. Back to Friedman and this quite old article:

In a CNBC interview with Tim Russert this weekend, Friedman said:

“We got this free market, and I admit, I was speaking out in Minnesota–my hometown, in fact, and guy stood up in the audience, said, `Mr. Friedman, is there any free trade agreement you’d oppose?’ I said, `No, absolutely not.’ I said, `You know what, sir? I wrote a column supporting the CAFTA, the Caribbean Free Trade initiative. I didn’t even know what was in it. I just knew two words: free trade.”

Not surprisingly, Russert didn’t challenge Friedman, or even ask a follow-up question. He didn’t ask how Tom Friedman, the deity whom D.C. bows down to on trade, could be so uninformed he would call the Central American Free Trade Agreement the “Carribbean” Free Trade Agreement?

He didn’t ask Friedman why he didn’t even bother to consider the widespread concerns about the pact’s lack of labor, human rights, environmental provisions.

Similarly, he didn’t ask Friedman whether, if he’s such an advocate for truly “free” trade, why Friedman didn’t bother to protest the brazenly protectionist provisions in the deal that make sure the drug industry is allowed to artificially inflate drug prices in Central American countries. 

And therein lies the dilemma of free trade. As a staunch advocate of small and medium business ‘free’ enterprise, at what point does this become advocate of south-east Asian sweatshops? Within our own country, we rail against – and quite rightly too – government interference designed to skim off any profit before the business can even get on it s feet, so that’s the opposite extreme.

So where, exactly, should the government place itself on the question of protection and free trade? Should government have a moral conscience? Because if you say yes, then that’ a green light for Labour to come in and impose a North Korea style economic environment. If you go the Tory way, then there is the heartless ‘sweatshopism’ essentially indulged in by crony capitalists overseas.

If lower overheads are the rule of business, what inhumanity is committed in its name? If unionism is the only answer, then how do unions view the death of Liverpool which they largely caused? And why does first world business go offshore? A large part is the impossible unionism and demands of workers which kill any sort of profit, killing off the business in this climate.

Coming back to Russia, I saw that in action. Anyone at all who tries to start a business, if even moderately successful after government, the mafia and police have been paid, will get a visit from the local mafia. There was a new gymnasium I went to which went that way. Entirely new skeleton staff came in, many of us left, one year later the business closed its doors. There are many tales.

Over here, the asphyxiation of any new venture is governmental. Our government, essentially, acts as the mafia and this especially applies to councils, staffed by precisely the greedy sods who could never run a successful business themselves. In ethnic pockets, real mafias operate on top of that. There are Dougs and Dinsdales all over.

So whither free trade? It’s a lovely ideal until the reality bites.

5 comments for “Questioning free trade

  1. Mudplugger
    October 7, 2014 at 8:22 am

    But this very day we see dairy farmers protesting about what is, in effect, the outcome of free trade.
    Milk prices are defined by the global supply and demand profile, it’s a commodity ideally subject to free-trade conditions, but when the global price drops below the level at which indigenous producers can compete, they seek protection in subsidies, falsely-inflated prices and consumer penalties.
    We can’t have it both ways – it’s either free or it’s not, and ‘free’ comes with some potential downsides.

    • October 7, 2014 at 7:04 pm

      From what I’ve read, French dairy farmers get bigger subsidies so they undercut British ones.

      • Mudplugger
        October 7, 2014 at 8:53 pm

        You don’t say – that’s about as surprising as saying the Pope’s a Catholic and that bears defecate in the woods.
        But then the French never were hot on free trade if it hurts their own merde-shovellers – the Common Agricultural Policy has always had their subsidised tractor-marks all over it.

  2. Voice of Reason
    October 8, 2014 at 3:52 pm

    Who wants to go to a gym where the staff are skeletons?

  3. October 9, 2014 at 10:49 am

    Exactly, you have put your finger on it.

    Most people assume that “free trade” means international and cross-border, but internal free trade rules are just as important.

    So if the USA enters into a so-called “free trade” agreement by which US companies are granted monopoly rights and protections in the other country, that is simply not “free trade”. Had the other country granted those rights to its domestic producers that would not be free trade, why is it any different if it grants those rights to foreigners?

    I have cross posted, there was a good example of this dichotomy in yesterday’s FT.

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