Smile When You Say Free Trade

It has come to my ears that some Earthsharing readers might be a wee bit skeptical about the efficacy and decency of Free Trade. Seriously? No, it’s true, “free trade” is a dicey thing to advocate these days. Many have said that the most eloquent defense of it ever written was Henry George’s 1886 book Protection or Free Trade (which was read in its entirety into the Congressional Record). Yet George couldn’t finish that book without informing his readers that as good as free trade is, it can do nothing, not a darned thing, to arrest the deepening of poverty as technological progress advances.

In this age of economic globalization, “Free Trade” policies tend to encourage investment in the lowest wage, least regulated places, ensuring a worldwide lowering of health, safety and environmental standards — and widening the already huge gap between rich and poor. This is the theme that was shouted by the anti-WTO “Battlers in Seattle” in 2007 — and was wildly cheered in 2016 by thousands of Donald Trump fans.

Perhaps, in a simpler time, comparative advantage was a natural law and trade was a simple matter of “three bushels of widgets for two crates of gadgets.” But now? People say: “We resist the threat of transnational corporations, instant communications and global pollution! Does that make us Protectionist? Guilty as charged!”

And people say: “Free Trade makes the rich richer and the poor poorer.” You might have to concede that one: it’s (almost) perfectly true. The strictly correct statement would be: “Under current conditions, the elimination of trade barriers will have the ultimate effect of lowering wages and benefiting monopolists.” Free trade makes labor more productive and increases national output. Historically, whenever that has happened, it’s led to “an immense wedge… forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down.” In this respect, free trade is no different from any of the processes that make labor more productive. If you are against free trade for this reason, then you should also oppose technology, public education and utilities, for their long-term economic effects are similar.

People say: “Free Trade wrecks the environment.” Producers try their best to “externalize” the costs of unsafe or environmentally degrading practices. Taxes and regulations can “internalize” these costs, making it more expensive to produce certain goods. Transnational corporations have become adept at “offshoring” those parts of their operations. If “free trade” actually makes it harder for countries to enact pollution controls, then we can make a case for the policies now passing as “free trade” helping to wreck the environment.

But is that really free trade? Undoubtedly, pollution imposes costs on someone — usually on an entire region, and often, these days, on the whole planet. To flee such liabilities, gunk-spewers seek to relocate to low-regulation countries. If producers can use this state of affairs to avoid paying the cost of the pollution they create, then who does pay it? Why, nobody but us air-breathers and water-drinkers. That’s not free trade; it’s protectionism — for polluters.

People say: “Free trade contributes to an overemphasis on destructive, monoculture cash-crop farming.” A superficial free trade argument would contend that if, say, coffee is the highest-priced product that a country can sell, then coffee is what it ought to grow, and if that means mere-survival wages for its coffee-pickers, well — things are tough all over. But the real question is, who decides what to grow and sell? Peasants with land of their own could grow varied crops for subsistence, or for trading in their local economy — or they could grow coffee for export. Given a choice, they would choose to grow what benefits them the most. But if they do not control the land, then they don’t have a choice. (It is also true that in many cases the profitability of these export crops is enhanced by subsidies afforded to the large planters: yet another form of protectionism.)

People say: “Free trade brings on uglification and westernization, steamrolling local cultures, destroying diversity.” But we must ask: is it free trade that does that, or the underlying economic distortions that funnel the benefits of trade into the hands of a few monopolists? Where wages are already very low, what chance is there for local, earth-friendly firms to compete with multinational badguys?

If the private sector cannot protect diversity — both biological and cultural — in the face of business pressures, then people look to government to do so. But governments everywhere are hard-pressed to generate revenue without destroying their tax bases — and this is especially true in developing nations. Talk about your race to the bottom! None of these underlying problems can be attributed to free trade. They are endemic to an economy in which abundant workers compete for scarce opportunities, forcing wages down across the board.

People say: “Free Trade compromises national sovereignty.” This complaint is usually made in connection with safety and environmental regulations. Nations that desperately need investment and jobs are disinclined to provide adequate safety and environmental protection.

We must ask ourselves what national sovereignty really means. The first, biggest aspect of sovereignty is a nation’s control over its territory: its land. Yet virtually every nation in the world allows private individuals or corporations to own land! Not only that, various “trade” agreements place restrictions on how a nation can tax or otherwise regulate its sovereign land. A thief is a thief — whether he enjoys the stolen goods right next door, or across the sea. If a nation allows private interests to make off with profits gained from owning its land, hasn’t it already yielded the greater part of its sovereignty?

Secretary of Commerce Wilbur Ross says, “Gosh! The tariffs only add point six cents to the cost of each of 7.X gasquillion cans…”

And finally, people say: “JOBS!” Here, anti-free traders really join forces with Luddites and flat-earthers. Over the years there have been a great many productivity enhancements, technological and social (what economists would call “improvements in physical and human capital”). Workers became as productive in eight-hour days as they once were in twelve. They managed to crank out widgets just as profitably even though their employers had to shell out to meet OSHA rules. Mexican peasants learned to make as round a tire as Union Members in Akron. What happened? It’s no great surprise. President Trump longs (and falsely promises) to bring back the halcyon “Great America” days of the 1950s. But what really happened is that the huge gains made by American workers between WWII and about 1973 were shown to be the exception, not the rule. Since the late 70s, wages in the US have fallen into step with the prevailing historical trend.

In the final analysis, defenders of free trade shouldn’t be ashamed — but neither should they make too much of it. In general, international trade confers social and economic benefits — just as do education, technology, efficient transportation and communication. But we must look elsewhere for the root causes of — and the solutions to — deepening poverty, and ecological crisis.