The Myth of Free Trade

[camero]

Oldie but a good article: http://www.globalexchange.org/campaigns/ftaa/883.html

>snip

The Bush administration seems unwilling to see the white elephant in its White House living room. Turning a blind eye on the upcoming Kyoto Protocol and continuing unilateral compromises in the Doha Free Trade agreement, Bush and Co. won't admit that the true culprit to environment degradation, as well as the regression in America's standard of living, loss in manufacturing jobs, growing national debt, and record trade deficits is due to international free trade. "Competitive protectionism is a proven idea with a lot of success. Free trade is historically a relatively new idea with a lot of failure," said Dr. Ravi Batra , international economist, in his book, The Myth of Free Trade. "Free trade has done to the us what Hitler and imperial Japan could not do during the war," he said.

Wasteful investment from intra industry trade and raw materials trade are crippling world economies in many ways. Batra claims together they represent 90 percent of global commerce, yet have no rational economic justification behind them. Since world trade has soared faster than economic activity, trade is a bigger polluter than industrialization-in spite of fuel efficiency. Trade in energy intensity industries reaches far above that of GNP of America and most nations, and continues to rise. Being green doesn't sell as pollution taxes on domestic trans nationals would further put them at a disadvantage in global markets and governments don't want to inhibit world trade, corporate profits and growth.

Destroying the world's resources unnecessarily, free trade increases pollution, and creates higher energy prices, while risking higher global rates of economic contagion (Asian Contagion, Russia and Argentina debt default), and international vulnerability to economic shocks like the OPEC crisis of 1973 or 1979. "By far international trade comes out as the worst villain in the destruction of the environment....Yet about 60 percent of international trade today is of the intra industry variety-another 30% in raw materials...The cost of transporting trade worldwide equals most countries GNPs...(indeed,) air freight fuel consumption almost tripled in just two decades from 1970-1990, emitting millions of tons of nitrogen oxides," said Batra.

Indeed, the oil trade is linked to the trade in other goods. "If intra industry trade were eliminated and countries manufactured and produced from their own raw materials, global oil demand would plummet. There would be no need to transport so many goods, materials, and oil across the seas. Global energy prices would fall generating massive growth around the world. Not only would the environment benefit, production costs would also decline thanks to declining energy prices...Few people realize that international trade is the worst polluter among all economist activities," said Batra.

Being the largest energy consumer and polluter in the world the US had a special responsibility to clean up the environment. Raising average tariffs to 40% would reduce pollution, while promoting competitive protectionism at home and eliminating wasteful intra industry trade.

Not only is free trade our biggest job killer, it is also our biggest polluter.

[Yavin4]

1. Free Trade Is Nothing More Than An Attempt To Re-Make

the world into America's image. It only benefits a small, small number of people, and it does not raise the living standards of the world's poor population.

Population control, education (esp. education of women), resolution of ethnic strife, greater democratic control of governments, and better management of natural resources would do far, far more to alleviate world poverty than "free trade" could ever do.

Giving our software jobs to India will not improve the lives and the fortunes of the average Indian.

[camero]

2. I was particularly astounded by the fact

That 60% of all trade is merely transporting products and not raw materials from one country to another.

Exactly

[camero]

3. It's also really about oil

because it keeps demand for oil up. That's why I think we need a tax on multinationals.

[camero]

4. Another good one on free trade destroying the environment

http://www.50years.org/factsheets/labor.html


The structural adjustment policy package -- including privatization, slashing of government spending, trade liberalization and opening to exploitative foreign investment -- is, at its core, anti-worker.

For poor countries, the IMF and World Bank's emphasis on exports is to a considerable extent an entreaty to exploit cheap labor as a "competitive advantage." But with countries around the world all forced to follow the same strategy, relying on cheap labor becomes a race to the bottom -- with countries forced into a de facto race to the bottom to offer foreign investors the lowest wages and least substantial labor
protections.

[mike_c]

5. I don't know where to begin ranting....

The more I learn about the so-called free trade agreements the more betrayed I feel, particularly since Clinton was such a strong proponent of negotiating those treaties. Advocates of "free" trade agreements paint my attitude as protectionist, but it is not. I fully support the notion of free trade as long as it's fair trade, but the present agreements are little more than a means for U.S. corporations to circumvent labor and environmental protections by exporting production overseas and a strong economic incentive for them to do so. Who benefits? Behind the smoke-screen of price benefits for U.S. consumers, the only real beneficiaries are the corporations themselves, who are able to leverage the desperation of people in poorer countries for profit while wiggling out from under a century of progressive labor and environmental reform in the U.S.

[camero]

7. I really think we need to get out of the WTO

Until worker rights and child labor laws are included in the agreement. We should not have to compete with child labor because they will work for candy. And they should be educated not exploited.

More evidence here: http://www.cepr.net/columns/weisbrot/Sweatshops.htm

[IrateCitizen]

13. I've become mixed on the WTO...

Don't get me wrong, I think it's pretty much a corporate bordello for the EU, US and Japan. But, it's the only international system we've got.

The US could actually take some pretty great leadership on these issues WITHIN the WTO -- if we WANTED to. Instead, we have chosen to use it as a vehicle through which we can ram down the collective throats of developing nations financial market liberalization and protectionism for OUR industries through "intellectual property rights" and the like. It's really quite shameless.

But the unintended consequence of the WTO, as seen at Cancun, is that it provides a forum for the less-developed nations to actually stand up to the industrialized North. Outside of this framework, those nations are much more susceptible to being picked off, one-by-one. In fact, USTR Robert Zoellick has gone so far as to admit that this is the preferred strategy -- and he's pursuing it!

The WTO is flawed -- DEEPLY so. But it's also the only international forum we have, and therefore, it might actually be WORSE in the long run to abandon it.

[camero]

14. It definitely needs to be made more democratic.

Sort of like an economic UN. Not the board which is in charge now.

[IrateCitizen]

16. Completely agreed. Also get rid of "green room consensus"

That's the process by which the rich nations come up with WTO policies on their own, and poor nations are only allowed to vote w/o any input.

[camero]

18. Agreed

Right now I think the powers that be are just using the WTO, NAFTA, GATT, and the like as an excuse to dismantle their social welfare programs.

Healthy and fed people aren't good for business you know.

[Zero Gravitas]

6. Free trade

Free trade should only be permissable with completely open borders (like in the EU). We should not enter into free trade pacts with countries we are not willing to allow unlimited no-questions-asked immigration from/to.

[Lydia Leftcoast]

9. More to the point

free trade should be practiced only among countries that have similar economic levels.

[camero]

10. What will happen then?

I would love to immigrate to Canada. But open borders would cause a flight of people to countries with good social welfare systems. Thus straining those systems. Ok, maybe not an unworkable one but the kinks have to be worked out by business regulation.

[Zero Gravitas]

19. right

the point is that pro-free trade people are the wealthy elites and corporations because they can line their own pockets at the expense of others. There is no down side to them, they get richer and the middle and working classes suffer. If free trade was coupled with open borders people would think twice before agreeing to it.

If the goal is free trade then they would be forced into a gradual implementation that would be designed to bring up the standard of living in the poorer places and do minimal damages to the better off ons. Once the final the barriers are lifted then there wouldn't be huge displacements.

Instead they just whip away the barriers and let the chips fall where they may. The wealthy elites don't give a crap what happens to the other 99% of Americans because they'll only get richer. Of course these people would welcome open borders right away too (cheap labor) but it would never fly politically.

It works for the EU but of course there was less disparity between the rich nations and the poor.

[camero]

20. Also

There is less disparity between rich and poor people in those countries.

[SoCalDem]

8. Americans DEMAND $5.00 shoes and cheap plastic toys..dammit

As long as people are in the mindset that "cheap is good", and their bank balances demand it, we will be "free traders".:(

Our whole economy has been turned on its head.. There was a time when people who made shoes in the factories here, made enough to be able to afford them.. Same goes for most manufacturing jobs.. The 80's started the downward slide, when unions were demonized and cheap stuff started being the norm.

There was a time when "made in Japan" was synonymous with "cheap junk"..not worthy of owning.. Made in the USA was the label of pride in workmanship...people were not ashamed of working in a factory, because back then factory jobs were "family-supporting, blue collar jobs"..

It's sad to see what we have become.. I don't see much of a change coming anytime soon.. :(

[camero]

11. Me neither unfortunately.

Just think about if intra industry trade were taxed how oil prices would plummet. And people would have more money for American products.

[camero]

12. kick

Here's the score on free trade:

http://www.cepr.net/globalization/scorecard_on_globalization.htm

[WhoCountsTheVotes]

15. "Second Thoughts on Free Trade"

http://www.nytimes.com/2004/01/06/opinion/06SCHU.html

Most economists want to view these changes through the classic prism of "free trade," and they label any challenge as protectionism. But these new developments call into question some of the key assumptions supporting the doctrine of free trade.

The case for free trade is based on the British economist David Ricardo's principle of "comparative advantage" — the idea that each nation should specialize in what it does best and trade with others for other needs. If each country focused on its comparative advantage, productivity would be highest and every nation would share part of a bigger global economic pie.

However, when Ricardo said that free trade would produce shared gains for all nations, he assumed that the resources used to produce goods — what he called the "factors of production" — would not be easily moved over international borders. Comparative advantage is undermined if the factors of production can relocate to wherever they are most productive: in today's case, to a relatively few countries with abundant cheap labor. In this situation, there are no longer shared gains — some countries win and others lose.

When Ricardo proposed his theory in the early 1800's, major factors of production — soil, climate, geography and even most workers — could not be moved to other countries. But today's vital factors of production — capital, technology and ideas — can be moved around the world at the push of a button. They are as easy to export as cars.

This is a very different world than Ricardo envisioned. When American companies replace domestic employees with lower-cost foreign workers in order to sell more cheaply in home markets, it seems hard to argue that this is the way free trade is supposed to work. To call this a "jobless recovery" is inaccurate: lots of new jobs are being created, just not here in the United States.

[IrateCitizen]

17. Thanks for posting this article. I read it yesterday...

... and when I did, I found the section on Ricardo's idea of "comparative advantage" to be very interesting -- and telling.

I can't tell you how many times I've heard advocates of "free trade" trot that term out. Now I can TOTALLY debunk that line of thought, rather than simply presenting an alternative one or telling them things that are wrong with it in the big picture.

[spindoctor]

25. excellent

nt

[camero]

21. kick

kick

[camero]

28. one more kick

for the night crowd.

[redqueen]

22. Most excellent post

Thank you dearly, camero.

[camero]

23. You're quite welcome and thanks

I hope the links come in handy.

[Buns_of_Fire]

24. "Free Trade" seems more and more akin to blowing up Hoover Dam

to allow the Colorado River to seek its natural level.

[camero]

26. The thing is....

We are on Hoover Dam.

[Buns_of_Fire]

27. Worse still...

we're downstream!