07 October 2007

Questioning "Free Trade": Who Says Elephants Can't Learn?

Last week the Wall Street Journal and NBC News released this poll on the views that Republicans in the U.S. have toward free trade. Lets put aside the reality that various trade pacts (e.g., NAFTA) simply structure trade and other economic patterns rather than rendering them "free." It seems that Republicans may be capable of learning from experience. Over the past decade (nearly) they have apparently changed their views on the virtues of free trade. Here is the punchline:

"In a December 1999 Wall Street Journal-NBC poll,
37% of Republicans said trade deals had helped the
U.S. and 31% said they had hurt, while 26% said
they made no difference.

The new poll asked a broader but similar question.
It posed two statements to voters. The first was,
"Foreign trade has been good for the U.S. economy,
because demand for U.S. products abroad has resulted
in economic growth and jobs for Americans here at
home and provided more choices for consumers."

The second was, "Foreign trade has been bad for the
U.S. economy, because imports from abroad have
reduced demand for American-made goods, cost jobs
here at home, and produced potentially unsafe products."

Asked which statement came closer to their own view,
59% of Republicans named the second statement,
while 32% pointed to the first."

Of course, there is widespread political and economic debate over the consequences that follow from the breaking down and rearranging of constraints on trade. Anyone citing this latest poll as even tentative evidence that we might actually think about how trade should be regulated will surely be labeled "protectionist." That, though, is an epithet not an argument.

Of course, there are distinguished economists out there who actually worry about the decidedly mixed effects of generalized "free trade" or globalization. Should you be interested you might start with these two short (wholly non-technical) essays [1] [2] by Pranab Bardhan (UC Berkeley) and also check out the blog Dani Rodrik (Harvard) has started to write. The point is not that we necessarily ought to erect high barriers to trade (or the mobility of capital or labor); it is simply that we can try to control those processes rather than simply allowing the already well-situated take advantage of economic "freedom" at the expense of the usually less well off. Our economic arranagements are and should be subject to democratic political control. Even Republicans may come around!

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Anonymous Anonymous said...

Quote: "Anyone citing this latest poll as even tentative evidence that we might actually think about how trade should be regulated will surely be labeled 'protectionist.'"

Pat Buchanan prefers the term "Economic Nationalist" Still, I don't see much problem with the word "protectionist" anyway. When you brush your teeth, you're being a protectionist against cavities; when you lock you home door, a protectionist against crime. What's wrong with following policies that protect a nation's competitiveness? Makes sense to me.

Free traders like to use the either/or switch of "free trade" or "protectionism", because they can then use the (valid) argument of why we should not have protective tariffs of 600% or so against the harder-to-explain issue of why we should not have revenue tariffs of 10-20%, with the revenue generated used to reduce taxation on our domestic manufacturers, giving them some breathing space. With there being only the options of "free trade" or "protectionism", that messy, latter argument can be avoided.

Still, opponents of 0% tariff rates can fight the protectionist label in two different ways. For one thing, those who support *revenue* tariffs (as opposed to very-high *protective* tariffs not meant to be collected) are both very much anti-free trade and still pro-trade. Why? Because you need imports--lots of imports--to pay the taxes, like we did in the 19th century instead of an income tax. It's the same reason why supporters of state sales taxes want people to buy lots of things--for how else would sales taxes raise revenue?

The second problem with a free trader's claims that he/she is against protectionism, is that a 0% tariff rate is simply too low, and it requires raising domestic taxation to compensate for the lost revenue, making domestic products more expensive compared to foreign equivalents. In that sense, it can be argued that free trade is really just reverse protectionism.

08 October, 2007 15:08  
Anonymous Anonymous said...

Jim, have you read Naomi Klein's book: "The Shock Doctrine: The Rise of Disaster Capitalism"? She argues compellingly that free market policies are typically pushed through in the wake of large scale crisis. Think of Katrina for example and how right wing ideologues are successfully exploiting the New Orleans' disaster to build a free market city, or the privatization of national security in the wake of Iraq, or the shock therapy methods imposed on developing nations in their times of crisis via The World Bank and the IMF. Essentially, Klein provides a somewhat credible and interesting grand theory to the intersection of the disasters the world has recently experienced and the rise of free markets.

08 October, 2007 15:21  
Blogger Jim Johnson said...

In the case of say, Chile, it is clear that a "liberal" or "free market" regime was imposed by a brutal dictatorship. (A corrupt one too, if recent news of the recent imprisonment of the Pinochet clan and friends is justified.)

And in numerous other developing countries the same sort of regime was imposed by elites who were willing to use military power to push the plans of the IMF & World Bank. So, the notion that something like market liberty just grows like mushrooms in your back yard is pretty much of a myth. This is nothing new. One only has to read The 18th Brumaire of Louis Bonaparte for a much earlier case study.

08 October, 2007 17:21  

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