Free Trade

[Godwynn]

An article in the New York Times today caught my attention. Specifically this:

In December, an NBC News/Wall Street Journal poll asked Americans, “Do you think the fact that the American economy has become increasingly global is good because it has opened up new markets for American products and resulted in more jobs, or bad because it has subjected American companies and employees to unfair competition and cheap labor?”

When this question was asked a decade ago, the public was almost evenly split. In the recent poll, however, only 28 percent endorsed globalization, while 58 percent opposed it.

The article goes on to elaborate that support for free trade usually declines in economic downturns. I am doubtful that a near half drop in support comes entirely from an economic downturn.

My question to you; Do you support free trade? Entirely or with conditions? Opposed depending on the nations? I would be most appreciative if you could elaborate on your position, instead of just stating where you stand.

I know a lot of members on this forum oppose free trade between a 1st world nation and an impoverished one. I am wondering if those same members support free trade between two first world nations, and free trade between third world nations.

As always, I welcome your opinions, positions, and thoughts. Thanks in advance!

 

[zxcvbnm]

With conditions that the corporations are prevented from forming cartels etc. and the rights of workers and the environment are protected. Also there must be no subsidies in farming or anything else, to help 3rd world from becoming serfs of the first. And no tax paradises by the system that corporations pay the taxes to the countries they are in relative to their income in each.

 

[Fugitive Sisyphus]

The vast majority of Americans(and people in general) know nothing about economics or globalization.

Personally, I think complaining about globalization is like complaining about osmosis.

 

[zxcvbnm]

The vast majority of Americans(and people in general) know nothing about economics or globalization.

Personally, I think complaining about globalization is like complaining about osmosis.

Osmosis is bad! It ruins our lives! Blame osmosis for the fact that we don't do things as effectively as we could!

 

[Thorbal]

Interesting... the numbers are quite similar to a survey conducted in Germany a few months ago. I thought that the concept of globalisation would be much more popular in the US than over here - more market friendly culture etc.

 

[Cutlass]

First, what's your definition of free trade? Where are the limits?

The US should push for free trade with developed nations. With the understanding that the nations in a free trade pact should at least be similar in their laws concerning property rights, labor standards, environmental regulations and business laws.

Trade with less developed nations should be allowed, but there should be a tariff which is determined by each nation on the basis of what their products would cost would be with comparable labor and environmental standards. Allowing nations to follow a "race to the bottom" strategy can only have the effect of making the people in both the developed and less developed nations worse off over time.

Also, there should be restrictions on mergers, acquisitions, and joint ventures. The large businesses now are already far too large for economic efficiency. Letting them consolidate further is insane. We need more competition, not more market for existing players.

 

[LightFang]

The vast majority of Americans know nothing about economics and so their opinion should be discounted.

I mean, come on. If the foreign man can produce things cheaper and better than the fat lazy American assembly line worker at home, should we let him do it? Of course we should. And we should trade him something we're awesome at producing for it. Everybody benefits.

The one good argument for tariffs and such as a reduction for free trade is the infant industry one. Small, developing countries like Jamaica (which has, by the way, been royally screwed over by the IMF) should watch out for predatory companies.

 

[skadistic]

I love free trade. More so when its fair trade with out tariffs and import taxes.

 

[innonimatu]

From the NYT opinion piece:

The basic lessons can be traced back to Adam Smith of the 18th century and David Ricardo of the 19th century: Trade between two countries creates winners and losers, but it leaves both nations with greater overall prosperity.

Adam Smith never really set out to support free trade, that was a by-product of his emphasis on specialization.
As for Ricardo, his job was apparently to spew out propaganda favouring UK industrial interests. 18th and 19th century UK was obviously interested in tricking other nation to embrace free trade: the UK stood only to gain from that, while other nations would have their industrial development stifled. I’ve already mentioned how ricadian economists advised the german government to forsake industry and support agriculture instead… fortunately for germans Friedrich List thumped Ricardo there.

Perhaps I’m being too harsh on Ricardo. Perhaps he did thought his theory of comparative advantage made sense in the 19th century he knew. It no longer does, and we have ample proof of it. My view is that comparative advantage fails due to three reasons:

1) it assumes economic agents have perfect information and can react instantly to changes in economic conditions – this would be necessary in order to continuously take advantage of competitive advantage in a dynamic world (in the real world!). A common failure in most economic theories.

2) is ignores the “secondary” effects of the distortions in productive activities caused by the specialization it advocates. While these can be positive, they can as easily be negative, one good example being the advice against industrialization of “less competitive” nations in the 19th, which resulted from the application of Ricardo’s theories. It turned out that industrialization was no mere economic sector but the catalyst of “modernity”, with far-reaching social, political and economic consequences – avoiding it for the sake of “greater efficiency” was a tremendous mistake.

3) It assumes that demand will always exist for more production, and that parties holding absolute advantages over a wide range of economic activities will still feel the need no engage in trade for things they could produce cheaper. That is not true. Especially, and this is an important point for this discussion, it’s not true in the context of an economic downturn, usually marked by excess inventories and forced cuts in production capacity. It also won’t be true when one of the parties engaged in trade finds itself in a position where it can’t produce any goods (or export any services) that meet the requirements of their trade partners – and this can happen when nations in vastly different stages of development trade.

Comparative advantage cannot be seen as some kind of fundamental theory able to justify free trade. It remains a useful observation, but much more must be taken into account before making any policy decisions.

 

[luiz]

I fully support free trade between all nations (though I can see the point in say an embargo against a nation fighting aggressive wars against its neighbours).

More trade is always a good thing. This "global race to the bottom" speech is just a form of bigotry really; unemployement did not increase at all in the US because of chinese imports, nor did income fall one single dollar.

There are in fact winners and losers, but there are always more winners. This can be demonstrated both with models and with empirical data.

 

[jessiecat]

Free trade would be a great thing like pure democracy. Neither has ever really
happened. It's a bit rich for countries like America to preach free trade while
they heavily subsidize selected domestic products like cotton at the expense
of Third World producers. Even if free trade really happened it would be
necessary to protect weaker economies from competition from stronger ones.
Unlike now, when we do exactly the opposite.

 

[downtown]

I think its easy to be very gung-ho about it when you're sitting in a position to benefit. Its another thing when all the major employers in your part of the country disappear, and you wonder where your town went.

I don't think you can fight it, and in the looong run, I think it will help even the burnt out industrial towns in Ohio, because it will force them to modernize and develop better schools...but it stinks when you put in 20 years at the plant, and your job is gone, and you can't retire.

What to do with the "losers" though is a political question.

Personally, I'm not super worried, since public sector jobs and non-profit work cannot be outsourced, but its going to be a rough decade or so for the industrial midwest.

 

[CIVPhilzilla]

I support free trade entirely, meaning no tariffs or artificial trade barriers. "Free trade agreements" such as NAFTA, are not really free trade as it regulates the manner in which it is conducted. The government can't make free trade agreements aside from removing economic barriers and inhibitors to trade.

 

[Swedishguy]

Free trade means more poverty for the poor and more richness for the rich.

 

[Godwynn]

Free trade means more poverty for the poor and more richness for the rich.

Could you elaborate?

 

[CIVPhilzilla]

Free trade means more poverty for the poor and more richness for the rich.

I would disagree. That's what results from manipulation of free trade. When first world nations subsidize their industries and agriculture, they make it impossible for third world nations to even enter the market. This keeps the money with the first world nation, subjects the third world nation to more poverty, and hurts the consumers of all income levels with higher prices.

 

[Elrohir]

I support free trade, generally speaking. I think there should be some basic humanitarian and reasonable stuff - meaning that the government should ban trading certain products from a country if they're literally being produced with slave labor, or something like that - but I don't think tariffs should be used to protect domestic industry, or as a primary source of revenue. If there's any doubt, I tend to side with cutting or eliminating tariffs, period.

Free trade means more poverty for the poor and more richness for the rich.

Free trade means more bananas for fifty and donkeys for Perfection.

See? I can make nonsensical unsupported statements too.

 

[Integral]

As regards trade with equal partners, for example US-Canada or US-EU, the "environmental and labor standards" that everyone complains about are already in place on both sides of the aisle, so I see no problems with eliminating barriers to trade in those situations.

As regards trade with unequal partners, some action must be taken on the side of the stronger partner as to not totally decimate the weaker partner's comparative advantage. In this case, take the example of farming - poor third-world farmers cannot possibly compete against well-subsidized American farmers. In this case, it is hypocritical for America to push for free trade and require that developing countries open all their markets while simultaneously engaging in noncompetitive actions like farm price supports.

A third area concerns the displaced workers and structural shifts that come in the wake of free-trade agreements. IMO, their plight could be most easily lessened by expanding education/retraining programs and the like. Free trade with a safety net...

The Summers quote basically sums up my position. It's in the article, but bears repeating: "[Nafta] was really a watershed as to whether America was going to stand for larger markets, was going to stand for forward defense of our interests by trying to have a more integrated global economy...It contributed to the strength of our economy, both because of more exports and because imports helped to reduce inflation."

 

[The Yankee]

I'll go with Integral's point. Hopefully, although we've lost quite a bit in some fields, those people could be educated for bigger and better things. We can't isolate ourselves from competition forever.

 

[SS-18 ICBM]

Free trade is beneficial in the long run. Just as we don't prohibit competition between people, we also shouldn't prohibit competition between markets. The transition will hurt, but so did the Industrial Revolution.