Free Trade

[mrt144]

No, obviously protectionism is only part of the various factors that lead to the dominance of western economies, but it was crucial as a contributing and facilitating factor.


The usual conception that free trade was born in the British Empire and in the US is ridicolous. The US and Europe always maintained policies of protectionism and still do, because they were crucial to their power. (Reagan, the great free trader, was the most protectionist president in post war history) Free trade, on the other hadn, was imposed upon the poor and defenceless, and indeed, the whole field of free market economics and laissez faire were just intellectual fields developed with elite interests in mind.

Yes, our agriculture subsidies have very easily made poor farmers in foreign countries better off, right? And the people of the U.S. benefit so greatly from these subsidies that we can afford to destroy excess food. Hurrah for protecting the American farmer! right?

Or perhaps protectionism could be engaged without negative serious consequences from other nations when there was ample supply of resources to take, not trade, from other "less civilized nations". For instance, almost every western nation engaged in some form of colonial exploitation well up into the 1950s. Western nations surely competed against one another in producing goods and enacting tarrifs but no western nation was bound by the constraints of a limited supply of resources or lack of area to expand in to. They simply plucked resources for almost free from places "less civilized". Until the resource rights and sovereignty of other nations were respected the supply curve could be shifted right to match any protectionist policy.

Surely Japan was protectionist pre WWII when they colonized integral of the pacific rim. and surely they were protectionist post WWII when they received capital for free from the United States. And surely their protectionism is helping their economic growth right now by, oh wait a sec, it isn't. Yes, the Japanese are wealthy comparative to other people in other nations but they've barely had any economic growth since the late 1980s. Protectionism has really helped the Japanese right? I mean they went from being a colonial power in their region, to being a world power, to being decimated, to being a world economic power, to being a stagnant economic power. and honestly, Ikeda LIBERALIZED TRADE, that is, made way for more free trade during his term. At some point a country can't play in the bigs and be protectionist without harming themselves, as Japan showed. That's right Princeps, trade actually liberalized in Japan post WWII within the 1960s. To attribute post war Japan's success to protectionism would be ignoring that the level of protectionism decreased in Japan following WWII. The retort to this observation might be that protectionism allowed them to get to the point they were at but I argue that consequence free exploitation allowed this to happen.

on the more fundamental and philosophical level, isn't holding 3rd world countries over a barrel for the benefit solely of a 1st world country protectionism? Isn't that what happens when you limit where a 3rd world country can fence their goods in retaliation for protectionism they enforce? Isnt that what happens when a 1st world country doesnt liberalize trade and prevents the ability of 3rd world countries to receive NCOs? Why are you so eager to deprive people in the 3rd world with limited resources the opportunity to compete by excusing 1st world protectionism? This is central to an observation in Ha Joon's essay I made; does a country even have the resources and capability to engage in international trade and protectionism at the same time?

After reading Ha Joon's essay I can't say that I am convinced of his explanation that protectionism provided the basis for economic growth in the western world. The examples that he provided for countries that used protectionism were either not confined to limited resources or factors of production in similar ways to countries now, were given technology/capital and resources as a proxy in wars with wealthier nations, and had already established forms of national identity and institutions of government. I think an interesting thought in his essay has to do with intellectual property though. Isn't copyright and IP just a form of protectionism? The flow of information freely is the antithesis of protectionism.

Another problem I see with a lot of this is semantics. Is regulations of foreign businesses within domestic borders protectionism or simply business regulation? What is truly free market and what is truly protectionist? I think tariffs, subsidies, can be ruled as being protectionist but is government failure to adequately regulate a foreign business while no domestic alternative or no international competition existing really free market? Is the IMF free market or simply a one way pro american trade organization? Lets not confuse predatory behavior as being the hallmark of any one school of thought.

In summary, while it may be nice to think that protectionism is a stepping stone to economic development and liberalized trade later down the road, it is not without greater costs to someone else in the world until that liberalization happened. Africa and Latin American are still paying the price for European and American protectionism.

 

[Cutlass]

I wonder how protectionism made Korea and Japan such economic powerhouses then?

 

[mrt144]

I wonder how protectionism made Korea and Japan such economic powerhouses then?

Liberalized trade relations with the west, self sufficiency in basic public needs, a historical basis of national identity and government, and the exploitation of weaker nations around them while engaging in protectionist policies (in Japan's case) or being the benefactor of several factors of production from other nations by engaging or being a proxy in a war with another nation(Korea) and finally a liberalized flow of information.

 

[D0NIMATRIX]

If people wanna trade with each other, let em'.

 

[mrt144]

If people wanna trade with each other, let em'.

no, the government will tell you who you can trade with because the government knows better than you. and who you can work for. and what you can do as a profession.

 

[El Koeno]

In summary, while it may be nice to think that protectionism is a stepping stone to economic development and liberalized trade later down the road, it is not without greater costs to someone else in the world until that liberalization happened. Africa and Latin American are still paying the price for European and American protectionism.

But then who will pay the price if the least developed countries of this earth adopted protectionist polices? Surely, it would be richer countries which would lead to more equal distribution of wealth? I realize that this is a bit of a unrealistic point, as the least developed countries are also the ones in the worst position to develop coherent protectionist policies.

I myself am inclined to say that protectionist policies are quite dangerous. In that they're hard to abolish. Because everytime, the gains from abolishing protectionist policies are large but spread out over many people. The losses on the other hand, are smaller but more focused, and so more visible. This gives opposition to free trade a pretty good political starting point. So it's quite hard to adopt them temporarily.

 

[JerichoHill]

I wonder how protectionism made Korea and Japan such economic powerhouses then?

They only became economic powerhouses when they liberalized trade. Hence, you have zero argument

 

[Cutlass]

They only became economic powerhouses when they liberalized trade. Hence, you have zero argument

But they took advantage of our liberalized trade while protecting their home markets.

 

[Princeps]

Yes, our agriculture subsidies have very easily made poor farmers in foreign countries better off, right?

No, and this is the reason why I am opposed to agricultural subsidies. Again, not all forms of statist measures are good ... why is it that people make this slippery slope fallacy? Assuming that since I speak for the advantages of some measures, I defend them or advocate them all. I advocate some protectionism, especially for the less well off. I suppose, that even in the US, you could still provide some subsidies for small farmers, so that they could compete with the giants.

Also, US protectionism extents far beyond farm subsidies. US has the military-industrial complex, i.e the pentagon system, which has spawned out numerous technologies and given birth to the IT-boom. US has a robust public sector that provides education, basic sciences and extensive research for the private sector, all at the tax-payers expense. The US public sector has extensively intervened to protect US businesses.

For instance, almost every western nation engaged in some form of colonial exploitation well up into the 1950s.

Yes, but part of this imperialism was that the western powers imposed the free markets upon the poor and protected their own economies. Thus they prevented the poor countries from growing, and forced them to purchase commodities manifactured in Europe.

Why do you think that Britain, that pathetic island, became worlds leading producer of iron?

Also, not every European country engaged in imperialism. Sweden, Norway and Finland, and many Eastern European countries (which were actually pretty wealthy before German and Russian imperialism) did not do plunder in the same scale as the Brits or French.

Western nations surely competed against one another in producing goods and enacting tarrifs but no western nation was bound by the constraints of a limited supply of resources or lack of area to expand in to.

Yes, actually many were more restricted. Like Germany, Sweden and Finland.

In Finland, there were some protectionist fanatics who did everything to hamper foreign businesses. But then, what happened? Did Finland become a poor, undeveloped country? No, Finnish companies grew strong and evantually competative in the international markets. Nokia, for example, has received strong backing from Finnish public sector in education and research. The same is true for Sweden and Germany, they've also followed similar policies. In fact, the same is true for France and Britain also: you can always find policies of protectionism.

They simply plucked resources for almost free from places "less civilized". Until the resource rights and sovereignty of other nations were respected the supply curve could be shifted right to match any protectionist policy.

Well, actually, during it's height, the British Empire also followed some of the policies of free trade that it advocated for others, because Britain could. The British business was to the extent overwhelming that few could compete with it. But yes, plunder played a part in it, but I'm not advocating that for anyone.

Surely Japan was protectionist pre WWII when they colonized integral of the pacific rim.

Yes. However, Japanese colonialism actually serves to refute this. Many of the apologists of colonialism, like Winner, point out how western powers supposedly developed the colonies out of benign altruism, building railroads and schools for the savage locals. This is of course false, because a lot of the infrastructure the western powers built were propped up to facilitate plunder of natural resources and explotation of the natives, not to benefit them, except the few.

Japanese colonialism was profoundly different. Unlike western plunderous colonialism, Japanese colonialism actually included significant economic development. In conditions of extreme savagery and brutality, the Japanese imperialists actually built manifacturing and infrastructure. It's worth noting that many of Japan's former colonies are today known as the Asian Tigers, because they picked up on Japan's development model, involving less savagery though, and obvioulsy mixing it with many of their own conceptions.

and surely they were protectionist post WWII when they received capital for free from the United States.

Well, actually, had Japan not been protectionist, the US private powers would've probably taken over the Japanese companies, which would've probably put Japan to third world. And the occupiers actually tried to do that.

And surely their protectionism is helping their economic growth right now by, oh wait a sec, it isn't.

Yes, the Japanese are wealthy comparative to other people in other nations but they've barely had any economic growth since the late 1980s.

Well, Japanese economy grew 2.5 % in 2006, and it's exports have grown fabulously since the 1980s. Also, the Japanese miracle took place with heavy protectionism and dislike for free markets.

Protectionism has really helped the Japanese right? I mean they went from being a colonial power in their region, to being a world power, to being decimated, to being a world economic power, to being a stagnant economic power.

The Japan was for a long time the second largest economy in the world, now India and China have grown past it, but that was to be expected: those two countries are simply much larger.

That's right Princeps, trade actually liberalized in Japan post WWII within the 1960s.

Not really. Only a few major US companies were allowed (McDonald, KFC, Coca Cola, IBM, Intel, JP Morgan etc) to operate in Japan under a managed trade treaty with the US. Others had to export to Japan and were forced to face heavy anti-competition custom taxes. Foreign car manufacturers have never been allowed to open factories in Japan. That's just beginning of it, Japan has long had strongly anti-free trade policies.

 

[Princeps]

Actually, you are only showing a lack of understanding of US history. The founding fathers of the USA very much supported free trade.

Complete nonsense. First of all, the founding fathers were often in strong disagreement with each other. Also, they were polticians and often lied, they were also corrupt and criminal in many cases. Much worse than today's politicians.

George Washington appointed strong protectionists, like Alexander Hamilton, to positions of power, fully knowing what they'd do. Thomas Jefferson violated his vaunted free trade standards faster than he could lower them.

So, they weren't influenced by few congressmen, they were influenced by the economic reality of a world dominated by the British Empire. They had risked everything to fight for their independence, and now they understood that they also needed economic independence.

 

[luiz]

Complete nonsense. First of all, the founding fathers were often in strong disagreement with each other. Also, they were polticians and often lied, they were also corrupt and criminal in many cases. Much worse than today's politicians.

George Washington appointed strong protectionists, like Alexander Hamilton, to positions of power, fully knowing what they'd do. Thomas Jefferson violated his vaunted free trade standards faster than he could lower them.

Most of the founding fathers (and notably Thomas Jefferson), strongly supported free trade. It was a fundamental part of the society they wanted to build.

Furthermore, Hamilton was much more an exception than a rule. The so-called American System of Henry Charles Carey only became the economical philosophy of the United States in the second half of the 19th Century - when the founding fathers were all dead. You should know that the first half of the 19th Century was dominated by the Democratic Party of Van Buren, Polk and Buchanan and their opposition to high tariffs and other protectionist measures.

So, they weren't influenced by few congressmen, they were influenced by the economic reality of a world dominated by the British Empire. They had risked everything to fight for their independence, and now they understood that they also needed economic independence.

Indeed, a big part of Hamilton's protectionism was influenced by nothing more than silly nationalism and a faulty notion of independence.

It is also very popular nowadays, you can hear echoes of it in the speeches of the likes of John Edwards. Some call it economic nationalism, I call it economic bigotry.