Free trade, but

This piece by Michael Kinsley is presented with the write-off (what Americans call the “lede”) “I’m for free trade but” usually means you’re not for free trade at all. Kinsley makes some good points in the article, demolishing a rather silly NYT Op-ed piece by Charles Schumer and Paul Craig Roberts but his central claim is contradicted by his own observation that

Almost everyone acknowledges some exceptions to the general rule that a nation is better off if it doesn’t try to tell its citizens what they are allowed to buy from or sell to foreigners.

In other words, nearly everyone, including Kinsley, is “for free trade, but”. Kinsley tries to salvage his argument in the next sentence where he says

A free trade butter (FTB) is someone whose exceptions take a big bite out of the rule itself.

(as an aside, I note that the annoying acronym is introduced but not used thereafter). This move won’t work. Who is to decide what is “a big bite” and what is a modest exception, acknowledged by “nearly everyone”, and therefore part of a “reasonable free trade position”?

The point can be made in relation to the issue of trade and labour rights which, as it happens was the subject of one of my earliest blog posts. Kinsley is hopelessly vague on this, as was the article by Kristof to which I referred then. He is open to the notion of

working conditions so wretched and wages so low and practices, like child labor, so heartless that you do want your own government to ban imports of the product at issue, to avoid the taint of association and, with luck, to pressure the exporting nation to change.

, but rejects the idea that American standards of health, safety and wages should apply globally.

These extremes leave a gap wide enough for a Hummer to drive through, and fail to make the distinction between process and outcomes. There is no reason why workers in poor countries should not have the same sort of legal protections and bargaining processes, for example with respect to rights of union representation, as those in rich countries. Given lower levels of productivity the outcomes in terms of wages and conditions won’t be as high as those in rich countries. It’s reasonable to use trade policy as a lever to demand protection of workers rights, but not to exclude imports simply because the people who produced them received low wages.

I haven’t got time to discuss capital movements where, these days, even free-trade stalwarts like Jagdish Bhagwati are in the “but” camp.

9 thoughts on “Free trade, but

  1. Exactly how is Jagdish Bhagwati in the ‘but’ camp? Free movement of capital is a different issue from free trade. Incidentally it’s worth noting that Paul Craig Roberts was a leading ‘supply side’ (i.e. Laffer curve, vodoo economics) adviser under Reagan. Nowadays he writes angry ‘whites are losing their rights’ pieces for Vdare

    What the hell is Charles Schumer doing teaming up with such a dodgy character?

  2. While it comes down to semantics pretty quickly, I’d say that “I support free movement of goods, but not of capital” is a “but” position. Certainly there are plenty of advocates of free movement of capital who’d say that this is nothing more than an aspect of free trade.

  3. Actually Jason, He is the geezer who came up with the taxation estimates that led the Reagan camp to cut taxes but ‘NOT’ increase the deficit.

    You are correct with regard to Bagwhati.

    I thought most free traders thought the last thing you deregulated was capital movements paricularly with regard to Third World countries.

  4. “plenty of advocates of free movement of capital who’d say that this is nothing more than an aspect of free trade.”

    Advocates, yes; economists, few.

    The case for free trade in goods, based on comparative advantage caused by differences in national productivities or factor endowments, doesn’t automatically or obviously translate into a case for the free movement of capital.

    That doesn’t mean that there isn’t a case for free international movement of capital (or labour) but it is based on different economic principles.

  5. I’ve mentioned this here and there: the big “but” I can see on free capital movement as free trade is, a proportion of nominal investment isn’t real investment when you do it with a depreciating fiat reserve currency (it’s a little more complicated, since there are intermediary countries between the ends of the value chain). It’s essentially what the Dutch did deliberately in the East Indies to set up their “culture system”, paying for it by depreciating the currency but ending up acquiring a permanent resource base rather than one-off effects from the depreciation.

    However even within free trade, I see a difficulty when people mix and match between “good for all countries” and “good for everyone”. Certainly there are always losers within countries that open up, even when the countries gain as a whole; they just never do pass around the compensation that would avoid this.

  6. The greatest exponents of ‘free trade but’ are the US, Europe and Japan, with their agricultural policies. Essentially, they are saying to developing nations – We believe if free trade and open markets but only for what we export, not for what you export.

    No powerful nation has ever believed in absolute free trade in practice, only in rhetoric, with the sole exception of Britain in the 19th century, which did practice free trade and, as a result, declined markedly compared to the highly protected economies of Germany and the US, during the Great Depression at the end of the century.

    Absolute free trade has never been beneficial to any nation, where others are practicing protection. Which means it never will be beneficial to any nation, outside the fantasy world of academic theorists.

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