What price free trade?

March 23rd, 2016
by Chris

A friend has recently posted an approving link to an article criticising both Trump and Sanders for opposing the TPP (Trans Pacific Partnership) treaty; the basis on which the criticism is levied is that free trade and more of it is good for the US economy; the article then goes on to suggest that the failure of non-competitive industries is a price worth paying for the benefits of increased productivity and innovation.

In doing that, it completely misses the point of Sanders’ criticism of the treaty, which is not on the basis that the lowering of trade barriers is bad for employment, but on the basis that the treaty hamstrings the ability of governments on both sides to enact legislation which might hamper trade. Sanders’ position is not (as the article suggests) protectionism, it’s simple care for the population and the environment which is being prejudiced.

This is the same criticism which I have been levelling at the proposed TTIP treaty between the US and the EU; in essence, the treaty would remove sovereignty from the individual nations in favour of unregulated big business, limiting or removing the powers of governments to legislate on (for instance) food safety, environmental protection and banking control. These kinds of treaties give corporations the power to sue governments for losses (generally being the inability to make future profits) which they anticipate if the governments restrict the ability of those corporations to (for instance) strip mine large tracts of land, deforest wide areas, sell dangerous drugs or foods or, of course, carry out the same kind of financial manoeuverings which led to the 2008 crash.

My view is that governments’ abilities to control large multi-national corporations are already far too limited, particularly in the US with it’s system requiring huge money in order to get elected, thus putting politicians in the pockets of big business. (Our home-grown politicians at present seem willing to do much the same things without actually directly receiving vast sums of money, which in my eyes makes them fools rather than crooks; I might prefer crooks, as at least their crookedness is predictable).

It is a huge shame that the treaties of this type in existence (and the drafts of TTIP) actually operate in this way. It makes sense to have a mechanism by which restrictive rules made by governments can be challenged; historically many of these have been back door means of instituting protection of native industries rather than regulations designed to safeguard the environment (a Christian duty in my view, as we are called to be good stewards of the remainder of creation) or keep consumers safe from shoddy or dangerous products (another Christian duty, as protecting the weaker against the stronger and limiting fraud). My personal instinct is in favour of free trade, as this has been historically the position of the Liberal Party (and then the Liberal Democrat Party) in the UK. However, this has to be tempered by considering the actual effects on people and environment.

What the article does in the main is attack some of Trump’s criticism. I don’t propose to talk about that directly, as Trump expresses his ideas on the subject fairly incoherently, but instead note an article by Chris Hedges recently. To quote from that article:-

“To allow the market mechanism to be sole director of the fate of human beings and their natural environment, indeed, even of the amount and use of purchasing power, would result in the demolition of society,” Polanyi warned in “The Great Transformation.”

“In disposing of a man’s labor power the system would, incidentally, dispose of the physical, psychological, and moral entity ‘man’ attached to the tag,” he went on. “Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed.”

Hedges is, of course, a significantly left-leaning commentator (as, it might be argued, is Robert Reich), but I think his observation that the existing treaty is impoverishing the population of the weaker partners (Mexico in this case) as well as contributing to the forces lowering the living standards of US workers is well founded. The benefit of free trade in enabling workers in poorer countries to lift themselves out of poverty by producing things cheaper than can be done in richer countries is a good; it contributes to the alleviation of poverty, which is a major Christian duty. However, in this case the existing free trade agreement seems not to be having that effect. Partly that will be due to the fact that the pool of labour is not organised and is far larger than the demands of production could ever need, of course.

I am also inclined to question whether it makes sense to ship low value goods vast distances, particularly to places which can readily produce their own; none of the mechanisms envisaged take account of the vast carbon footprint of long distance travel, which in my opinion ought to render some trade uneconomic. I might, for instance, like the fact that under TTIP British farmers could potentially strike down US regulations forbidding British beef and lamb from US markets – but the USA are perfectly capable of producing their own, and the transport costs (if they included pollution) should render this uneconomic.

It might be that under a properly constituted free trade agreement, the poor farmers of other countries would be able to sue the US government for subsidising agriculture to their considerable disadvantage. However, the mechanisms which are in place, even were this a practical possibility, are effectively open only to rich companies and not to poor individuals.

It may well be that protectionism is indeed something which is now impossible to resurrect – the article suggests it’s a thing of the 50’s, though I would argue that it is still alive and well and being practiced in many countries, perhaps all in some measure. We would not in any event, I think, wish to go back to the days of major tariffs on imported goods, as we like our cheap consumer goods, clothing and food too much. Is protection, though, a completely bad thing when just designed to protect our native industries and workers?

Hedges’ quotation accurately pinpoints one of the problems; a larger pool of labour (worldwide rather than local) reduces the bargaining power of labour, and thus reduces the income of workers. As Trump might say were he not speaking in a wholly populist manner, this is likely to prejudice the workers ability to meet the needs of the bottom two levels of Maslow’s hierarchy of needs (basic sustenance and security) and in fact is doing so. I have in mind here the repeated suggestions of Alan Greenspan (former president of the Federal Reserve) that immigration of skilled workers should be encouraged in the US in order to drive down the wages of the skilled.

So what I’m left concluding is that while free trade between parties with rough parity of bargaining power (the kind of situation advanced by most proponents as paradigmatic) is in principle a good thing provided due consideration is given to (for instance) the environment, the kind of agreement which TPP and TTIP represent doesn’t achieve this in a sensible way, and indeed may act against true freedom of trade by increasing the relative power of large corporations against the consumer and labour (and, of course, the environment) without really achieving the improvement of the situation of the workers in poor countries which is a major aim.

But it’ll keep things cheap, at the expense of sweated labour (or even outright slavery) somewhere.

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