“Underlying most arguments against the free market is a lack of belief in freedom itself” Free trade (FT), a form of international business not restricted by Government interference or restriction in the form of tariffs and sanction; the idea has been praised for well over three hundred years so why is it not in practice today?
The benefits of FT have been indicated as, “limit[ing] the power of the state and enhance[ing] the freedom, autonomy and self-responsibility if the individual” (“Seven moral argument for free trade”, Daniel T. Griswold, 2001), maximising global efficiency and reducing war through mutually beneficial trade. However western governments choose to protect their own interest whist pointing to the Word Trade Organisation and the World Bank when funds for developing countries are needed and so seems hypocritical. The impression that one cannot help but be left with is that the western governments would rather protect its own interests, gain funds for its own use and maintain control on the Less Economically Developed Countries (LEDCs) and so do not believe in the “universal good”.
One argument against FT is that tariff revenue is a legitimate source of finance for governments, which of course it is but how does this help countries who live on less the 64p a day? Their defence is that international economics is not just about raising global efficiency, the tariffs protect their own countries job security: if FT was observed, the competitive nature of the market would lead to domestic unemployment.
However this structural unemployment could be used to an over all advantage, the subsidised jobs could flow towards the developing world where they are desperately needed or re-trained and put back into work within the native country as was done with de-industrialisation. However the utilitarian view of greater good in this fashion is hampered by domestic opinion and therefore political action and “good will” will become somewhat more localised.
It is human nature to protect yourself over anything else and so is it really surprising that governments use protectionist policies over policies of free trade even though they are not economically efficient? The European Common Agricultural Policy (quota based), has meant that good have been grossly overproduced and so lowered the percentage that the producers receive; therefore the protectionist policy has further stunted the development of certain countries.
The next argument against FT is that it would not work in practice, that ‘text-book economics’ is not practical in the ‘real world’, which is true. It has been found that most LEDCs would have to spend the entire annual humanitarian budget in order to meet to World Trade Organisation’s (WTO) criteria for membership and there are other things within the country that the money is needed for. However, if we gave the countries free trade they could strengthen their economies, their comparative advantage and eventually lead to economies of scale.
Another factor against it is that International trade is not a self-regulating activity, governments need to cushion their markets against shocks; furthermore the WTO talks keep collapsing underneath the continually dividing regional FTA and the differences between development and industrial speed of countries; in this way smaller countries will lose out significantly. But is this just an excuse? Is this just western government’s rationalisation for not agreeing to FT?
Possibly; it would allow developing countries to gain ready access to liberalised international financial capital flow. Sanctions as a method of democracy can be indicated mainly in two ways, it leads to an increase in wealth and the growth of a middle class, also results in an internal pressure and so political change. The approach brought about the fall on communism in the Warsaw past, and only through unlimited FT will there be deep structural changes in human rights in china as opposed to merely preserving their “most favoured nation” status.
However once FT has been accepted the west has no leverage on them, and through FT living conditions for the very poor has got worse as none of the wealth produced filtered down to the very poor; and the national industries have been put out of business by the multinationals. It can allow large corporations to bypass labour laws and will hurt farmers and the poor. However this is only in one instance, in South Africa FT and sanctions have worked extremely well Supachai Panitchpakdi said “An open trading system will help increase income levels and reduce poverty…
Free Trade is vital in helping poor countries grow their way out of poverty and move onto the path of sustainable development. ” Zoellick said, “The agreement would move beyond trade, and also emphasise growth and development” and finally but most poignantly “Ultimately it has to be done by Africans themselves. We can create opportunities. The age of dependency in Africa was over. ” Free trade has given them freedom, it has worked and because it has worked somewhere it weaken the arguments against.
Finally another control mechanism for LEDCs is that of world debt; if we were to have FT and a single market, world debt should surely be cancelled. World debt it seems, like the denial of FT is a control device. It keeps the west strong and LEDCs weak, and it’s pointless from a moral and financial point of view, even if not an economic point of view. The arguments against FT as presented here, are arguments against freedom itself, if we chose to not be protectionists and were not afraid of meeting people on an even playing field we could allow LEDCs the freedom they greatly deserve.