What’s The Problem With “Free Trade”

[Triana]

NOTE: This entire article is a great explanation for how/why all this "free trade" shit is . . .shit. I can't excerpt enough of it here without violating the 4-paragraph rule, so I encourage you to read the whole thing at the link!

. . .

Free Trade Undermines Democracy And Wages

“Give us a protective tariff, and we will have the greatest nation on earth.” – Abraham Lincoln.

Democracy has a short term “cost” with a longer-term gain. In countries where people have a say, the people say they want higher wages and benefits, good infrastructure, good education, a clean environment, safety on the job, and other services. These things all lead to a prosperous economy later, as long as benefits from this system are fed back into maintaining that infrastructure, education and services. This prosperous economy made America a desirable market to sell things to.

When the country and the idea of democracy were young we “protected” this concept with tariffs, so that goods from places where labor was cheap (or free) did not undermine our democracy. Those tariffs in turn funded investment in infrastructure and other common needs that enabled productivity gains that made our goods competitive elsewhere. But generally companies here served the population here and grew and prospered along with the rest of us.

At some point elites and free-market “economists” began an effort to convince us that “free trade” is a good thing and “protectionism” is not. We used to “protect” our country’s manufacturing base from being undermined by goods from low-wage countries that don’t protect workers or the environment. Then we didn’t.

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THE REST:

https://ourfuture.org/20160313/whats-the-problem-with-free-trade

[Nye Bevan]

1. Al Gore convinced me that NAFTA was a good thing in his televised debate with Ross Perot.

Has Gore ever renounced his position on NAFTA?

[jillan]

2. And Ross Perot scared the crap out of me. He was right.

And yes I voted for him. ☺️👍

[Triana]

4. He was right. People made fun of him but...

..he was right!

[Herman4747]

3. Actually, I tend to oppose NAFTA & other free trade agreements...

...primarily because I suspect that shipping goods thousands of miles would (seemingly) have a negative impact on climate change and the environment.

[Triana]

5. That's as good a reason as any.

In fact right now, it's an incredibly valid reason, IMO.

[Wounded Bear]

6. K & R ......for visibility..

I kind of reluctantly supported the NAFTA fiasco, mostly because of the worker and environmental protections Clinton claimed would be in the deal. They ended up being false promises, at least in part because of the Repub Congress and the lobbyists, of course. In the end, it was a giveaway to the big Corps.

Pretty good article, if you can get past some of the more egregious typos and such. (Sorry, my inner grammar nazi is on duty ).

[TreasonousBastard]

7. Sorry, but that article is full of half-truths and air...

Trade and manufacturing have become enormously complex in the past few decades, and clumsy meddling could cause a lot more trouble. Most of our manufacturing job loss isn't due to imports, but to automation, and that is getting worse by the minute. Jobs in the trade sector seem to be growing, so why do something that doesn't help manufacturing while killing jobs in a growing sector?

Early in the days of Adams and Jackson we played around with tariffs and they caused huge messes that took decades to sort out. Even though Smoot-Hawley was not a major cause of the Depression, it certainly didn't help and did make quite a few things worse.

Now, comparative advantage is a cute little vestige of bygone days-- nobody takes it seriously any more. Sure, there are some places where it's easier to grow coffee or bananas, but manufactured goods are made largely on the whims of politicians, the public, and available financing. And markets-- Asia is now a booming market and it makes sense to make a lot of stuff over there.

If we increase tariffs on iPhones, which are made from components from a hundred or so countries, what would that accomplish? Apple would make less money while the phones cost more but the chips, connectors, wires, cases, microphones, cameras, etc wouldn't suddenly start being made here.

What car would you buy? Aren't more Toyotas than Chevys assembled here, and components come from all over the planet. A US made camera, television, vacuum cleaner? How long would it take to expand production here? How much would it cost? And, even if we did manage to put a huge tariff on Samsung phones, what would stop Korea from buying even less from us? Past experiments with tariffs usually ended badly with the rest of the world getting equally punitive.

Now, what could work would be more attention to the anti-dumping laws. "Dumping" simply put, is when a nation or a business dumps stuff on a market at less than cost to gain market share, or bankrupt the competition. That's as far from "fair" trade as you can get, and is illegal pretty much everywhere. Enforcement, however, is another story.

And the tax code could be changed-- taxing excessive import profits from the Mexican manufacturing facility would be nice, and wouldn't hurt export sales out of Mexico.

[Xolodno]

8. What a lot of people don't realize, we already had a form of defacto NAFTA.

The Maquiladores program already allowed US companies to shift their factories south of the border long before "NAFTA". If anything, Mexico got shafted. Agriculture and many agricultural products are far more cost effective to make in the US, which put a lot of small Mexican farms "out of business".

Even then, there are still many trade protections. For example, I can go to the supermarket and buy a bottle of wine from Australia, Chile, etc. with no problem. But to buy a bottle of Monte Xinac from Mexico....impossible. Tariffs on Mexican wine are prohibitive....why? To protect the west coast wine industry...primarily California (Oregon and Washington are primarily producing for niche markets)

Side note, think it would be an interesting economic study to look at Marijuana exported to the US from Mexico before and after the implementation of NAFTA. Wouldn't surprise me if that's what many ex-farmers turned to.

[Hortensis]

11. Good, informative post. Thanks, Bast. :)

In simple terms, saying free trade agreements are bad is like saying hammers are bad or baking powder is bad. They all perform valuable tasks when used right, and banning all hammers because they can be used to hit people instead of nails would be foolish.

Our largest problem, of course, is that power is out of balance between people, governments, and special interests.

[pampango]

9. We had "protective tariffs" until FDR came along. Germany and Sweden do just fine without them.

I think FDR knew what he was doing as do Germany and the Scandinavian countries today.

Actually the enactment of the 16th Amendment in 1913 which allowed income taxes to replace tariffs as the main source of government revenue was a great progressive victory.

The Hidden Progressive History of Income Tax

The income tax was the most popular economic justice movement of the late 19th and early 20th century. This truly grassroots movement forced politicians to act in order to stay in office, leading to the 16th Amendment to the Constitution in 1913. That’s right, the income tax was so popular that the nation passed a constitutional amendment so that the right-wing Supreme Court couldn’t overturn it.

Income and Tax Inequality in the Late 19th Century

Everyday Americans hated the tax system of the Gilded Age. The federal government gathered taxes in two ways. First, it placed high tariff rates on imports. These import taxes protected American industries from competition. This allowed companies to charge high prices on products that the working class needed to survive while also protecting the monopolies that controlled their everyday lives. Second, the government had high excise taxes on tobacco and alcohol, two products used heavily by the American working class.

These forms of indirect taxes meant that almost the entirety of federal tax revenue came from the poor while the rich paid virtually nothing. This spawned enormous outrage.

http://www.alternet.org/labor/hidden-progressive-history-income-tax?akid=9361.277129.2KDGDd&rd=1&src=newsletter706781&t=14

Then along came republicans in 1920. What did they do? For 12 years they raised tariffs, lowered taxes, deregulated, restricted immigration and attacked unions. Of course, all their tariffs and other policies drove the economy into a Great Depression but not before 'achieving' historic levels of income inequality that we still have not equaled.

Of course, FDR started in 1934 to dismantle the high tariffs he inherited through bilateral trade agreements then, near the end of WWII, proposed his international trade organization as a mechanism for countries to collectively govern trade.

Trump is a throw-back to the 1920's republicans in many ways. He thinks that bringing back tariffs will solve our problems. That's the same thinking as Warren Harding, Calvin Coolidge and Herbert Hoover. FDR knew better.

Trade is a relatively small part of our economy anyway. It's 23% in the US, 70% in Germany, 55% in Canada and between 45% and 60% in Scandinavian countries. It is popular to blame our problems on trade. If trade were the problem, Germany, Canada and the Scandinavian countries would be a whole lot worse off than we are. They are not.

[YoungDemCA]

10. Protectionism simply isn't viable in the globalized 21st century economy

That being said, I do believe that policymakers would do well to adequately address the understandable concerns that many people have about the negative consequences of free trade agreements. Every policy has winners and losers, and free trade is no exception to that rule.