WHAT’S REALLY WRONG WITH ‘FREE’ TRADE

The farmers in Mexico are up in arms over NAFTA, even though there is plenty of evidence that what’s putting them out of business isn’t ‘free’ trade but the relative inefficiency and protectionism of their own methods (see for example http://www.j-bradford-delong.net/movable_type/archives/001178.html).
But this entirely misses the point about the real problem with ‘free’ trade and why the Mexican farmers have every right to be furious. Economist Herman Daly says it best (read more in the Developing Ideas interview at http://iisd1.iisd.ca/didigest/special/daly.htm):
So the opposite of free trade is not autarky or no trade. The opposite is not state trade or total monopolization of trade. The opposite of free trade, which is deregulatory, is regulated trade. Trade which is regulated in the national interest by governments involved. And the notion that there should be no national interest [in] this trade across national boundaries, that the state has no interest in this, that this should be left entirely to the mutual benefit of the trading parties … I mean imagine if this logic were applied say to corporations – individuals within corporations just trade with each for their own mutual advantage – nonsense! … Every deal that corporation people make has to be vetted up through higher authorities to make sure that it’s really in the interest of the larger entity. And so I think the same thing is the case with trade across national boundaries. The reason again goes back to community because if you have the free flow of goods and capital and, increasingly, labour across national boundaries, then you really lose any possibility of policy at the national level. You can’t have an interest rate policy that’s different from your neighbour because capital is mobile. You can’t have environmental cost internalization standards that are different from other people because if you have higher standards that’ll raise your prices higher than your trading partners’, and you put your own people at a disadvantage. So you have to have some equalizing kind of tariff…
So the vision of a globally integrated economy is really a single system. You have one tightly integrated system that’s mutually dependent across the globe. That’s a very dangerous kind of system – something goes wrong, you’re in big trouble. We prefer nations to be much more fundamentally self-sufficient, not totally self-sufficient, that’s too expensive. But to the degree possible, strive for self-sufficiency and maintain loose international trading relations to make up for where it’s hard to be self-sufficient. I mean everyone can make their own aspirin and matches, you don’t need to trade multinationally for that. But there are some things that you do need to trade for. That’s kind of the vision that we put forward, and you maintain more local control over your economic life. If you don’t, then control is shifted far away and the foreigners who control the capital investment in your country may be lovely decent people, they may even be nicer than the local people, but they’re far away and they don’t really know or have an interest and a feel for what happens there. This is a vision that John Maynard Keynes expressed very similar kinds of notions [to] when he wrote on national self-sufficiency, and his views along with the others have kind of been swept aside in this globalization mania, which really serves the interests of the global multinational corporations because what holds them in check is the nation state – the rules of the nation.
In 2008, the last and most critical U.S.-Mexico tarriff barrier is scheduled to fall — corn. There is already evidence that Mexican farmers will never be able to compete with U.S. corn producers by then, and the result will be devastating to millions of Mexican farmers and the whole communities that depend on them. If they’re already rioting in the streets now, expect bloodshed big time in 2008. If we followed Daly’s principles, NAFTA wouldn’t cover corn, since all three NAFTA countries produce tons of it, and it’s in the best interests of the PEOPLE of each country to encourage it to be produced locally by using tarriffs, taxes, duties and subsidies if needed (all anathema under NAFTA) — when it comes to domestic well-being, ‘efficiency’ be damned. If NAFTA enabled ‘free’ trade only in luxury items that aren’t domestically produced (and there are lots of them), it would be an employment and creator benefitting everyone, not just MNCs. But since the governments of all 3 NAFTA countries are (at least for now) in the back pockets of the MNCs, don’t expect this renegotiation to happen soon.