Ever
since Adam Smith published The Wealth of
Nations, more than 200 years ago, free traders have seen themselves as
natural champions of consumers in a struggle to curb the market power of
producers. As such, powerful corporations naturally employ rhetoric like “free
trade” and “free markets” to advance their agendas.
Free trade is an economic concept referring to the selling of
products between countries without any trade barriers or tariffs. Free trade is
the absence government-imposed barriers to trade among individuals and
companies in different countries. International trade is often constricted by
different national taxes, other fees imposed on exported and imported goods, as
well as non-tariff regulations on imported goods; theoretically, free trade is
against all these restrictions. In reality, trade agreements that are labeled
as “free trade” by their proponents may actually create their own barriers to a
free market.
International
trade agreements erect trade barriers as often as they remove them. As Wayne
Andreas, the former CEO of agribusiness giant Archer Daniels Midland, said, “There is not one grain of anything
in the world that is sold in the free market. Not one. The only place you see a
free market is in the speeches of politicians.” Well acquainted with the
illegal price fixing, exploitation of the third world countries, and legally
wielding political power to extract taxpayer subsidies, Mr. Andreas knows of
what he speaks.
European
Union, have implemented free trade in some forms between their member nations.
However, there is a continuing debate whether free trade would help the less
developed countries with different economic problems and whether free trade is
good for the developed countries.
Some
economists argue that free trade increases the standard of living through the
comparative advantages and economies of scale. Others argue, however, that free
trade allows developed countries to exploit developing countries and to destroy
local industry in addition to circumventing social and labor standards.
Conversely, it has also been argued that free trade hurts developed countries
because it causes jobs from those countries to move to other countries as well
as producing a race to the bottom which causes a general lowering of health and
safety standards. While others argue that free trade encourages countries to
rely on each other economically, meaning that they are less likely to go to
war.
But
it’s a mystery why opponents of trade agreements that elevate corporate
interests above democracy concede the terms of debate by calling for “fair
trade, and not free trade.” The Fair Trade Initiative is being supported by a
number of grassroots organizations. It seeks to give a higher than market
prices to producers so they can improve their standard of living and further
develop their community. It measures economic gain in wider terms than
thickness of corporate bottom profit line.
One
fundamental assumption on the theory of comparative advantage rested on a
necessary condition of “capital immobility.” If financial (or labor) resources
can move between countries, then the comparative advantage theory erodes, and
absolute advantage dominates. Given the liberalization of capital flows under
free trade agreements of the 1990s, the condition of capital immobility no
longer holds. As a result, it can be argued that the economic theory of
comparative advantage no longer supports free trade theory. However, as
economist Paul Krugman (2008 Nobel Prize Winner) has noted, the 19th
century economic theorist David Ricardo who formulated the well-known simple
model of the comparative advantage doctrine lived himself in a period of high
capital mobility. Some take this to mean that the assumption of capital
immobility in early models of the theory was merely an expositional convenience
that is not essential to the principle.
Furthermore,
advocates of free trade itself have criticized the current implementation of
free trade. One complaint is that developed countries tend to insist that
developing countries open their markets to industrial products from the
developed world, yet refuse to open their markets to agricultural goods from
the developing world. Besides, it has been noted that the current concept of
free trade supports the free movement of products and employers, which favors
the developed countries, but not the free movement of employees, that is labor
(immigration), which would favor the people of developing countries. Some have
argued that free trade changes living conditions and careers too fast. Economic
disruptions used to happen slowly enough that natural attrition, such as deaths
and retirement, took care of the changes.
A driving force behind most existing and proposed
trade agreements is politically-powerful corporations’ pressure to expand the
most costly and anti-competitive forms of protectionism – patents, copyrights
and other monopolies grouped under “intellectual property rights,” thereby,
effectively mandates suffering and death to bolster corporate profits in many
instance. For example, poor countries that import generic HIV/AIDS drugs that
save thousands of lives have been sued to halt the practice as a violation of
trade treaties. The question remains: How
free is the “Free Trade?” or rather: Should
we stop calling it “Free Trade?”
Dr. M. L. Yakubu (Lawal Karmanje)
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