Debate: Is Free Trade a Global Good - or Simply an Elaborate Excuse for American Imperialism?
Two super smart pseudo-intellectuals duke it out over free trade.
The Emissary had NAMUN staffers Ted Fraser and Jeff Leung engage in a quick debate on one of today's most polarizing - and pressing - debates: the merits of (and fallacies surrounding) free trade. Here's what they came up with.
OPENING STATEMENTS
JEFF
Free trade is, on the surface, a near-utopian idea; one that would allow all countries to trade resources as they please. Due to competition, countries would end up specializing in certain trades or services, upping their quality and providing the best products they possibly can (also known as comparative advantage). However, in practice, this idea is simply a thinly veiled modification of global imperialism; a neoliberalist nightmare conducted by the United States and other powerful Western countries in a frighteningly effective attempt at worldwide financial dominance, often utilizing economic violence to overpower smaller nations, resulting in extreme consequences to the indigenous peoples and industries of those countries (Grocott and Grady). The “comparative advantage” model, then, only works for countries of similar economic standing.
Sure, some people living in the imperialist dystopia that is the US (and countries like Canada that heavily rely on the US for trade) might benefit from this, but while they do, the peoples of what become effectively conquered nations lose everything. Considering that two of the United Nations’ goals is to “protect human rights” and “promote sustainable development (What We Do, UN.org), the aggressive imperialist tactics that countries like the US employ against small countries like Bolivia is not exactly justified.
In her documentary “Life and Debt”, Stephanie Black investigates the long term effects of globalization on developing countries such as Jamaica. What she found was that much smaller local businesses (chicken plants, banana farms) end up being strong-armed into bankruptcy by the much more powerful American corporations, which benefit from cheaper labour (due to Jamaica's lower cost of living) thus both stifling local infant industries and taking jobs away from the American people (Black).
Let's put it this way. It’s like each country is a person holding a different rock. Hypothetically, through free trade, the competition makes it so everyone modifies until they have their own unique rock, allowing everyone involved to grow. However, this doesn’t account for the fact that some countries have naturally better rocks (more powerful, influential, etc.) and use them to club all the weaker countries to death, before taking their rocks and duct-taping it to their own before searching for other countries to club and rob. That's the effect of free trade on developing countries.
TED
I'll start by borrowing a definition of free trade from John Van Reenenn, an economist at MIT. Reenen defines free trade as “allowing goods and services to move as freely as possible across different countries.”
Why is this a good thing? There are three big reasons. Firstly, a concept called “comparative advantage,’ or letting countries produce the thing they're best at making. If we close off our economies, we'd be responsible for producing the goods we want to consume - and the services we want to take advantage of. If all countries adopted a more protectionist trade policy, Canada would have a lot harder time importing, say, Italian olive oil, German cars, or Chinese solar panels. We'd have to pay more, or choose to produce it ourselves, reducing choices and raising prices for consumers.
Secondly, a more general benefit: prosperity and trade galore. Take NAFTA - an example very close to home. Since 1993, trilateral trade between Canada, Mexico, and the United States has increased threefold, reaching USD $1 trillion in 2016. Over the same span, “Mexico-Canada merchandise trade grew nine-fold, while services trade has increased six-fold,” according to Government Canada’s estimates. This is not only great for Canada-Mexico relations politically, but also beneficial for us: more products means more choice, more competition, and better living standards.
CETA had similar benefits. After slashing duties on 98% of products, Canadians can connect with 500 million Europeans and a $24 trillion market. Thanks to the deal, Canada was able to export loads more aluminium (up 378%), motor vehicles (up 89%), mineral fuels and oils (up 84%), and more, creating jobs and sustaining important industries.
Thirdly, lower prices. Students are cash-strapped to begin with - and can't tolerate the needlessly high costs of import quotas or tariffs. If you're from the U.S., and a company in Denmark can make a cheaper, higher-quality wool sweater for you to shiver in at NAMUN, you should be able to buy it, not get peppered by politically-charged tariffs forcing you to “Buy Local.” Free trade grants you the privilege of choice - and, as a result, lower costs.
REBUTTALS
TED
Free trade works because, even though not everyone is better off as a result, the so-called “winners” of free trade are able to compensate the “losers” with the gains they've acquired.
Welfare, government subsidies and unemployment insurance (all funded through the gains made through free trade) are put in place to offset the negative aspects of free trade. Smart countries have systems in place to retrain redundant workers - and bring them back into the cycle of free trade by moving them to a new job relating to one of the country’s comparatively advantageous industries.
It's absolutely true that some of the present-day beneficiaries of free trade used to erect protectionist walls themselves. And it's true that this fact makes them hypocrites, especially the United States. But tariffs of centuries past - for instance, the Smoot-Hawley Tariff during the Great Depression - could not be deployed nowadays. When President Donald Trump tried to slap similarly high tariffs on aluminum and steel in 2018, he largely abandoned them (with regards to Canada, Mexico, and others) a year later. Moreover: various studies have concluded that Trump's tariffs have reduced real income in the U.S., in addition to hampering GDP growth.
Free trade does, in fact, work for the majority of developing countries. Free trade is one of many factors that can turn a closed-off, developing country into a developed country. The example Jeff provides - Bolivia - is a complicated one. It’s tough for a country with such volatile industries to sustain itself and remain consistent. Bolivia's main exports (petroleum gas, zinc, and lead) are inevitably subjected to the whims of global price fluctuations - and as a result, the economy is liable to wane. However, Bolivia has taken advantage of free trade in the past: the country inked a deal with MERCOSUR in 2015 to become a full member, and once the process is complete, economic prospects will almost surely improve.
JEFF
Free trade doesn’t work because while the so-called “winners” might be capable of compensating the “losers”, they have no incentive to do so and never do. Protectionism, such as the past economic policies of countries like Singapore, Taiwan, and indeed, even America, allow infant industries to grow without being “subject to the whims of global price fluctuations. The argument is not that countries like Bolivia are totally against free trade; it’s that they were bullied into it by America and suffered the consequences. The Morales socialist government, one that had “achieved successes” through bucking colonial and imperialist influences, was overthrown in a coup with heavy American involvement (Whitney Jr.). How exactly has free trade turned any developing country into a developed one? There's no evidence of this. All we have is counter-evidence from Jamaica, Bolivia, and, most notably, Mexico.
Let's take NAFTA. Instead of taking information from Canadian governmental websites that are essentially patting themselves on the back for their own trade deals, let’s take a look at fairer source; a 2018 scholarly study published in the Mexican Law Review and conducted by American senior associates at the CEPR (Center for Economic and Policy Research) in USA, which found that the policy changes put in place due to NAFTA ended in “decades of economic failure by almost any economic or social indicator.” (Weisbrot et. al) This includes their per capita GDP growing slower than the rest of Latin America, growing poverty rate, and, most telling of my first point about America’s benefits at everyone else's expense, the severe impact on agricultural employment as a result of US subsidiaries “wip[ing] out family farmers in Mexico’(Weisbrot et. al). Yet another case of “free trade” negatively affecting the weaker country.
In fact, it’s not even just Mexico that suffers. As mentioned above in the Jamaican example, American companies can pay Mexican workers far less than they would pay American ones, incentivizing said corporations to simply move their operations to Mexico, taking jobs away from American citizens, furthering the unemployment rate and widening income disparity, which, according to UC Berkeley economist Emmanuel Saez, has only grown to the point where the top 1 percent now average over 39 times more income than the bottom 90 percent (“Income Inequality in the United States”, Inequality.org). So, not only is Mexico suffering, but the average American is as well. The only people who benefit are the top 1 percent owning the corporations that seek to put local businesses out to pasture.
CLOSING STATEMENTS
JEFF
Free trade is not without its benefits. However, | feel that it is important to understand that it doesn't benefit everyone the same way, and for it to benefit some countries, it ends up disadvantaging others.
Free trade does not encourage countries to make the thing they're best at making; it encourages them to bend to the will of Western (read: USA) corporate interests or be subject to “economic violence”, resulting in lower GDP for affected developing countries and the systematic annihilation of their indigenous industries and livelihoods.
Protectionism does push countries further away. Away from the overpowering nature of foreign corporations that replace the growing infant industries and their hard-working entrepreneurs with yet another Coca Cola factory. Protectionist policies would have done well to protect Jamaica and Mexico from economic failure; and in fact, such policies DID do well in allowing Bolivia's prosperity, up until American intervention.
Furthermore, for all the talk of free trade somehow helping Canadians and Americans, all that has happened is a growth in the unemployment rate and a wider income disparity. Developing countries have lower costs of living and thus lower wages, thus incentivizing big corporations to move their operations to those countries. This action simultaneously wipes out local industries, forcing indigenous peoples to work in those factories for lower wages, and takes jobs away from Canadians and Americans, while filling the pockets of the ever-richer corporate CEOs.
Let's redo my analogy from earlier. It’s more like if free trade is a card game played between two countries, but one of them flipped the table over and shot the other player, before taking his cards. All free trade does is make the rich richer, the poor poorer, and negatively affect the majority of the people involved; all except those with the most power. Free trade is undoubtedly necessary in today's world. If a developing country, such as Bolivia, decides not to kowtow to its influence, then a more powerful country (read: America) will fix that—all in the name of freedom, of course.
TED
I've tried to explain - as best as | could in 600-odd words - the benefits of free trade, and its superiority to protectionism. The three main arguments are ones you've heard time and time again: free trade encourages countries to make the thing they're best at making, raises GDP and living stands, and lowers cost for the consumer.
The drift to protectionism is tempting - and seems like an easy fix for countries in a bind. But all protectionism does is push countries further away, impeding cooperation and prosperity. It is true that bigger countries stand to benefit more from free trade, but that's not a reason for smaller countries to close themselves off. Entrepreneurial companies and hard workers should be rewarded, not limited to a stale and small domestic market.
It's also true that the contemporary beneficiaries of free trade - China, US, Singapore - did, at one point, favour protectionism. But that was a different world, one where a country could turn its back on global commerce and revel in a splendid isolation.
Times have changed; any country planning extensive mercantilist policies now should also be planning its demise. Free trade, in today’s world, is not only preferable - but necessary.
REFERENCES
Grocott, Chris, and Jo Grady. “Naked Abroad’: TheContinuing Imperialism of Free Trade.” Capital & Class 38, no. 3 (2014): 541-62. doi:10.1177/0309816814550388.
“Income Inequality.” Inequality.org.
Jr, W. T. Whitney. “The Coup in Bolivia Has U.S. Fingerprints All over It." People’s World, November 25, 2019.
Black, Stephanie. Life And Debt. Life And Debt. Tuff Gong Pictures Production, 2001.
Weisbrot, Mark, Lara Merling, Vitor Mello, Stephan Lefebvre, and Joseph Sammut. “Did Nafta Help Mexico? An Update After 23 Years.” Mexican Law Review 1, no. 1 (2018). doi:10.22201 /iij.24485306e.2018.1.12515.