Monday, April 05, 2010

There is no such thing as "free trade"

Yep - we're back on this old chestnut again.

If it wasn't for the fact that the consequences of this fixation with "free trade" was so damaging for Britain as a nation there would be some sort of delicious irony in the fact that "free trade" conservatives will be the authors of their own destruction. However, their destruction will also mean the destruction of this nation and its people.

Free trade does not exist. It is questionable whether it is even possible (or desirable) to attain free trade within a national economy, but it most certainly is not possible beyond national borders.

For free trade to exist you have to have identical conditions for trade between the two trading parties - not mostly similar or relatively close conditions - they have to be identical. If they are not then one or other party will have a "penalty" and the trade can not be free.

As I said, this is pretty hard to achieve even within the national context. There are still regional discrepancies and so trade is never really free within national borders - but at least you can have a single government that can make those conditions as similar as it is possible to be.

But when you are talking about two different nations with two different governments with widely differing approaches to trade then "free trade" is nothing of the sort - and if those conditions of trade offer one of those nations such a massive advantage that you can not compete with it then it is in your national interest to impose conditions on trade with that nation.

If you don't then you are effectively giving up on your national economy. Other nations will take advantage of that and plunder your nation for what they can get. They'll sell you whatever they can and buy up whatever they want - until you've got nothing left to offer them at which point they'll leave you and go elsewhere.

6 comments:

Brian, follower of Deornoth said...

"For free trade to exist you have to have identical conditions for trade between the two trading parties - not mostly similar or relatively close conditions - they have to be identical. If they are not then one or other party will have a "penalty" and the trade can not be free."

Balderdash. You can buy groceries in whatever shop you wish, and the trade will not be done in "identical" conditions (one shop will be nearer, one will be easier to reach, etc etc), but no-one would consider the trade to be non-free as a consequence.

Even trade between producers of different competence can certainly be free and beneficial to the weaker party. You need to check out David Ricardo.

Pat said...

Free trade is to be observed in action at a boot sale near you. Also visible on EBAY. What are you talking about?

The English Physician said...

Well said - but you can take the analysis further:
http://kataphusin.blogspot.com/2009/09/pandemic-economopathy.htm

Stan said...

"Free trade is to be observed in action at a boot sale near you. Also visible on EBAY. What are you talking about?"

And how many transnational car boot sales have you been to?

Ebay governs all trade on it's websites (and even then there are differences between national versions of Ebay).

"Balderdash. You can buy groceries in whatever shop you wish, and the trade will not be done in "identical" conditions (one shop will be nearer, one will be easier to reach, etc etc), but no-one would consider the trade to be non-free as a consequence."

Again, like Pat, you choose a localised example of trade which - as I explained - is the nearest you can ever get to "free trade" - but as you note, it is still not completely free (distance, convenience, etc. etc.)

"Even trade between producers of different competence can certainly be free and beneficial to the weaker party."

Yes they can - if they are able to negotiate favourable deals to their benefit - but not if they just allow anyone to plunder their market regardless.

"You need to check out David Ricardo."

You need to check out the state of our economy and the scale of personal and national debt.

Pat said...

If by free trade you mean free even of the need to walk somewhere you may be right- though the walking somewhere I would regard as part of the cost of the trade (cost doesn't have to be in cash,it can be in kind). The point is that people are not coerced, not that there are no conditions. Similarly with Ebay- though they do have conditions imposed on them by Governments banning the sale of certain goods and as ever requiring a rake-off, unless you want to deal in illegal goods it's free enough to pass muster- and definitely international.
I don't agree that the lamentable state of our economy, or our personal and national debt is caused by too much free trade but by too little.

Stan said...

No, Pat - that isn't what I mean.

By "free trade", I mean that the conditions under which two similar traders trade are identical. If either of the two competitors are hindered or restricted by something which the other is not - then the trade is not "free".

For example (but just an example) - a manufacturer of widgets in the UK is required to pay a minimum wage to the employees - a manufactuer of widgets in India is not required to pay a minimum wage (or if they are, not to the same level as the UK manufacturer).

Therefore, the trade is not "free" - one trader has a restriction on their trade which the other does not.

As long as there are nations and national governments this will always be the case. The only way to avoid it is to have a single, global government - not just a single global regulatory authority, it has to be a single government.

As someone who believes that this is neither possible nor desirable (because such a global government will have to be totalitarian in nature just to overcome the cultural differences).

I am opposed to this idea. Therefore I am opposed to "free trade" outside of the national context.

You can believe all you like, but it doesn't change anything.