From: baron@cattell.psych.upenn.edu (Jonathan Baron)
Newsgroups: bit.listserv.biosph-l
Subject: Re: Free trade
Date: 2 Oct 92 23:53:14 GMT
Organization: University of Pennsylvania

Yancy@mail.bucknell.edu asks why free trade has become an issue.
Here are a few comments:

1. Economic theory says that free trade benefits everyone.  It
allows products to be made wherever they are made with least
expense (shipping costs aside), thus lowering prices, thus
increasing the ability of people to buy the products, thus
increasing employment.  If we regard human beings as equal, we
should be happy about this, regardless of where the jobs are.

2. Evidence supports the theory.  The Great Depression was at
least exacerbated by the Smoot-Hawley tarriff and other
(retaliatory?) tarriffs passed around the same time.  The
economic expansion of economies around the world after World War
II at least coincided with (perhaps was caused by) reduction of
trade barriers, a process that is still going on.  These economic
effects are not abstract.  They are not of interest to financiers
and capitalists only.  The Depression was real.  The expansion of
trade has lifted many people in countries like Japan, Korea,
Mexico, and the U.S. out of the kind of poverty we now associate
with Africa.

3. Arguably, the greatest moral problem in the world today is the
gap between rich and poor.  This is a world problem.  Free trade
is not a panacea.  But many poor people in the world today would
not be poor if they could sell the products of their labor to
those willing and able to buy them.  They are prevented from
doing so by trade restrictions (e.g., Japanese restrictions on
rice, perhaps the most flagrant example).  Elimination of such
restrictions is one of the few relatively EASY things that the
rich countries can do to help those who are poor and in other
countries.  Other things, like relaxing immigration restrictions,
giving meaningful foreign aid, etc., are politically more
difficult.

4. Free trade agreements are fragile.  A change in the direction
of free trade usually hurts someone in the short term.  If a few
are hurt a lot in the short term and many are helped a little,
the few will organize politically.  Weak governments - of which
the world has many - will not be able to withstand this kind of
pressure (nor find ways of compensating those who are hurt).
Free trade is cooperative.  Protection is an attempt to benefit
in the short term in the hopes that others will not retailiate.
But international cooperation can break down easily.

5. It is true that the movement toward increasing free trade is
fraught with problems.  With increased free trade, countries can
compete for capital investment by offering laxer environmental
and labor laws, for example.  In the long run, free trade might
be beneficial even with this kind of competition: the citizens of
poor countries will themselves demand improved environmental laws
as these countries develop economically.  (I have seen estimates
that an average annual income of $4000 per year is required for
any effort to reduce pollution.  Thus, pollution will increase
until that level is reached, then decrease.)  But it is even
possible to write trade agreements to discourage such practices.

It is the last set of problems that have made free trade
controversial among environmentalists.  It is nice to be able to
make changes that have only beneficial effects.  But if we
already had free trade, would we want to dismantle it?  Do we
want to change the U.S. constitution, for example, to permit
states or cities to erect trade barriers?  If not, what is so
special about nations?

Jon Baron (baron@cattell.psych.upenn.edu)
Newsgroups: bit.listserv.biosph-l