Free trade is fair trade
In December 1999, in Seattle, USA, a session of the World Trade Organisation (WTO) took place that was, to put it plain, a failure. The WTO ministerial meeting took place against a background protest by an odd coalition of non-governmental organisations (NGOs) and clouds of tear gas. These organisations were concerned about a variety of legitimate issues such as the environment and labour rights. Some of them had less legitimate agendas, demanding simple and pure protectionism to keep the uncompetitive industries they represented afloat at the expense of consumers.
These NGOs were widely blamed for the failure of the ministerial meeting. This is, however, a simplistic and incorrect picture. After all, none of the NGO representatives was sitting in a meeting room with voting rights. It also overlooks the European Union coming to Seattle with its usual agenda of agricultural protectionism and the US administration realising elections are nigh and deciding to cave in to the trade unions, an important vote bringer for the Democratic Party.
Whomever contributed to the failure of Seattle and whatever their motivations, it is clear that "free trade" as a concept was severely damaged. Increasingly, it seems legitimate to blame free trade or the vague concept of "globalisation" for all evils in the world. In the previous issue of this magazine, Mary Robinson spoke of "a complete lack of education, extreme or absolute poverty" as a consequence of globalisation. This does not only show a lack of understanding of globalisa-tion but also conveniently draws the spotlight away from the failings of many African and Asian leaders towards their own people.
At its next congress Liberal International will discuss free trade. It is necessary to have a discussion based on facts rather than fears and to look at the merits of free trade vs. protectionism and sanctions.
Trade Sanctions
Before rejecting free trade it is useful to examine the alternatives, starting with trade sanctions. Sanctions are at times a popular instrument but almost always for reasons of political expediency and seldom for their actual effectiveness. The US sanctions against Cuba are a case in point. The sanctions are largely in place because various American politicians felt the need to appease the Cuban voters in Miami and other places. There is no evidence whatsoever that these sanctions have actually weakened Castro and many indications to the contrary. Failure of trade sanctions is also demonstrated by Milosevic et al. He and his clan are heavily involved in black trade and the continued embargo against Yugoslavia makes them richer by the day. Saddam Hussein is not the least bit weakened by the sanctions against him. His people are the ones that suffer, he uses the sanctions to prove how inhumane the Americans and their allies are.
In fact, I would rather argue that trade sanctions achieve the opposite of what liberals would aim at. Trade and economic development creates a middle class and gives those people the cash to read newspapers, buy a satellite dish to watch CNN and learn, form opinions. Wealth invariably leads to enlightenment, enlightenment invariably leads to the end of dictatorship. Economic and political development go hand in hand. In the same way that we cannot expect lasting economic development without political freedom we cannot expect lasting political development without economic freedom.
Protectionism
In the thirties protectionism in its pure and simple form became hugely popular. Governments impeded trade with regulations and prohibitively high tariffs and waged campaigns encouraging their citizens to buy local goods. The consequences are well known and were disastrous. Indeed many more mistakes were made in those years and the tight monetary policy as a consequence of the gold standard was probably the most serious one. However, protectionism certainly did nothing to alleviate the problem. These days more subtle forms of protectionism are in vogue. One of them is the use of anti-dumping laws. This basically comes down to the logic that if a foreign country manages to produce cheaper than we do they must be dumping their products so let's slap huge duties on them. This tactic is particularly popular in Washington DC and Brussels.
Food safety is another convenient excuse. The EU still refuses to admit US beef to European markets for fear of negative effects on health caused by the growth hormones used. No matter that there is scant scientific evidence for that fear and no empirical evidence; certainly Americans aren't dying like flies from eating American beef. The real reason for the reluctance to admit that beef to European markets is probably that the American farmers produce more efficiently than their European counterparts.
The consequences of protectionism are always the same and are well known: the consumer ends up paying too much and inefficient industries are kept afloat with the tax payers' money. Human resources that could be much more productive in other industries are tied up in unproductive ones. Successful industries are harmed by the retaliation that protectionism provokes. Protectionism is a lose-lose policy.
Free Trade is Fair Trade
So that brings me to the title of this article: free trade is fair trade. We should be under no illusion that poverty can be legislated away. Arguing against trade with India because of the use of child labour in that country means arguing against the economic development of India. Poverty can be fought with trade and development, not with sanctions. The only way to put a stop to the many bitter social injustices in the third world is economic development. Free trade can be an important tool for that, in fact free access to Western markets would be of greater benefit in real terms to the least developed countries than the development aid they currently receive. It is therefore very disappointing that a recent UNCTAD conference ignored a proposal to give the 48 least developed countries in the world freer access to Western markets. Industrialised countries - with the exception of Sweden - refused to even discuss such a deal.
Development and Human Rights
At this point I should make clear that I am not pleading to replace development aid with free trade. On the contrary, development cooperation continues to be a bitter necessity and many industrialised countries need to make a more substantial effort. I am aiming to make clear that there is a need to do more. Certainly, opening up Western markets is an essential building block of any policy to develop the poorest countries in the world. This will sometimes necessitate painful decisions in the West. For example, the European Union will need to reform its agricultural policy. Then again, many would argue that this is long overdue anyway.
This article is also not arguing for blindly trading with anyone while ignoring human rights issues. I do feel very strongly, however, that trade sanctions do nothing to promote human rights and I fear sanctions achieve exactly the opposite.
My plea therefore is for a policy of free trade combined with real open engagement on human rights issues. This means, for example, that the EU and the US should push for a resolution on human rights in China in the United Nations Commission on Human Rights currently meeting in Geneva and that official visits to China should include discussion on individual freedoms and market economy. At the same time we engage in trade and other forms of exchange, for example political and cultural, particularly with those Chinese that do not represent officialdom. This same strategy should be applied to Yugoslavia, Cuba, North Korea and other countries that do not yet belong to the democratic family of nations.
In Conclusion
During its upcoming congress in Ottawa, Canada, Liberal International will discuss many of the issues raised above in much more detail. A very interesting resolution on this issue was prepared by the Liberal Party of Canada. At a time when the tide is turning very much against free trade and open borders it seems essential that liberals take a strong stand on this issue.
Free trade is not a zero sum game. All players in the game of free trade across open borders stand to gain. Free trade is a win-win policy.
This article originally appeared in the London Aerogramme, the magazine of Liberal International, May 2000.
