Pacts such as the TPP find expression in long and complex documents because all parties know the others are predisposed to cheating. And cheat they do. Unlike Donald Trump, those now lambasting his position on tariffs refuse to accept that genuinely free trade is no better than a fairy tale.
When Donald Trump announced the imposition of tariffs on steel and aluminium many conservative commentators – some of whom I suspect have never been within cooee of an economics text – became free-market economists overnight. I heard some bringing Adam Smith into the frame in support of free trade. Now it is true to say that Smith favoured ‘free trade’ but with more nuance than those who casually drop his name.
Like most people who studied economics I read some of Smith’s work but not much of it. The late, great economist Mark Blaug in his book Economic Theory in Retrospect spoofed the notional man who laboured through every word of The Wealth of Nations before revealing his view that there “probably never was any such man.”
That said, it’s a safe bet that Blaug read a lot more of Smith’s magnus opus than most economists of the past and infinitely more than the current breed. He makes the point that Smith supported free trade but also understood that “protectionist measures are justified…in retaliation against foreign tariffs.” There, you see, fair trade. Trump and Smith in furious agreement.
This is my view. Those who spout the free-trade mantra live in fairyland. They simply don’t know what they are talking about. There is no such thing as free trade between independent nations.
Free-trade deals find expression in long and complex documents. They are long and complex because of a litany of carve-outs and also because each side knows that the other is predisposed to cheating. And cheat they do.
Does anyone think that a US vehicle manufacturer setting up shop in Mexico doesn’t get a sweetheart deal from the Mexican government? Does anyone think that China operates in the best traditions of laissez-faire? And where are the purists in arguing for dismantling the plethora of barriers that every country puts around its agricultural sector? Let me repeat for the benefit of so-called free traders: there is no such thing as free trade.
What is the truth about international trade? On the whole, without doubt, it has been enormously beneficial. But, like many beneficial things, it should not be embraced willy-nilly or lauded beyond its potential bounty.
International trade provides scope for all sides to reap gains as specialisation increases the total quantity and quality of the output of goods and services. However, the distribution of these benefits between countries is indeterminate; in the sense that economic theory offers no reliable way of predicting the outcome.