• Tag Archives free trade
  • Why the UK Chooses Free Trade

    In a few short weeks, Britain will begin negotiations with the EU on how we will trade in the years ahead; in the next three years, the return of Britain’s capacity for self-government will give us the chance to trade freely with the rest of the world once more. To grasp these opportunities will require confident choices.

    Sir Kenneth Clarke wrote that it is a lack of confidence, more than anything else, that kills a civilization. It would be hard to say Greece within the Eurozone, for example, is not a case in point. Countries often forget the attitudes that made them flourish: bad choices may follow leadership, and too many bad choices means demise. Freeing trade is one of the confident choices we must now make.

    Free Trade Generates Wealth

    In The Wealth of Nations of 1776, Adam Smith first uncovered why freeing trade can generate wealth for all parties involved, because countries could export what they make efficiently and import what they cannot:

    The tailor does not attempt to make his own shoes, but buys them off the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor… What is prudence in the conduct of every private family can scarcely be folly in that of a great kingdom.

    In our day, this means that by allowing farmers in the developing world, for example, to import without tariffs results in higher incomes for them and cheaper food for Britain’s poor. To trade freely, then, is to choose real social justice. Smith also showed how it is still worth choosing free trade even if we don’t expect reciprocation: a country gains just by importing things made more cheaply by others.

    Today, what a country like Britain does most efficiently is neither shoemaking nor tailoring, but the production of knowledge-intensive services. Yet these are increasingly at risk. The arrival of the “MiFID II” regulations in the City shows how EU rules are now so burdensome that, just weeks after the imposition of this 7,000-page set of regulations, firms are already moving business elsewhere (witness the InterContinental Exchange moving trades to the US). To apply Smith’s insight today must mean not only removing tariffs but being able to make our own, pro-competitive, regulation. Our inability to do so is already destroying prosperity.

    Adam Smith also knew that economies thrived on their values. And free trade is part of the greatest of these, democracy. It was no coincidence that Britain’s Corn Laws, the tariffs on imported grain which the landowning aristocracy generally supported, could only be repealed in 1846, after the Great Reform Act gave the vote to so many who had been made hungry by them.

    Limited Freedom

    But in the EU today, the man on the street finds his Parliament no longer has the authority—the sovereignty—to repeal the modern equivalents, like the Common Agricultural Policy. The free trade cause, whose defense a century ago drew tens of thousands to the streets, has been taken from the people’s hands and given to technocrats. Because free trade depended on popular representation in Parliament is why technocrats in undemocratic systems, from Brussels to Beijing, have tended to choose protectionism instead. In these systems, leaders keep subsidies and favors flowing to client groups who are protected by tariffs and regulation designed to favor incumbents—and from incumbents, these elites expect support. So it is free trade that reminds us that the building block of true internationalism is the democratic nation-state itself.

    Because the mercantilist alternative keeps incumbents at the top and tends to prevent the emergence of innovative challenger firms, growth is reduced, which in a developed country is largely the fruit of innovation. In Britain, regional inequality also follows, as big corporates, disproportionately in the southeast of England, outflank smaller firms elsewhere. This limited freedom and stalled prosperity has become the status quo.

    So Brexit has arrived at a critical time. Global economic output has slowed and trade as a share of GDP has fallen. It is not inevitable that the world’s wealth will keep growing: we forget at our peril that poverty typifies the human experience. Through the span of human history, very few states have achieved any economic growth. Prosperity is only achieved following specific choices, which need urgently to be re-made. This means choosing a self-governing, free, and free-trading state, setting rules and regulations ourselves. If Britain, and other Western countries, do not find the confidence to do this, they will lapse back into the normal state of mankind: prosperity only for elites, who maintain their grip by curtailing freedoms.

    We choose free trade, then, because that cannot be our future. In his great poem Ulysses, Tennyson imagined the Greek hero of the Odyssey, old in years but vowing once more to look out across the sea:

    There lies the port; the vessel puffs her sail… Come, my friends, ‘T is not too late to seek a newer world.

    Free exchange between free people is not just a good in itself, but makes people everywhere more prosperous. That is why, in 2018, Britain must choose free trade.

    Reprinted from CAPX.


    Radomir Tylecote

    Dr. Radomir Tylecote is Senior Research Analyst of the Legatum Institute’s Special Trade Commission.

    This article was originally published on FEE.org. Read the original article.



  • Canada’s Prime Minister Only Pretends to Support Free Trade

     

    The lack of free trade hurts poor people the most. Therefore, we should welcome Canadian Prime Minister Justin Trudeau’s comments in support of free trade, right? Well, not so fast.

    During Trudeau’s visit to China in December, the Canadian Press published an article titled, “World at ‘pivot point,’ needs to embrace free trade: Trudeau”:

    The world is at a “pivot point” and will fail unless countries embrace free trade and elevate their citizens who have been left behind by globalization, Prime Minister Justin Trudeau warned Wednesday.

    …Trudeau came to the Fortune Global Forum, a Davos-style gathering of the world’s business elite, to sell Canada as a good place for foreign investment, but he went off script and delivered a stern warning about the dangers of allowing protectionism and inequality to flourish.

    “We are at a pivot point in the world right now, where we decide whether we work together in an open and confident way and succeed or whether we all falter separately and isolated,” he said.

    “As that anxiety spreads, people start to turn inwards. They start to close off. They start to get fearful,” he added. “If that continues to happen, make no mistake about it, we will all lose.”

    Trudeau didn’t mention the Donald Trump administration in Washington, but he’s already spoken out in China on the need to save the North American Free Trade Agreement [NAFTA] from demise…

    Trudeau expressed concern about people starting “to turn inwards” and “close off” because “we will all lose.” He is referring to protectionism, and I suspect his comments are largely directed toward the United States. Much has been written about the NAFTA negotiations and Donald Trump’s desire for more protectionist tariffs.

    Trudeau’s position seems to be that free trade is economically beneficial and protectionism is economically harmful. I agree, but if we pay close attention, we see that the Prime Minister is merely paying lip service to free trade.

    Defining Free Trade

    Free trade is a simple concept which exploits the division of labor to the fullest possible extent. Two parties want to trade with each other. They want to exchange goods for goods, or goods for money, or labor for money. If no one interferes with this voluntary exchange between the two parties, then free trade exists. If a third party — the government — intervenes and uses force to prohibit the exchange or to impose conditions on the exchange, then free trade does not exist. In today’s world, free trade does not exist.

    Many countries negotiate “free trade agreements,” but this is a misnomer. The essence of these “agreements” is to serve corporate interests through the establishment of rules that reduce competition. These are lengthy, complex documents that contemplate “managed trade,” not “free trade.” The largest beneficiaries are multinational corporations, and the biggest losers are consumers who pay higher prices. The division of labor is suppressed, and political power becomes more centralized.

    Bill Curry, writing for the Globe and Mail before the US dropped out of the Trans-Pacific Partnership (TPP), referred to the TPP as an agreement which “would create a free-trade zone among 12 nations around the Pacific, making it the world’s largest.” However, further along in the article, we read this: “TPP countries get duty-free access to 3.25 percent of Canada’s dairy market and 2.1 percent of its poultry market.”

    So, more than 95 percent of Canada’s dairy and poultry markets remain unfree. I am not sure why Curry defines this as free trade, but that is how the TPP is commonly described.

    Similarly, Canada’s dairy and poultry markets are highly protected under NAFTA, which Trudeau wants to “save from demise.” The Prime Minister has a strange conception of free trade.

    Protectionism

    If a firm is unable to sell its products at a price that consumers are willing to pay, and which allows the firm to be profitable, then the firm is wasting resources — human labor and raw materials. I have written about this here. In the realm of free trade, lower-priced imports send a market signal to inefficient domestic producers. The signal says, “You must improve efficiency, lower your costs etc., or you will go out of business,” thereby conserving resources for someone else who can utilize them more efficiently.

    However, producers hate these market signals, and they lobby the government for tariff protection. This penalizes consumers whose choices are limited to buying the expensive domestic product, or the formerly cheap import which is now expensive because of the tariff.

    The government claims it must approve tariff requests from these inefficient producers in order to “save” domestic jobs while simultaneously avoiding discussion about the economic cost of this policy. Studies often reveal this cost to be exorbitant when the “additional markup” all consumers are forced to pay in a particular year is divided by the total number of workers whose jobs have been saved. The cost per job saved is often considerably higher than the worker’s annual salary.

    For example, according to calculations by the Peterson Institute for International Economics, the total cost to American consumers from higher prices resulting from safeguard tariffs on Chinese tires in 2011 was at least $900,000 for each job “saved,” where the annual average salary for a tire builder was $40,070. Studies in other industries have also revealed an exorbitant cost for each job saved.  

    Furthermore, as the Peterson Institute tells us, tariffs have a ripple effect elsewhere in the economy:

    The additional money that US consumers spent on tires reduced their spending on other retail goods, indirectly lowering employment in the retail industry. On balance, it seems likely that tire protectionism cost the US economy around 2,531 jobs, when losses in the retail sector are offset against gains in tire manufacturing. Adding further to the loss column, China retaliated by imposing antidumping duties on US exports of chicken parts, costing that industry around $1 billion in sales.

    NAFTA contains numerous protectionist measures favoring special interest groups at the expense of the general public. Prime Minister Trudeau knows this, and he wants to “save NAFTA from demise.” All his talk about the evils of protectionism is nothing more than political rhetoric.

    Get Government Out of the Way

    Governments do not trade with each other — individuals do. If a government really wants to facilitate free trade, a legal document that runs hundreds, or even thousands of pages, is unnecessary. A one-page document with two sentences would suffice: “People are allowed to trade freely. The government’s role will be limited to enforcing the terms of the contract which the private parties themselves have voluntarily negotiated.”

    I have seen no evidence that Prime Minister Trudeau is sincere about “embracing free trade.” He appears to be a typical politician, subservient to special interest groups while attempting to bamboozle the public with an illusion of free trade.


    Lee Friday

    Following a 23-year career in the Canadian financial industry, Lee Friday has spent many years studying economics, politics, and social issues. He operates a news site at www.LondonNews1.com

    This article was originally published on FEE.org. Read the original article.




  • Team Solo or Team Vader?

    Team Solo or Team Vader?

    Han Solo is a smuggler – yes, a free trader. He is admittedly aloof to the politics of the rebellion, yet his black-market trading makes him a natural enemy of the empire. He only joins the rebellion out of mercenary interest, agreeing to fly Luke and Obi-Wan to Alderaan. For payment. Few questions asked.

    Han is just trying to earn a buck, and smuggle in peace. He doesn’t care about the empire, or the rebels. Nor does he discriminate when doing business with Jedi, whom he thinks are members of a bogus cult. They needed a lift, they offered payment, he offered the Millennium Falcon.

    In this galaxy, the Millennium Falcon is just called “Uber.”In this galaxy, that’s just called “Uber.”

    Oh, and he likes guns.

    As ruthless anti-heroes go, Han Solo’s badness yields social good. His “self-interest” is truly selfish, and purely profit-driven. His self-interest merely found common cause with the self-interests of the rebels – they all desire freedom from the empire’s tyranny.

    Han’s socio-political aloofness puts him at odds with principled rebels, like Princess Leia. To Han, the empire is mostly a nuisance – one he avoids by staying off the grid, and trading with crime bosses like Jabba the Hutt.

    The empire is certainly a nuisance to Leia and the rebels too. However, in their case, this nuisance has manifested itself in a much uglier form than what Han has faced. Han may not enjoy the inconveniences of the anti-free trade environment, but Leia watched as they blew up her entire home planet and murdered everyone on it. Now, that is personal.

    Han is your average, everyday free market capitalist. He is not an ideologue, and he doesn’t care about the big picture. I promise you, Han does not vote, watch cable news, or care who the next emperor will be. He doesn’t care what the Supreme Court has to say, either.

    Economics drew him into the rebellion. And somewhere along the way, fighting for the cause became its own reward. But down to the end, Han remains the rebel among the rebels – the reluctant mercenary, driven by economic self-interest, and inadvertent champion of a great cause.

    A temple of intergalactic liberty.

    The Dark Side

    I don’t know if George Lucas intended the pro-liberty motif running through the story, but I believe it explains the visceral attraction we have for these movies.

    Humans in general want to be free from arbitrary power. We know this story, and we have seen it many times throughout history. We have seen many Han Solos.

    But we have also seen a few Darth Vaders. And we should never underestimate the power of the Dark Side to obscure this desire for freedom with the siren call of demagoguery.

    Humans also desire harmonious order, and we respect legitimate authority. Freedom is not an enemy of order or authority. Yet, tyranny attempts to pervert both. Tyranny tells us its prescriptions for authority and order will bring about true freedom, and protection from our enemies.

    I can’t imagine that Lucas did not recognize the overtly fascist, Nazi tropes he was using with Vader and the empire. The empire is unambiguously evil, oppressive, and dictatorial. You are not supposed to like Darth Vader. He is not a difficult villain to spot. And nobody is led to think the Dark Side is a benign form of government that just hasn’t been “purely” implemented.

    Would a real-life Darth Vader command our respect, confidence, and pride? Would we dismiss Han Solo as a selfish, self-serving misanthrope?It’s just bad.

    So imagine my surprise when the audience kept cheering Darth Vader at the opening night showing of Rogue One. Not just the first appearance onscreen – but each time Vader came on, people cheered. They cheered as Vader was plowing through a hallway of rebels! (Albeit with crazy Jedi skills.)

    I don’t mean to psychoanalyze my fellow audience members.

    Well, sure I do.

    Look, who among us doesn’t root for the fictional villain sometimes? Vader is a powerful Jedi who commands respect and confidence. Like Han Solo, Darth Vader is independent and ruthlessly self-interested. But Vader’s ruthlessness emerges as a desire to control others. Han is content to control of his own life, and leave others in peace.

    Vader’s limitless power (and sweet black cape) make him an excellent villain. But he’s also an excellent archetype for the fearless leader – the powerful leader, vanquishing his enemies.

    Tyranny is effective if it inspires fear among dissenters. But it is most effective when it inspires pride and confidence among the tyrant’s followers.

    The audience’s cheers for Vader were likely a burst of pent enthusiasm for a familiar character, rather than a chilling peak at the social spirit of our age. But I wonder: would a real-life Darth Vader command our respect, confidence, and pride? Our cheers, and hosannas? Would we dismiss Han Solo as a selfish, self-serving misanthrope? Would we resent the rebels as enemies of order and authority?

    Would we trade the renegade freedom of Han Solo, for the kind of “freedom” promised by the empire?


    Robert Coleman

    Robert Coleman is an alumnus of Berkeley and Pepperdine Law, and a corporate attorney.

    This article was originally published on FEE.org. Read the original article.