There seems to be an emerging consensus that so-called "free trade" is dead. Even the business press is beginning to accept the inevitable. So, maybe we can now begin a rationale debate about trade, without meaningless marketing phrases like "free trade".
Yesterday, Bloomberg ran this piece:
The liberalization of global trade has come “to a screeching halt,” said Fred Bergsten, director of the Peterson Institute for International Economics in Washington. “It’ll take years to rebuild the foundations of free-trade policy.”
The cause is more political than economic. “This is a challenging time to be in the pro-trade wing of any party in virtually any country,” U.S. Trade Representative Susan Schwab said June 12 at the U.S. Chamber of ICommerce. “It’s hard to be for open trade, whether you are in India or the European Union or in China.”
Understand that the article is framed with the usual nonsense about the wonders of so-called "free trade" and how the sky is falling because "liberalization" of trade is ending. But, the most interesting thing about the article is that the advocates of so-called "free trade" acknowledge that the end is near for a policy that has failed the vast majority of people.
Indeed, the failure comes, in large part, because the people have spoken. In 2006, the voters made clear that they rejected so-called "free trade" and even Republicans have turned against the phony marketing phrase.
It isn’t, however, just about politics. Economically, liberalization has failed. Just as one example, my colleague Mark Weisbrot pointed out some time ago that, if you measure success using the standard of "are people better off?", "liberalization" has failed repeatedly:
If we ignore income distribution and just look at income per person – the most basic measure of economic progress that economists use – the last quarter-century has been a disaster. From 1960 to 1980, per capita income in Latin America grew by 82 percent, after adjusting for inflation. From 1980 to 2000, it grew by only 9 percent; and for the first five years of this decade (2000-2005), growth has totaled about 4 percent. To find a growth performance in Latin America that is even close to failure of the last 25 years, one has to go back more than a century, and choose a 25-year period that includes both World War I and start of the Great Depression.
Of course, Latin America also has the worst income inequality in the world. The contrast between the luxury condos in the Barra da Tijuca neighborhood of Rio de Janeiro and the favelas in the hillsides where the police fear to tread, or between the poor barrios of Caracas and the wealthy estates of Alta Mira jumps out at you. But inequality in the region has not increased dramatically over the last 25 years. It is the growth failure that has deprived a generation and a half of any chance to improve its living standards.
In the U.S., here is what the people think about the failed marketing phrase "free trade":
PEW
"In general, do you think that free trade agreements — like NAFTA, and the policies of the World Trade Organization — have been a good thing or a bad thing for the United States?"
(Upon request, respondents were read full name of NAFTA: "The North American Free Trade Agreement."
Good Thing Bad Thing Unsure
4/23-27/08 35% 48% 17%
A year ago…
NBC News/Wall Street Journal Poll conducted by the polling organizations of Peter Hart (D) and Neil Newhouse (R). March 2-5, 2007. N=1,007 adults nationwide. MoE ± 3.1 (for all adults).
"Do you believe that the United States is benefiting from the global economy, is being harmed by the global economy, or do you think the global economy has had no impact on the United States one way or the other?"
Benefiting Harmed No Impact Unsure
3/2-5/07 25% 48% 14% 13%
Now, the advocates of so-called "free trade" often like to effectively disparage the public’s perception of so-called "free trade" as based on "fear" or ignorance of the "benefits of trade". But, actually, people understand that the trade being imposed is not one of "free trade" (every one of these deals is crammed full of conditions, exceptions and protections that MANAGE trade for corporate investors) but trade based on one factor: finding the lowest wage possible.
The revolt against that model is widespread because people get a basic idea: in a model where the lowest wage is the driving force, there is no bottom.
My hope is that we can now get to a discussion about trade that dispenses with the marketing phrases of "free trade" and gets real about what the rules should be governing trade–which everyone believes in.
