More Challenges to “More ‘Free Trade’ is Always Better” Orthodoxy
One way to induce a Pavlovian reflex in mainstream economists is to invoke the expression “free trade”. Conventional wisdom holds that more trade is always better; only Luddites and protectionists are against it. That’s one big reason why the toxic TransPacific Partnership and its evil twin, the Transatlantic Trade and Investment Partnership, have gotten virtually no critical scrutiny, save from more free-thinking economists like Dean Baker. They have been sold as “free trade” deals and no Serious Economist wants to besmirch his reputation by appearing to be opposed to more liberalized trade.
“Free trade” boosterism runs two parallel arguments: the “’free trade’ increases wealth and therefore we should all go along” and the “more open trade is inevitable, you better be on this bus or you will be under the bus.” Too often, these arguments rest on the assumption that coming close to the economists’ fantasy of frictionless ‘free trade’ is better. But that was debunked in 1953, in the Lipsey-Lancaster theorem, which demonstrated that trying to move to closer to an unattainable state was not only not assured to produce better outcomes, it could very well produce worse ones. You actually need to do the work of evaluating various “second best” alternatives, rather than assuming more is better. But even though economists know about Lipsey/Lancaster, they dismiss its inconvenient implications.
Moreover, there are other sound critiques of our “more ‘free trade’ is always better” regime. William Greider has long pointed out that we do not operate under a free trade regime, but a managed trade system, and virtually all of our trading partners negotiate them from a mercantilist perspective: that they aim to run trade surpluses and protect their workers. Dani Rodrik has described a trilemma: that you can’t simultaneously have deep integration of markets, national sovereignity, and democracy. At least one of them has to give. And we can see in Europe that it is democracy that is being sacrificed.
At this stage of economic development, trade deals are largely beside the point. And that reality is perversely acknowledged in the TTP and the TTIP. They are not about “free trade”. They are, in the case of the TTP, to advance US geopolitical aims by isolating China, and in the case of both proposed pacts, to weaken national sovereignity to make the world safer for multinationals.
http://www.nakedcapitalism.com/2014/07/challenges-free-trade-always-better-orthodoxy.html
