Why Free-Trade Economists Fail to Persuade: FREE TRADE TODAY; FREE TRADE UNDER FIRE

In: Dissent: a journal devoted to radical ideas and the values of socialism and democracy, Volume 49, Issue 2, p. 102

Abstract

The protests at the 1999 World Trade Organization meeting in Seattle marked a turning point in trade politics. The size and depth of the international coalition that came together to protest the WTO was striking. And then there were the television images and the stunning denouement: Teamsters marching with 'turtles,' tear gas and police charges in the darkness, the collapse of the negotiations. The author of one of the books reviewed here, Jagdish Bhagwati, was in Seattle as an adviser to the WTO's director. While trying to get to the meeting, he found himself 'confronting a tough Chinese Red Guards-style female demonstrator who was blocking my way illegally.' A colleague then 'drew me away from a confrontation that would surely have left me bloodied, saying, `You are the foremost free trader today; we cannot afford to lose you!" Bhagwati's story speaks to several things, including his considerable ego. Most important, though, it captures the embattled state in which mainstream trade economists loyal to free trade doctrines now believe they exist: 'there are not too many out there, fighting the fight for free trade,' Bhagwati worries, 'We need to change that.' Do Irwin and Bhagwati understand that this is what most of the critics believe? I'm afraid not. Both authors characterize the critics as 'anti-globalization.' Although this accurately describes some, it is not true for the majority. Both authors seem to think that the main reason critics are against globalization is that they are anticapitalist and antimarket. Irwin, for example, tells us that for many of these groups, 'Free markets and capitalism are seen as embodying and furthering environmental destruction, male dominance, class oppression, racial intolerance and colonial exploitation.' To characterize most environmental organizations, or most contemporary trade unions, as 'anticapitalist' is absurd, if that means that they are committed to the abolition of capitalism. If the term means that they are critical of the way that capitalism currently operates, the characterization is accurate, but then the authors' summary dismissal of that position becomes puzzling. The critics insist that there are better and worse forms of market economy, that the neoliberal model of regulation toward which we are currently moving (one that expands property rights while ignoring human rights) is worse than feasible alternatives, and therefore, that the current model of global economic regulation can and ought to be changed. Unfortunately, Irwin and Bhagwati, by tilting at anticapitalist windmills, fail to join the real argument. IN THEIR EFFORT to extract free trade from the wider matrix of economic globalization, the authors downplay the degree to which trade deals such as NAFTA and the WTO shape the character of the larger economic system. For example, some of the most novel and important provisions in NAFTA and the WTO--pertaining to investor property rights and the deregulation of financial services--undoubtedly increase international capital mobility. Dani Rodrik has argued that increased international capital mobility could significantly increase the 'price elasticity of the demand for labor.' That is, firms will shift production to other countries in response to smaller and smaller differences in labor costs, other things being equal. This could dampen wage growth not only in the North, but in the South as well. Bhagwati and Irwin both devote considerable effort to exploring how free trade affects wages, yet neither so much as mentions Rodrik's well-known argument. Why not? Free capital mobility is one thing, Bhagwati says, free trade is another. He favors considerably less of the former than we have today, and much more of the latter. But while conceptually distinct, the fact is that both principles are promoted in NAFTA and the WTO. If we want to assess the impacts of these international agreements, we must consider how they affect capital mobility, and how it in turn affects workers, the environment, and so on. Slippage in the way the concept of 'free trade' is employed permits Bhagwati and Irwin to evade this challenge.