Sunday, March 24, 2013

On unbalanced trade

When it comes to trying to justify perpetually-increasing restrictions on democratic governance in the guise of "free trade" agreements, advocates present two polar opposite views as to what such agreements are intended to accomplish.

The first - and more plausible - view of the actual and intended effect of trade agreements is that they primarily serve the purposes of the parties who push and negotiate them. When corporate interests and their pet Randians meet behind closed doors to draft agreements which will be subject to zero public accountability, it's a safe bet that it's the general public which stands to lose out as a result. And there's certainly a constituency for the view that democracy should be subordinate to the profit motive - making trade agreements into a rational if cynical strategy to tie the hands of elected officials while ensuring that business ultimately rules everywhere.

But that constituency is rather smaller than the number of people who might be persuaded that there's a problem with encouraging plutocrats write the rules of international trade in a way which lets them override the democratic will of the public. And so we also tend to hear another excuse for free trade agreements: that such agreements aren't intended to protect wealthy investors or corporate interests at all, but instead to ensure the availability of the greatest range of goods and services at the lowest possible cost to consumers.

In principle, this second argument is entirely vulnerable to a fairly obvious criticism. If the need for free trade agreements is based solely on a desire to reduce and ultimately eliminate our own tariffs, then there's a far more direct path to that goal: reduce and eliminate our own tariffs, rather than signing agreements which carry a myriad of other consequences including asymmetrical rights for businesses to extort their desired policy from states. But most of the time, we don't get to test whether advocates of the consumer-focused position will be as interested in tariffs when they aren't linked to government suicide pacts.

Well, the Harper Conservatives have created just such an opportunity. In the midst of a campaign to lock Canada into ever more dubious free trade agreements - granting preferential trade and investment status to Colombia despite (if not because of) its recent history of anti-labour goon squads, granting China a multi-decade stranglehold over Canadian public policy, and apparently increasing the cost of prescription drugs to appease big pharma as represented by European negotiators - the Cons have declared that they're implementing an increase in tariffs on imports from developing countries. Which in principle represents both a beggar-the-poor philosophy from the perspective of those who see tariffs as primarily affecting producers, and a direct cost to Canadian consumers for those who see trade policy primarily in terms of purchasing power.

Now, it could be that there's a long game being played by the Cons: the affected countries might well get pushed into negotiating free-trade agreements if their exporters demand some means of reversing the tariffs. But once again, that explanation wouldn't hold water as a matter of consumer interests: the end result would simply be the elimination of the Cons' new tariffs, accompanied by a superfluous set of giveaways to the investor class.

In other words, the Cons have made clear that their gleeful pursuit of any free trade agreement which another country can find time to sign is rooted solely on the first argument: as a means of exacerbating inequality in wealth and power, with consumer interests serving at best as an excuse to implement that agenda. And I'll be curious to see whether we see adherents to the second theory show anywhere near the level of concern about the Cons' direct and deliberate increase in consumer prices that they tend to offer whenever progressive voices point out the real effects of free trade agreements.

Update: Following up on the conclusion above, Stephen Gordon and Mike Moffatt step up to the plate.

[Edit: fixed wording.]


  1. I believe the justification for restrictions on democratic governance is to prevent governments from creating tariffs by other means.

    For example, many people believe that the 2001 US ban on PEI potato due to potato wart disease was really to increase prices for US producers.

    1. Again, that would be the producer-focused argument for restrictive trade agreements, which strikes me as more internally consistent than the consumer-focused one. But I still see that as a highly dubious case in practice: do we honestly consider a slight improvement in access to export markets (and keep in mind that NAFTA didn't stop the US from implementing exactly that ban) to justify tying our own hands in every area of public policy?

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