Attention all Aussies: Free trade benefits everyone!
Published August 05, 2004
I recently had an argument with an Australian on-line friend of mine about the Free Trade Agreement (FTA) between Australia and the U.S. Although there is nervousness and suspicion in Australia over the FTA, echoing much of the same angst that Americans themselves felt during the heady days of the 1993/94 NAFTA debates - during which time I stood solidly behind Ross Perot, the ultimate anti-NAFTA hellraiser - I think now, as a convert to free trade ideology, that Australians who oppose the free trade agreement are wrong to feel that their smaller economy can't compete. Free trade uplifts smaller economies; it is not simply about the "big boys."
The following is what I wrote my Aussie friend, in an attempt to educate him about the true nature of free trade:
If free trade between nations did not exist, then economies would stagnate. You cannot impose tariffs without costs rising for consumers. Sure, the Greens and other assorted grab-bag Lefties love a policy like that as they are opposed to a consumer culture. Well, sorry, but it's capitalism, innovation and entrepreneurship that drive a nation's economy, and free trade, which allows nations to flourish at what goods and/or services they excel at providing, fits into this scenario like a hand to a glove.And Australia, isolated enough to begin with just given its geographical position, can ill afford a protectionist policy. Don't tell me that there aren't a plethora of products already on the Australian market from China. Any thoughts on that? Free trade with America will give Australian consumers more, and cheaper, choices.
And by cheaper, I don't necessarily mean as a result of using cheap labor, though it's no doubt true to an extent. But usually, what we define as "cheap labor" is simply a wage that we can't imagine living on but which suits the worker in a poorer country. For instance, I couldn't live on a wage of U.S. $5.50 per hour, but a Mexican worker could. If NAFTA hasn't propelled Mexico into first-world status, that's hardly the fault of free trade.
* Mexico has no unemployment insurance and no social assistance (what we call "welfare.") Socialized medicine does not exist. Only those who work for the government or a private company which is registered with the national system (IMSS) have any pension, about one-third of the economically active population. The ability to provide social programs has been limited by the structural adjustment programs imposed on Mexico by the World Bank and the International Monetary Fund and supported by the Mexican political and economic elite * (how is this solely a point of blame for America?).
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Mark Edward Manning grew up in Boston, MA and now lives in London, England. He wrote commentaries for The Boston Herald in the mid 1990s.
- Attention all Aussies: Free trade benefits everyone!
- Published: August 05, 2004
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- Writer: Mark Edward Manning
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i would have mentioned the same as the reply above, except that i didn't know enough of the details to make it sound more than hot air, but i have heard enough to know that the US likes to undercut all competitors to an extent that they simply cannot compete
as for
"...But usually, what we define as "cheap labor" is simply a wage that we can't imagine living on but which suits the worker in a poorer country. For instance, I couldn't live on a wage of U.S. $5.50 per hour, but a Mexican worker could"
i was under the impression (i may be wrong here) that when inhumanly low-paid working conditions in other countries are revealed, it is not the absolute wage that is given, but the equivalent it would be if it were happening e.g. here in the UK or in the US. Hence when they say the workers are getting about £1.50 an hour, they mean that's what they would be getting if the same situation were happening here, hence it's *not* a wage that could be lived on.
The problem with free trade is that it's every country for itself. Whilst you may say this is as fair as it can get, that ignores the fact that some third world countries have crap economies at least in part thanks to the likes of the US, the UK, etc. and if we don't try to make amends to some degree things will only get worse for them.
The exemptions on beef and sugar to protect American industries are also a real shame in this "kinda-free" trade act.
OZ is a a primary producer so blocking/limiting these kinds of imports to the US really hurts them and US consumers.
Check your history. The United States was once the third-world haven for low-wage work and production, and Britain was the economic king.
Did Britain embrace free trade, or did it erect protectionist policies to try to fight the unfair competition of the US, with its immigrant work force? Did their approach work?
Did the US remain a third-world nation of tenement dwellers or did it emerge into the greatest economic force ever seen?
Protectionism is stagnation and economic death. Hal is right that the US engages in plenty of it, and not just in sugar and dairy products. Add lumber, steel, and a host of others. US trade policy largely is repeating the mistakes the British made 100-150 years ago. If it continues, we will join Britain in the second tier of nations, while those that embrace free trade, include industry with low wages today, will surpass us.
Your basic premise in what you wrote your friend is wrong, too. That simply repeats the propaganda of the large multinational corporations.
MEM wrote: If free trade between nations did not exist, then economies would stagnate.
That's one of the lies I've seen propagandists like James Glassman of the American Enterprise Institute pushing. That statement is propaganda and false because there has never been real "free trade" in the history of the world, yet countries have engaged in trade forever. It's a "false dichotomy." (Goebbels would be proud, though.)
I wish you'd forget your religious conversion to the Cult of Free Trade for a few days and and take some time to look at the facts. I'll give you a number of links, but the others here are on the right track:
1. The U. S. is not a free-trader, it's protectionist.
2. Multinational corporations keeps chanting "free trade" to the gullible to enable them to export jobs and make huge profits, while getting huge subsidies and even tax-breaks from taxpayers.
3. It is not a partisan issue - Democratic and Republican Congressmen pass the laws - but this administration is particularly egregious in its application of protectionist policies. You can find lots of detail on this by doing a search a search on "Robert Zoellick" and "trade." Pay particular attention to the Aussie deal, Morrocco and CAFTA.
I'll be back.
Here's a short excerpt from a piece I blogged that discusses Glassman's position and gets into trade and jobs:
We're not in an era of free trade.
We're not, NAFTA, CAFTA and the FTAA notwithstanding.
Today, "free trade" is really "Faux Free Trade," simply sheep's clothing to mask the actions of predatory multinationals which do not have the best interests of the American public at heart.
The spinners drag in the red herring of "Free Trade", but real free trade is based on David Ricardo's Theory of Comparative Advantage and that rests on "the key assumption of factor immobility." Labor and capital are assumed perfectly mobile within an exporting country, but must stay within that country.
Today's reality is a significant departure from the theory: both jobs and capital are being moved off shore at the speed of light even as you read this. The results are a significant departure from the theory, too, and we're just starting to get hit by them.
You can read the full piece at NEOCONS ON JOBS: ARE THEY TOTALLY LOSING IT? 2/16/04 And here are some links from that item:
Glassman's article on Exporting Lou Dobbs and John Kerry
Glassman on CNN's Lou Dobbs show 02/12/2004 interview
My piece was on off-shoring of jobs, so I also included:
Most Siemens software jobs moving east
By S. SRINIVASAN, ASSOCIATED PRESS WRITER
BANGALORE, India -- The German firm Siemens will move most of the 15,000 software programming jobs from its offices in the United States and Western Europe to India, China and Eastern Europe, a company official said Monday [02/16/04].
Here's a list of items that are relevant to this discussion. Most are from the perspective of jobs lost because the "faux free-trade" we live under is simply a cloak for exporting jobs, while taxpayers subsidize the exporters.
I do build a clear explanation of what "comparative advantage" in trade really is and it's not what the "faux traders" would have you believe. The basic fallacy in their claims is that the concept of real Free Trade was predicated on "the immobility of factors of production." That's mildly exotic, but it just means that labor and capital (including profits) must remain within their respective trading countries. That doesn't happen today, with both jobs and money moving around the world at the speed of light.
Anyhow, I'd like to hear from you after you've read the items (I have contact links on my site). Each item can be printed separately for easier reading.
The myth of job recovery 01/22/04
Free traders and globalizers; waking up at last? 01/26/04
"Sending jobs overseas helps U. S." - More from our misleader 02/10/04:
Neocons on jobs: are they totally losing it? 02/16/04
Why your job is moving to Bangalore 02/18/04
A perfect example of "ignorance is bliss" on jobs 02/25/04
The Ludvig Von Mises Institute (guess where it fits on the political spectrum) article discusses a couple of items that should be read to get the full picture:
Second Thoughts on Free Trade
Clarifications on the Case For Free Trade
Manning, you've probably figured it out by now, (which means you've either cancelled your internet service or cut off your own fingers so you'll never type again), but you're debating the wrong guy (Hal) on the wrong subject (outsourcing/economics).
Just nod your head, wink, or wiggle your eyeballs if you surrender...
(Although it didn't work last time something like this happened. I believe his name was... Custer...)
Economists will have differing opinions on the benefits of free trade. All I do know, and what convinced me that the FTA could reap good for Australia, was that the opposition Labor party endorsed it.
This is what Labor wrote about the FTA, on their website:
Labor has reached the following conclusions:
* The Howard Government could have achieved a better deal for Australia if it had pushed harder at the negotiating table, especially for our farmers.
* Despite several flaws in the Agreement, it has net economic benefits for Australia and, on this basis, should be supported.
* Expert economist, Phillippa Dee, has estimated the benefits at $53 million a year. Over time, the Agreement will allow Australia to establish closer economic relations and integration with the world's largest economy with increased two-way investment flows. This will be of long term benefit to Australia.
*Labor's policy preference is for multilateral trade liberalisation via the World Trade Organisation.
* Nonetheless, this bilateral agreement will increase access to US manufacturing, agricultural, services and government procurement markets.
* Throughout the examination and debate surrounding the FTA, Labor has raised a number of concerns about its social impact. Some of these matters have been addressed as more information has become available. The FTA is a 'living agreement' and it will continue to develop overtime.
* Labor Senators on the Senate FTA committee made a number of recommendations to improve the implementation of the Agreement. Drawing on these recommendations, Labor will put forward safeguard amendments to the enabling legislation in the Senate to ensure the FTA does not undermine the Pharmaceutical Benefits Scheme (PBS) and the existing local content rules.
The concern over John Howard's "giveaways" notwithstanding (the exemption of Aussie sugar being one of them), why would an opposition party endorse a critical FTA that people are nervous and unsure about?
Is it because, as Labor have noted, they still see it as an overall net plus for Australia? They have said so, and I believe them.
So, who does oppose the FTA in Australia? The liberal-Left Australian Democrats and Australian Greens. 'Nuff said.
Howard and his Liberal Party were wrong not to push harder to include sugar, and there's this concern over pharmaceuticals that might have been better examined too. I'll concede on those points.
Hal, I will yield to your obviously superior knowledge of economics for the time being. As with anything, time will tell if this FTA works to Australia's advantage. If it does, then any debate I have with you right here and right now will have been rendered moot.
Quoting opinions, even Aussie opinions, doesn't change facts.
It wasn't a free trade deal and the U. S. is actively pursuing and implementing a protectionist trade policy, while telling the gullible that it's free trade.
The supposed "benefits of free trade" cannot possibly be realized when there's no free trade.
I find it amazing how many buy into this adminstration's lies and then repeat them in public when the facts on the ground refute them as clearly as they do here.
Rather than letting it continue, free traders would do better to write their Senators and House representative and tell them to stop the subsidies and corporate welfare.
One more time: IT IS NOT A FREE TRADE AGREEMENT.
Didn't you read anything I wrote and provided links for (there are impartial sources there)?
If you did, how can you say: "time will tell if this FTA works to Australia's advantage." IT IS NOT AN FTA!
Pfui - I'm out of here.
(Manning spots Hal's "Ptui, I'm outta here!" and is finally able to breathe again)
End of debate.
Call 1-800-555-RONG to donate blood.
===================
ASIDE: It's hard to guess the effects of a "FREE TRADE AGREEMENT" relative to "free trade" theory/models/sims, but since we've never actually SEEN a true Free Trade Agreement, it's hard to judge reality against the theories.
BTW: a FTA was spotted recently over Roswell, New Mexico -- but it quickly disappeared into the same black hole as Dick Cheney's Energy Task Force Meeting Notes.
I need to provide the correct link for Why your job is moving to Bangalore.
Aside from that, I really am out of here.
If you do want to discuss any of this, please use any of the contact links on my site.
Hmm...
Color me confused:
Hal opposes Free Trade
Hal Opposes US Trade Policy
US Trade Policy is, according to Hal, NOT "Free Trade"
WTF?
As any first-year economics student knows, free trade benefits all in the aggregate, just as free markets do.
Unsurprisingly, your statements about my positions are wrong, RJ.
And your "first year economic student" is naive.
John Cassidy has an article in the August 2, 2004 issue of The New Yorker that might help you.
Add your comment, speak your mind
(Or ping: http://blogcritics.org/mt/tb/18293)
You have it all wrong, MEM.
If it's subsidized it's not free trade and the American's are keeping subsidies on their products.
Further, in the trade deal with Australia, the U. S. is protectionist - they refuse to open the dairy and sugar markets.
Zoellick is clearly implementing protectionist American trade policies as he flies around the world cutting (and forcing) deals.
I blogged a bit more, with links, last March under the heading of THE "CARGO CULT" IS ALIVE AND WELL - TODAY IT'S CALLED "FREE TRADE".
Take a look at it then let's talk.