Morning Coffee: Free vs. Fair Trade

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March 07, 2008 Free Trade and Fair Trade: SIEPR 2008 Economic Summit Conference

J. Bradford DeLong

The question of "free" versus "fair" trade, has three baskets: an environmental regulation basket, a labor-standards and freedom basket, and a "wages basket."

The first two can, I think, be disposed of quickly. We don't want those able to bribe governments in other countries to poison people or the globe by turning other countries into pollution havens. We don't want environmental standards to be used to freeze the world distribution of wealth and keep people in other countries hungry, illiterate, and barefoot. The difficulties that remain are those of implementation.

Similarly, we want expanding trade to be a force for opportunity rather than for oppression: we like it when expanded trade gives ordinary people a path to a better life; we don't like it when expanded trade gives rich and powerful people in the cloud city of Stratos an incentive to round others up and put them to work in the xenite mines. As then-Principal Deputy IMF Managing Director Stanley Fischer warned the great and good at the 2000 Federal Reserve Bank of Kansas City's Jackson Hole Conference, there is nothing in the ILO's principles that we cannot and very little that we should not be eager to endorse, all of us. The difficulties that remain are, once again, those of implementation.

The question of trade and wages remains: To what extent are rich countries obligated to open their markets to poor countries when the consequence is falling wages for the poor in the rich--bearing in mind that the poor in the rich are often wealthier and have more opporunity than the rich in the poor? To what extent do rich countries do themselves well--serve their national interest--by opening their markets to poor countries even when the consequence is falling wages for the poor in the rich?

Let me make four remarks on this "trade and wages" basket:

First, between 1950 and 1997 trade and wages weren't an issue: our foreign trading partners raised their own relative wage levels at least as fast as globalization enhanced their influence, and there was no net effect of trade on wages--no link from greater openness to the global economy to greater inequality here at home.

Second, at times between 1950 and 1997 trade and wages became a political issue as a way of distracting attention from true problems. The voters of Michigan in 1985 did not want to hear that the problems of Michigan's manufacturing industries were home-grown--in the fecklessness of management and in the Reagan administration's budget deficits that pushed up interest rates which pushed up the value of the dollar and made the goods they made uncompetitive on world markets. They wanted, instead, to hear that the Japanese were doing something clever and illegitimate.

Third: since 1997 or so the link between expanded imports and wage inequality has become real, as our imports now embody a much larger amount of factors competing with our own lesser-skilled than they used to. How large? I don't think we know. Paul Krugman is now writing a paper for the Brookings Institution in which he essentially throws up his hands at the question. But there are two points worth noting: (a) the effects of trade on pre-tax wage inequality are much smaller than the effects over the past generation of changes in the tax system on after-tax income inequality; (b) the effects of trade on inequality of opportunity are much less than the effects of educational inequities on inequality of opportunity.

Fourth, to the extent that we in the United States begin thinking of trade restrictions as a way to fight inequality, we are setting ourselves up for extraordinary trouble late in this century--extraordinary damage to our long-run national security.

Think of it this way: Consider a world that contains one country that is a true superpower. It is preeminent--economically, technologically, politically, culturally, and militarily. But it lies at the east edge of a vast ocean. And across the ocean is another country--a country with more resources in the long-run, a country that looks likely to in the end supplant the current superpower. What should the superpower's long-run national security strategy be?

I think the answer is clear: if possible, the current superpower should embrace its possible successor. It should bind it as closely as possible with ties of blood, commerce, and culture--so that should the emerging superpower come to its full strength, it will to as great an extent possible share the world view of and regard itself as part of the same civilization as its predecessor: Romans to their Greeks.

In 1877, the rising superpower to the west across the ocean was the United States. The preeminent superpower was Britain. Today the preeminent superpower is the United States. The rising superpower to the west across the ocean is China. that was the rising superpower across the ocean to the west of the world's industrial and military leader. Today it is China.

Throughout the twentieth century it has been greatly to Britain's economic benefit that America has regarded it as a trading partner--a source of opportunities--rather than a politico-military-industrial competitor to be isolated and squashed. And in 1917 and again in 1941 it was to Britain's immeasurable benefit--its veruy soul was on the line--that America regarded it as a friend and an ally rather than as a competitor and an enemy. A world run by those whom de Gaulle called les Anglo-Saxons is a much more comfortable world for Britain than the other possibility--the world in which Europe were run by Adolf Hitler's Saxon-Saxons.

There is a good chance that China is now on the same path to world preeminence that America walked 130 years ago. Come 2047 and again in 2071 and in the years after 2075, America is going to need China. There is nothing more dangerous for America's future national security, nothing more destructive to America's future prosperity, than for Chinese schoolchildren to be taught in 2047 and 2071 and in the years after 2075 that America tried to keep the Chinese as poor as possible for as long as possible.

And let me stop there.

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2008 SIEPR Economic Summit: Critical Issue Sessions and Panelists:

March 7: 4:30-5:45pm: Session II: Is Free Trade Fair Trade? * Moderator: Dixon Doll, SIEPR Board member * Brad DeLong, Professor of Economics, University of California, Berkeley * Alan Taylor, Professor of Economics, University of California, Davis * David Dollar, Country Director, China and Mongolia, World Bank

Frances C. Arrillaga Alumni Center, 326 Galvez St., Stanford Campus

http://siepr.stanford.edu/SummitAgenda2008.pdf

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http://www.j-bradford-delong.net/2008_mov/Free_and_Fair_Trade.Mobile.m4v

http://www.j-bradford-delong.net/2008_mov/Free_and_Fair_Trade.Medium.m4v

http://www.j-bradford-delong.net/2008_mov/Free_and_Fair_Trade.Large.m4v

Comments

[kusaka]

> Throughout the twentieth century it has been greatly to Britain's economic benefit that America has regarded it as a trading partner--a source of opportunities--rather than a politico-military-industrial competitor to be isolated and squashed.

Well, US did squash British empire. And in general, being a trading partner does not give you all that much protection from ass-kicking - some, yes, much, no.

[dale]

We should be decent to all nations- not just those whose protection and favor we may need in the future.

[jerry]

I think you are way too quick to dismiss the labor standards basket, especially given how the labor standards forces and the wage standards forces are as related (and convertible) as electricity and magnetism.

But this sentence just seems flat out wrong and not supported by anything you have said:

"There is nothing more dangerous for America's future national security, nothing more destructive to America's future prosperity, than for Chinese schoolchildren to be taught in 2047 and 2071 and in the years after 2075 that America tried to keep the Chinese as poor as possible for as long as possible."

I see no reason to believe that fair trade is an attempt to keep the Chinese as poor as possible for as long as possible. I can't do the math, but I see it likely that fair trade is a better solution to the maximization problem that free trade claims to solve. Maximizing the individual wealth of workers in the shortest interval. Free trade confuses the measurement of the wealth of nations with the measurement of the wealth of workers in those nations. But even if free trade gets to the end faster, the variance of the free trade process is reasonable to object to.

Poor as possible? Long as possible? I suspect that's a baseless smear.

Given China's taking down of YouTube due to their crackdown on Tibet, I am not confident that any action we take will change what they teach to their students. If we have more power now than we will towards the end of this century, I advise we use that power now to best free up the Chinese media and the Chinese people. The way to do that is through fair trade which advocates for the Chinese environment, labor standards, and wages.

When you have American companies lobbying to stop the ability of Chinese workers to form unions, which is what they are doing now, what is the takeaway for the Chinese citizen? That America and free trade is seeking to enrichen their lives by removing any labor power they have? Or that America and free trade is seeking to impoverish their lives for as long as possible?

I am sorry, but you'll have to do better than this. Please redo and resubmit.

[foo]

How can you have ties based on as delong says:

quote: "blood, culture, commerce" with China ?

blood ? No

[Come to San Francisco or Los Angeles sometime. Even New York has a "Chinatown."]

culture ? No

[Come to San Francisco or Los Angeles sometime. Even New York has a "Chinatown."]

The Chinese are not Indo-european people, they are a difference race...

[OK. That's enough...]

[Matt]

"Reagan administration's budget deficits that pushed up interest rates which pushed up the value of the dollar and made the goods they made uncompetitive on world markets."

I have to nitpick on this because I fear Brad is using the same disguise when his formula should dissuade him. Not an economist, but a mathematician, I know that in the static accounting for national accounts, budget deficits don't matter, all things being equal.

It is the relative size of the government relative to the economy that Reagan pushed up, he did this by lowering the cost of government so the wealthy socialists could buy more on the cheap. Back to that same problem.

That we ran a deficit is a result of the dynamics, we bought more government and less private sector goods, under Reagan, the socialist. You have to say it this way, otherwise economists will start another four years debate.

[John]

How best to follow up a quote by Charles de Gaulle? By chugging diet coke with two hands, of course (at 9'46") - good job, Brad, very classy! It's also ironic to be chugging coke while discussing China's rise to power...

[Colin Danby]

Didn't we already do this one?

Anyway, just to address some of the xenophobia that any mention of "China" on this blog summons up so reliably, if we can substitute "family" for the metaphor "blood," there are already plenty of U.S.-China links and we can reasonably hope for more. And (speaking as a U.S. citizen whose Mom was born and raised in China) "culture" is an elastic enough term to incorporate many existing and potential links.

Where do people like "foo" get this stuff? Indo-European is a language group, not a race, whatever the hell a "race" is supposed to be in the first place. Languages are learnt. And one of the more endearing aspects of the US of A is that citizenship is a matter not of any particular ethnicity but of shared commitment to freedom and opportunity.

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What exactly does "fair trade" mean? Can someone supply a url? The term is bandied in predictable ways at these moments, but I've never seen anything that lays out how it would guide policy.

[Ben Ross]

Colin, what exactly does "free trade" mean?

If I take the term literally, it means tearing down the trade barriers that obstruct Chinese entrepreneurs who want to sell Americans things like handbags with "Gucci" written on them (honestly labeled so the buyer knows that it is a knockoff) and newly invented drugs (pure drugs, with their chemical composition accurately described).

As far as I can see, the trade negotiators who advocate free trade are busy erecting trade restrictions against these Chinese entrepreneurs. Wait a minute, you may say, copyrights and patents are good for the economy. It's certainly a plausible argument, but there are also plausible counterarguments saying that the current copyright and patent regimes are overrestrictive. As it happens, I happen to think that labor legislation, minimum wage legislation, and environmental legislation is desirable - you are free to agree or disagree.

Nobody is for unrestricted trade. The so-called free traders support trade restrictions like patent and copyright protection that protect large corporations, and an important element of current trade negotiations involves strengthening these restrictions. They oppose trade restrictions that protect workers and the environment. Why on earth would Chinese workers welcome trade restrictions that protect large American corporations but object to trade restrictions that protect the right of Chinese workers to organize?

[RNL]

If we're going to continue to gut opportunities at the lower end in this country, then we need to compensate by providing advancement opportunities:

- Free, Universal Higher Education system
- Free job training programs
- Public works programs
- "Outsourcing/offshoring" insurance

One of the most important parts of a Universal Higher Education program would be funding for /adults/, so that they can attend school full-time without having to work, so that they 1) actually retain knowledge, rather than forgetting everything because of burnout and exhaustion due to absurdly taxing work and school schedules and 2) don't have to spend 5-7 years in school because they were forced to go part-time, and can get back into the labor force with their shiny new skills in a more reasonable time frame.

Many (especially on the Right, but there are plenty on the left as well) like to yell about how education is the answer to the lost jobs problem, but then leave how to pay for it up to the very people who are wrecked by these policies. That has to change.

[Colin Danby]

Ben I asked a genuine question, which you don't answer. The term "fair trade" gets invoked a lot in these discussions and I would like to know what it means!

FWIW, free trade can be defined pretty simply as a condition in which national location doesn't affect the ability of buyers and sellers to deal with each other. My impression is that there's a long tradition of support for that ideal and prominent contemporary exponents like Jagdish Bhagwati, but in any case I'm not invoking the term...

I take it for granted that business and commerce are always already in a regulatory regime of some kind (legal, at the least). I have no problem discussing such regimes or joining Brad in backing more effective implementation of international labor and environmental regulation. We can have a number of interesting discussions about what kinds of international regulatory systems should apply.

[Rob]

Brad, you keep telling the story of in 2050 Chinese school students learning how the US tried everything to keep them poor. The problem with that is your policy would most likely end up with Chinese students learning of a US that did everything to prop up a repressive government in order to benefit from near slave labor conditions in order to benefit an entrenched oligarchy.

[Ponzi Q. Globalization]

* Neoliberal 'free' trade will f*ck over many citizens of the United States.
* It will weaken the position of the United States in the world.
* HOWEVER -- follow it or else those who benefit from following it will be mad at you for saying that it's not a good thing to follow. Advice which, if followed, would prevent their anger from really mattering.

I guess this is what counts as American Patriotism for economists in the 21st century. Call it 'Econopatriotism'. Econopatriotism is to patriotism as wanting what's best for the upper 1% of Americans is to wanting what's best for all Americans.

Most mainstream economists are tunneled-vision tools of those who are currently wealthy. Is this by now not obvious?

[Chris Brown]

It always seems quite arrogant to me when we of the USA, who despoiled our environment and exploited labor in developing our economy, demand that lesser developed nations adhere to environmental and labor standards which have come relatively recently to our economy.

What am I missing?

[Ponzi Q. Globalization]

Let me rephrase what our illustrious host is saying...

Think of it this way: Consider a world that contains one country that is a true superpower. It is preeminent--economically, technologically, politically, culturally, and militarily. But it lies at the east edge of a vast ocean. And across the ocean is another country-with more resources in the long-run due to weird self-destructive policies pushed by ideologically blinded economists and greedy bags of crap who only care about the short-term who reside in the superpower, a country that looks likely to in the end supplant the current superpower due to weird self-destructive policies pushed by ideologically blinded economists and greedy bags of crap who only care about the short-term who reside in the superpower. What should the superpower's long-run national security strategy be?

I think the answer is clear: if possible, the current superpower should give up all it's power to the possible successor. It should bind it as closely as possible with ties of blood, commerce, and culture and act in ways that ensure that the emerging superpower comes to its full strength. All the while the current superpower will fantisize that its successor will share the world view of and regard itself as part of the same civilization as its predecessor: 19th and 20th century Westerners to their Chinese (hah!).

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Are economists really this naive about how the world works? Didn't working in the White House endow our host with any sense of how the real world works?

China has four times our population and a culture that is much older. What makes DeLong think we won't be sharing their world view more than China shares ours? Are we that advanced? Are the parts of our culture that are most important to us really that universally appealing? I'm not talking about ubiquitous porn here. Gravitating to the Chinese way would be a good thing in some ways and a horrifying thing in other ways. Do we really want to leave the amount of our drift and what drifts to the Chinese mass in Chinese hands?

[piotr]

Somehow, Brad skipped a rather salient question: what actions can be contemplated in the name of "fair trade"? Embargo, quotas or duties? Or something more fancy, like labeling?

My favorite would be duties, and they do not have to be big. In case of "wage parity" they can be outright modest, if we think that the case for such a requirement is the weakest.

Now, in case of certain environmental damages we could consider embargo. In case of freedom and worker rights, I would be disinclined on the account that it is harder for objective standards (our standards so far were most capricious).

As far as Chinese learning in schools how Americans tried to keep them poor, well, I bet they learn it already. And we are learning about Boston Massacre.

Finally, are we ready to impose duties or quotas on oil exporters with woeful record on environment and worker's rights? I am all for it, but the design of consistent rules is not simple. Ah, perhaps labeling, gas stations with "fair-trade gasoline".

[david]

Even New York? New York's got three Chinatowns, each with their particular charm. I'm particularly a fan of Flushing dim sum before a Mets game...

[P.M.Lawrence]

"In 1877, the rising superpower to the west across the ocean was the United States". I've said it before and I'll say it again. In 1877 the USA was merely a rising power of the second rank. It was only in the first rank a generation later.

"The preeminent superpower was Britain". This is also false. Britain was only preeminent economically and at sea. This was enough to put it at the head of the first rank of powers, but not enough to make it a superpower.

"Throughout the twentieth century it has been greatly to Britain's economic benefit that America has regarded it as a trading partner--a source of opportunities--rather than a politico-military-industrial competitor to be isolated and squashed". That WOULD have been better, but as Kusaka noticed, the USA actually worked actively to undercut the independent power base of the British Empire (and the other European maritime empires, come to that). I am not addressing the morality of it, just the actual historical fact. See Skidelsky's biography of Keynes for an insight into a part that happened around 1945.

"And in 1917 and again in 1941 it was to Britain's immeasurable benefit--its veruy soul was on the line--that America regarded it as a friend and an ally rather than as a competitor and an enemy". As I pointed out the last time that Brad DeLong trotted out this guff, the 1941 price included that "soul", and he overstates the 1917 situation to the point of being wrong. If you don't believe that soul was the price, why do you suppose Britain is chipping in with today's US adventures in this way?

"A world run by those whom de Gaulle called les Anglo-Saxons is a much more comfortable world for Britain than the other possibility--the world in which Europe were run by Adolf Hitler's Saxon-Saxons". Again, Brad DeLong is repeating a past error that I pointed out before. This is a false dichotomy; what Britain and the world have now is WORSE than would have been the case if - for example - the USA really had "regarded it as a trading partner--a source of opportunities--rather than a politico-military-industrial competitor to be isolated and squashed". British influence and phased withdrawal in the Middle East would probably have allowed Iraq's constitutional monarchy to develop further, for instance, rather than being destabilised and overthrown in the aftermath of US intervention over Suez - an intervention that went well beyond the Suez affair itself, in its repercussions (ones which Britain warned about).

[tjallen]

There won't be a Chinese Empire, at least of the kind Brad fears. America's empire, built on cheap oil and cheap energy, is a model unavailable to the Chinese - oil (and coal) will run out before a handover from America to a new superpower. Plus, with many times the people, it will take many times the $ for the energy to sustain a Chinese empire - there aren't enough resources for such an empire - energy, water, clean environment, and other limits will be reached before China makes its to superpower status.

tjallen

[tjallen]

Brad's China-mongering reminds me of economists' predictions in the 1980s of the other menace from the east - the rising sun of Japan was going to sink us... yeah what happened with that? All this seems xenophobic to me. Why should we worry about having to one day kiss up to China, when nations don't kiss up to us now?

This shows such guilt over our misuse of our super powers - if we didn't do bad things like warring and invading and killing, we wouldn't have to harbor deep seated fears of what will happen when we lose our power.

tjallen

[Colin Danby]

You need to read more carefully, tjallen.

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Re misc. comments above, is there any way discussion might not assume that all Chinese folks are alike or share one monolithic culture?

[Dennis Tuchler]

What is "fair" trade? The answer seems to be that trade is "fair" when the price of imported goods of good quality is not appreciably lower than the price of competing domestic-produced goods.

[Altoid]

I have to laugh at Brad's quaint notion that we can get the Chinese government to do anything it doesn't want to do. Brad, can you really think they're not quite happy to have our productive capital relocate to their shores, and to hold our consumer production and much of our military production and technology hostage? Not to mention their financing of our national budget.

As far as I can make out, they're an interesting combination of Marxism and Confucianism, both of which begin with real capacities and material assets. We have a lot of real capacities in this country, but relatively we've been shuffling them off to benefit a narrow range of interests within our own politico/economic system. The result is that even from our own perspective, we're very much weakened. From their perspective, it would seem to me that we've given the game away long since.

If they were to blow a whistle and declare the current game over, what would happen? Would we cease to buy what our capital investment there produces? Would our government take military action of some kind-- nuke assets owned in part by our own nationals, or engage in that fabled land war in Asia against a country with 25 times the population of Vietnam when we got ourselves bogged down there? Or would our government find a way to keep our people happy and acquiesce to whatever had happened, being suppliant to the Chinese government's possession of American-financed assets and holding the fate of our dollar in its hands?

I'm not an economist. But in my view, it's simply fatuous to assume that the Chinese government has the same ultimate goals in mind as do those in the West who worship free trade. No one who subscribes to national sovereignty can elevate free trade above other gods. Trade is better than no trade, if we consider the nightmare of the 1930s. But trade that serves national purposes is better than free trade, and more to the point, it's what the most important trading nation of the present day-- China-- is doing.

To be a free trader in a mercantilist world is folly, and I think they (and the Europeans too, but that's another story) are much closer to mercantilists than to free traders. Bill Clinton was smart to try to use our position as the world's largest market to get what he wanted. Unfortunately we are also the world's largest debtor. We're in no position to call the tune.

[save_the_rustbelt]

The economists cannot yet determine if wages are be depressed for lower income Americans due to trade?

Heck, wages of much of the lower and middle classes are being depressed by the mad rush to globalize everything.

By the time the econo-guessers catch on it will take a couple of generations to fix the mess, IF we can find a way to fix the mess.

[tjallen]

Colin, you could critique more perspicaciously. I read exactly what you read - where in particular do you think I've misread? I think this whole "China is our Rome and we're the Greeks" meme that Brad peddled twice on us now is glib, false, unwise, xenophobic, poorly thought through, and generally unworthy the high level maintained around here.

tjallen

[jerry]

What is "fair" trade? The answer seems to be that trade is "fair" when the price of imported goods of good quality is not appreciably lower than the price of competing domestic-produced goods.

The wikipedia has a good summary under "trade justice", http://en.wikipedia.org/wiki/Trade_justice

But yes, in a sense, if the prices of the same goods are not the same regardless of where they are made than there is an arbitrage possibility set up. I think what the fair traders are saying is that this arbitrage IS taking place. What is being arbitraged is not simply the difference in cash prices, but the difference in environmental conditions, labor standards, as well as wages.

Fair Trade says that if someone can make the same widget of the same quality for less, that's fine, so long as everyone is competing on relatively level playing fields and that we are not actually subsidizing a foreign price by weakening our environmental standards or placing a tariff on our own goods by in essence making our companies pay for environmental standards that are not demanded of everyone. Or that a foreign country isn't subsidizing that foreign price by creating hidden costs to be paid for later in terms of worker health, abusive child labor..

So yes, I think it's reasonable to claim that in an efficient and fair market, the price differences are a result of fair processes and fair competition and are not due to arbitraging away environmental or labor standards.

It's similar in concept to a carbon tax being used to remove the hidden biases of our system to carbon fuels and our subsidizing carbon fuels by not measuring the pollution effects that we make taxpayers pay through superfund taxes and healthcare costs.

[Colin Danby]

Just to sort through the concepts, then, "fair trade" as defined here http://en.wikipedia.org/wiki/Fair_trade seems to mean the payment of above-market prices to certain categories of producers in certain circumstances. It's an interesting set of ideas. There's a tension between "fair trade" as an independent solidarity movement and gov't intervention to compel or encourage purchases that someone has certified as "fair trade," with the obvious informational questions. As defined on that page, "fair trade" seems limited to handicrafts and certain foods. (Are there assumptions or criteria about the relations of production under which goods are being made?)

"Trade justice" as defined at http://en.wikipedia.org/wiki/Trade_justice seems staunchly supportive of free trade, or at least of certain categories thereof.

The third idea being advanced above is that trade is fair as long as you're not being underpriced. The ironic part is that people who regard a lower price as prima facie evidence of an unfairly lower cost are relying on the neoclassical economics they profess to disdain: all kinds of assumptions about competition and clearing markets and uniform technologies and smooth adjustment and so forth have to be in place for the price of a good to be regarded as any kind of expression of its costs of production. When production is oligopolistic, goods are not standardized commodities, capital markets work in odd ways, etcetera etcetera etcetera, then you simply cannot interpret a price that way.

Given that opacity and the fact that we don't live in a general-equilibrium world, the case for intervening as close as possible to the problem you want to fix is only strengthened. This would include efforts to enforce already-agreed ILO and environmental standards.

--

tja, Brad's argument is if anything naively xenophilic, for which he's taken criticism both times he's posted it. And while the 80s Japan-bashing you point to was indeed xenophobic, I don't remember that coming from economists, in particular because "sink us" is incoherent.

[Brooks]

Excellent post by Brad. I would point out, however, that while I think his points re: the matters of environment, labor standards, and wages, respectively, are quite sensible in terms of what is desirable (i.e., in theory), in practice -- i.e., via the policital process -- the environment and labor standards issues seem to be used often as a smokescreen to (supposedly) protect wages via protectionism.

[Mandos]

I'll support free trade when we have global wealth taxes.

[Denis Drew]

Just two points:
One; the real determinant of how importing cheaper manufactured goods affects labor depends on how effectively organized labor is to extract all the benefit for itself by being able to extract all the market will bear in every other (non-manufacturing) occupation. Which is to say that is all that manners in any case.
Two; I would pull the education equation inside out: I believe that poor schools (talking about impossible ghetto schools) are a result of too many (economically) poor parents. Pay parents enough to support a middle class life and I believe the schools will work just fine. When the Cabrini Green housing project still existed in Chicago, 85% of the parents were on welfare. How could the schools that served Cabrini Green possibly have worked?

[Ponzi Q. Globalization]

"I would point out, however, that while I think his points re: the matters of environment, labor standards, and wages, respectively, are quite sensible in terms of what is desirable (i.e., in theory), in practice -- i.e., via the policital process -- the environment and labor standards issues seem to be used often as a smokescreen to (supposedly) protect wages via protectionism."

One could also say that 'free' trade is, in theory, about comparative advantage and other mythologies which teach us that neoliberal trade is the way to go. However, in pratice, 'free' trade is used by financiers and corporate executives to simply do end runs around environmental laws, labor practices, and high living standards in their home countries to reduce production costs. These titans of finance and industry can use the reduced costs of production to buy new yachts and give their loved ones multi-million dollar birthday parties.

BTW, does anyone else think Prof. DeLong trying to promote the current neoliberal trade regime by threatening us with legions of angry unborn Chinese people if we don't support it 100% a bit daft? Economists should just stick to using their religious stories about free trade as the will of the Lord to get the potential 'protectionist' heathens in line. Threats of damnation should come from not following God's law and not from pissing off other mortal men.

[Ben Ross]

I'll ask again - if the so-called free traders are so concerned about Chinese anger, why aren't they worried about Chinese who are angry because our so-called free trade policies are preventing the free manufacture of life-saving drugs? I believe there's already quite a bit of anger in India over this.

[Karl Bilawski]

I don't want to be some new Rome's Greece. So the Chinese wind up learning English as a second language and watching lots of Hollywood style movies. Great. That doesn't really compensate for putting all of the men of, say, Chicago to the sword and selling all the women and children into slavery. See Corinth in 146BC, or Sulla's sack of Athens in 87BC, etc. etc.

The British approach to the rise of the United States, sure, that analogy holds some water. But Greeks to Romans is completely unappealing. Geopolitically supine cultural tutors? No thanks.

[Brooks]

Ponzi Q,

Re: "'free' trade is used by financiers and corporate executives to simply do end runs around environmental laws, labor practices, and high living standards in their home countries to reduce production costs."

For the most part, it's the wages rather than environment and labor standards. When poor people abroad are willing to work for a fraction of the wages required in the U.S. and other developed countries, it will draw labor-intensive businesses, as it should, for the sake of the poorest in the world whose alternative is even greater poverty, for the sake of consumers trying to make ends meet, and ultimately for the economic benefit of the vast majority in those developed countries (just as do cost-saving advances in information and production technology, despite short-term dislocation of workers).

[save_the_rustbelt]

Is Prof. DeLong will to give up his job, his benefits and to see his home go into foreclosure to boost the cause of free trade?

If it is good enough for blue collar workers it should be good enough for economics professors.

[Julian Elson]

Brad, I think you're ignoring a fourth basket -- possibly fourth, fifth, sixth, and so on baskets. That is how free trade agreements govern intellectual property protections, corporate rights, and arbitration of conflicts between domestic laws and international investments.

I don't think any of your baskets address what free trade involves prohibiting Brazilians from making their own cheap knock-off anti-retroviral drugs for a domestic anti-AIDS campaign, so that they'll be forced to by brand-name drugs from the U.S. That's not in the wages basket, the labor standards basket, or the environmental basket, but it is part of the topic of discussion when we talk of free trade agreements. Similarly, protections for foreign investments giving them the right to compensation for lost profits in response to new regulations, such as environmental regulations. This could be considered part of the other baskets -- but instead of talking about forcing, say, producers in India not to pollute too much if they want to trade with us, we're talking about the U.S. government being forced to pay off a Canadian firm for lost profits if it implements a new, non-discriminatory (vis-à-vis foreign and domestic firms), purely domestic law regulating emissions when the Canadian firm is a polluter.

The three baskets of "fair trade" you mention are all important, but there are other baskets you don't seem to address. The intellectual property basket, the special FTA court arbitration basket, etc.

[Maurice Lanselle]

>The three baskets of "fair trade" you mention are all important, but there are other baskets you don't seem to address. The intellectual property basket, the special FTA court arbitration basket, etc.

After the bluff, "the first two [of the three baskets] obviously don't matter", I stopped reading and scrolled down to the comments. Reminds me of the story of the math professor at Yale who announced that the next deduction was obvious...

As I think I noted once before, it is said that the bilateral trade agreements go so far as to ensure non-extradition for war crimes, crimes against humanity, for Americans, in "supplier" countries. That doesn't seem to have much to do with quality standards or treatment of labor. Sounds more like Nazis in the heart of South America, to me.

Is subsidising producers "fair"? If the country can afford to, yes.

Should imports to a country which has unemployment insurance, universal health care, retirement, etc. from a country which doesn't be taxed or tariffed to "level the playing field" for the workers in the importing country?

[tjallen]

Sorry Colin, but fear of the anger of unborn Chinese is xenophobic, not xenophilic. He doesn't love the chinese, he fears them - phobic.

[Colin Danby]

Brad can defend himself from this stupidity, but an argument of the kind that says if you treat people well they may treat you well too is not xenophobic.

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Karl B is right that Brad's international relations claims are a tad sweeping and gestural. OTOH the success of the EU and predecessor institutions in making renewed war among the W European powers unlikely suggests that the IR extension of the doux commerce thesis has some plausibility.

[Ponzi Q. Globalization]

Human population growth and increases in per capital consumption are putting a great strain on the resources of our world. Technological improvements can limit the strain by squeezing more out the resources or by finding replacements but so far it seems that the consumption growth is outpacing the technology. Standards of living are tied to the level of consumption of these resources.

People don't like to see their standard of living decrease and would be perfectly willing to find justifications to make sure that their access to the resources is undiminished even if this means diminishing the access for others. Groups with power will obtain the resources. Groups without power will not. These groups may be nations, classes, or a mixture of these and other categories.

Groups of human beings have always been willing to commit acts of violence on other groups in order to maintain or better their position. The violence is always justified someway. In the past, the justification was often simply the superiority of one's tribe. Nowadays, the justification is often the creation of a democratic capitalist utopia for all humankind. People in the past were more honest about why they were violent.

You can talk about neoliberal 'free' trade as if it will banish the way human beings have behaved for thousands of years but deep down most of us know this is bullsh*t. Neoliberalism is not the cure for the world's ills. It is a problematic ideology in that it does not limit growth to levels sustainable for all. In fact, it gives positive reinforcement to increases in growth which will ensure that bloodshed, not mutually beneficial trade, will be how resources are partially distributed in the future.

What exactly is DeLong saying when he dons his Thomas Friedman hat and writes, "There is nothing more dangerous for America's future national security, nothing more destructive to America's future prosperity, than for Chinese schoolchildren to be taught in 2047 and 2071 and in the years after 2075 that America tried to keep the Chinese as poor as possible for as long as possible." He is saying that we should try to limit the ability of the unborn Chinese to find justifications for being violent towards us as much as possible. This is not very appealing. I think neoliberalism needs a better marketing campaign than this.

[Paul Steed]

I've lived in China and I've lived in Taiwan for 10 years. The differences in language and culture between the US and China and the US and the UK are so vast. The UK and the US could see each other as close cousins, part of a broader Anglo-Saxon project. The move to Chinese dominance - if the weaknesses in their environment, society and politics do not bring the enterprise to a halt - could never be so seamless.