Why free trade is wrong

For many years, the debate between free trade and fair trade has been ongoing, and it has been one of the stalwarts of economic argument recently, in an ever changing field. Free trade proponents across the world argue that it is a viable policy to ensure a level playing field between all manufacturers, and to therefore grow the economies of developing countries through increased competition and increased production. However, it could be argued that the ramifications of free trade outweigh its benefits, and it is for this very reason that I am an advocate of fair trade, not free trade. Free trade has several disastrous repercussions attached to itself, including environmental degradation, poor working conditions, and the loss of jobs. These points mean that free trade can never be morally, or indeed economically justified.

Firstly, the introduction of free trade means that there will be a substantial decrease in the quality of working conditions. If all companies start on a level playing field, they will be forced to pay their workers less and less in order to increase margins, boost production (due to more workers being paid less) and therefore gain a comparative advantage. In order to increase profits, some companies would even resort to using child labour in order to increase production. Some symptoms of these can already be seen in many emerging economies such as those of India and China. In the 21st century, we cannot allow such blatant exploitation of workers, whose salaries were barely enough to provide a subsistence lifestyle to begin with. We cannot look at free trade on the surface and accept it, and we must think of the images of poor workers being forced to work 12-hour days, and children working in dirty factories when they should be frolicking outside.

The ruthless nature of free trade, in wiping out companies that simply are not good enough, also means that companies have to look to increase production rapidly without any concern for the environment. This means that environmental degradation occurs faster and faster, with every company needing to resort to these measures in order to gain a comparative advantage. With levels of global warming higher than they have ever been before, it is axiomatic that this policy is not economically or environmentally viable. We need to keep 80% of discovered fossil fuels in the ground to avoid going above 2°C warming, and the introduction of free trade would be a gargantuan barrier to this, ensuring that this target can never be met. Again, this will come at a cost to developing countries such as Bangladesh, where 70% of the country is less than 1 metre above sea level. This is not a compromise which we can make, and this reason alone should be enough to convince one that free trade is wrong.

Finally, free trade leads to job losses in host countries such as the USA and the UK. This means that, for example, US nationals will lose their jobs to workers from developing countries, who are prepared to work for a much cheaper price. Eventually, this will lead to these US or UK nationals either being forced to work at cheaper rates, which will not be enough to support their families, or to levels of unemployment increasing in these host countries. Either possible outcome will only exacerbate the already great problem of income inequality in the host countries, as the workers earning minimum wage will be earning far less than the chief executives of the company they work for, who will naturally take the lion’s share of the newfound profits. It is for all these reasons that I believe that free trade is immoral and wrong, and should not be practiced in the 21st century.

15 Comments Add yours

  1. jredoug98 says:

    You say free trade will lead to a destruction of the environment. How can you be so sure? Free trade allows knowledge and innovation to diffuse around the globe at an incredible rate; which could of course increase the chance of their being more environmentally-friendly production and more chance of finding renewable non-greenhouse gas emitting energy. Then again, although this a counter-argument, I must say it is a feeble one.

    I do agree with your point on worker-exploitation; after seeing the atrocities at Foxconn. Although it does comes down to the question is having work better than not having work in these countries?

    Finally, greater competition could lead to US firms having to become more cost-efficient; thus increasing their labour productivity. As a result US workers in work could receive higher wages.

    I do like you article, and I do like the way you do address moral and social issues of economic growth, unlike others who see growth as the end rather than being a means to an end.That said, what are your views on the argument’s above?

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    1. Firstly, thanks for the comment 🙂

      To the environmental point, I say that corporations will be more likely to use the knowledge acquired from free trade to find ways to boost production, thereby increasing profits. As there is no incentive for corporations to find more environmentally friendly means of production, they will not, and will continue to hike production despite rapidly increasing rates of environmental degradation.

      To the second point regarding work vs. no work in developing economies, I would argue that this should not be the case at all, and that conditions in these developing economies should be such that it becomes a question of having to work for less vs. having to work for more. As civilised human beings, we should not simply be sticking to the status quo, and we should actually be trying to make a change.

      Finally, to your last point, I would say that corporations would prefer to employ gargantuan numbers of people in developing countries for little to no wages, than to boost employee wages in their own country, in order to boost cost efficiency. Corporations are not humans, and the “best” way to boost cost efficiency is to employ great numbers of people at little to no cost to yourself.

      Hope that answered your questions. Thanks again for the comment! 🙂

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  2. HB says:

    I agree with you on this. Free trade shouldn’t even have a place in the 21st century. It’s just reprehensible how poor the working conditions are – plus the environmental factors you mentioned. Fair trade is a modern approach and should be more common to all.

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  3. HB says:

    And looking at your Twitter, I cannot wait for half term either. The weeks have dragged on, and it’s time for a break! :-).

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    1. Yeah, my half term started Friday 🙂

      Like

  4. HB says:

    Lucky :-). My half term begins on Thursday. I can’t believe it’s bloody Halloween the week after, as well. Time has flown past.

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  5. HB says:

    Totally!

    Apologies if I’m turning this a regular conversation, I’m just interested in your blog and like speaking student to student. ;-). It’s always refreshing seeing someone whose into the role (talking about this stuff), other than some people in my class who are a bit biased towards politics and other things.

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    1. Nah that’s cool 🙂 Absolutely!

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  6. computeruser6 says:

    Out of curiosity, is there a reason you don’t have a lot of links or citations in your articles?

    “Firstly, the introduction of free trade means that there will be a substantial decrease in the quality of working conditions. If all companies start on a level playing field, they will be forced to pay their workers less and less in order to increase margins, boost production (due to more workers being paid less) and therefore gain a comparative advantage.”

    What exactly are you basing this statement on? Protective tariffs are a double-edged sword. Raising prices on imports leads competing countries to enact the same legislation and will lead to a loss of market share. What’s worse, selling a product at a lower price or not producing anything at all? (1) Governments trying to enact wage and price controls simply does not work. FDR’s Treasury Secretary, Henry Morgenthau Jr., admitted that central Government control and New Deal policies were complete and utter failures. (2)

    (1) http://future.state.gov/when/timeline/1921_timeline/smoot_tariff.html
    (2) http://dailysignal.com/2009/01/14/were-spending-more-than-ever-and-it-doesnt-work/

    “In order to increase profits, some companies would even resort to using child labour in order to increase production. Some symptoms of these can already be seen in many emerging economies such as those of India and China. In the 21st century, we cannot allow such blatant exploitation of workers, whose salaries were barely enough to provide a subsistence lifestyle to begin with. We cannot look at free trade on the surface and accept it, and we must think of the images of poor workers being forced to work 12-hour days, and children working in dirty factories when they should be frolicking outside.”

    I guess those children could always go back to sifting through garbage for food. What do you mean my “frolicking outside” and images of poor workers? Lots of children is Western countries simply get indoctrinated at school rather than getting an education; which one is worse? How about the kid that got suspended for a pop-tart shaped like a gun? http://legalinsurrection.com/2013/06/7-year-old-pop-tart-gun-offender-loses-first-appeal/

    “The ruthless nature of free trade, in wiping out companies that simply are not good enough, also means that companies have to look to increase production rapidly without any concern for the environment. This means that environmental degradation occurs faster and faster, with every company needing to resort to these measures in order to gain a comparative advantage. With levels of global warming higher than they have ever been before, it is axiomatic that this policy is not economically or environmentally viable. We need to keep 80% of discovered fossil fuels in the ground to avoid going above 2°C warming, and the introduction of free trade would be a gargantuan barrier to this, ensuring that this target can never be met. Again, this will come at a cost to developing countries such as Bangladesh, where 70% of the country is less than 1 metre above sea level. This is not a compromise which we can make, and this reason alone should be enough to convince one that free trade is wrong.”

    Anti-Trust legislation has never worked well. Federal and Central Governments deciding who is too big or needs to be knocked down a peg is a mix of incompetence and cronyism. (3) What do you mean by “levels of Global Warming higher than ever before” and what are you basing your warming statements upon? Are you referring to how 2014 was about 0.03 C warmer than the year before? Since you seem to believe in antrhopogenic global warming I have some questions for you:

    1)Between carbon dioxide, methane, and water vapor, what wavelength of radiation is absorbed and which is the worst greenhouse gas?
    2)Do methane, carbon dioxide, and water vapor evenly mix in all layers of the atmosphere and what effect does this have? Do UN IPCC models account for the effect of all three of these gases or are two of them ignored because it might cause them to actually disprove their hypothesis, like scientists are supposed to do?
    3)How would solar heat be controlled? Should a giant soletta be put above the Earth?
    4)For all the talks of Arctic and Greenland ice sheets losing mass, what about how Antarctica is gaining both surface area and mass in its ice sheets? (4)
    5)Why is it that many of the same climate change proponents claimed in the 1960s and 1970s that emissions would reduce sunlight input and lead to global cooling rather than a warming planet? Why do the same gases now suddenly lead to a runaway feedback loop instead? Why did they have such a shift in their ideas on the climate?
    6)How do UN IPCC reports determine previous temperatures? Are they truly representative of Earth’s temperature? (5)
    7)If climate change proponents are correct, why do they believe in censorship? Why do they sue their opponents? (6,7)
    7)Of total carbon dioxide emissions each year, how much is caused by man?

    (3) http://www.utdallas.edu/~plewin/TheFoundationforEconomicEducationonanti-trust.pdf
    (4) https://notalotofpeopleknowthat.wordpress.com/2014/08/27/mit-scientists-confirm-antarctica-is-cooling/
    (5) http://wattsupwiththat.com/2015/11/15/corrupted-australian-surface-temperature-records/
    (6) http://wattsupwiththat.com/2015/11/13/censorship-used-to-promote-anthropogenic-global-warming/
    (7) http://www.steynonline.com/7162/the-gravedigger-of-science-weighs-in

    Any country that’s only a meter above sea level has problems. Erosion is a continuous process irrespective of changes in Earth’s climate. Coastal communities have always been in danger of eroding into the ocean and always will be. Concerning economic catastrophes in general, the worst ones always seem to occur under central government control. (8,9) The free market will be able to determine the next good energy source better than a central government can. (10)

    (8) http://www.columbia.edu/~tmt2120/introduction.htm
    (9) http://www.usatoday.com/story/news/world/2014/01/16/china-smog-air-pollution/4504729/
    (10) http://dailycaller.com/2015/11/04/uk-using-diesel-generators-to-avoid-blackouts-from-too-much-wind-solar-energy/

    “Finally, free trade leads to job losses in host countries such as the USA and the UK. This means that, for example, US nationals will lose their jobs to workers from developing countries, who are prepared to work for a much cheaper price. Eventually, this will lead to these US or UK nationals either being forced to work at cheaper rates, which will not be enough to support their families, or to levels of unemployment increasing in these host countries. Either possible outcome will only exacerbate the already great problem of income inequality in the host countries, as the workers earning minimum wage will be earning far less than the chief executives of the company they work for, who will naturally take the lion’s share of the newfound profits.”

    Again, what are you basing this statement upon? Massive transfers of wealth, central government control, and bad government policy lead to low job participation rates and economic stagnation; not freedom and liberty. Anyone who believes otherwise should move to a Workers’ Paradise like: Zimbabwe, Venezuela, Greece, Detroit, Spain, or look at the former Soviet Union and Warsaw Pact countries. Like I stated earlier, big government New Deal policies were utter failures that didn’t end the Great Depression and didn’t get unemployment below about 14% between 1933-1941.
    Income inequality is a non-issue. If you want be in a country where everyone is equal, move to Zimbabwe. Almost everyone is equally poor with no chance of mobility in a Workers’ Paradise like Zimbabwe or Cuba. (11) As for CEO compensation, in the U.S. average CEO income is about $157,000. (12) Most corporations are not large, but rather made up of small numbers of workers. (13) I know that it’s common for people to only think of large multi-national corporations when the word “corporation” is brought up, but the word corporation is simply a legal designation. It has no bearing on the size of the organization. If corporations aren’t people, why are labor unions?
    Countries like China can temporarily push their economies to the stars and inflate bubbles, but the Chinese economy is now looking like Japan in the 1990s. (14)

    (11) http://www.economist.com/news/finance-and-economics/21576665-grubby-greenbacks-dear-credit-full-shops-and-empty-factories-dollars-they
    (12) http://www.payscale.com/research/US/Job=Chief_Executive_Officer_%28CEO%29/Salary
    (13) http://www.census.gov/econ/susb/
    (14) http://money.cnn.com/2015/07/09/investing/china-crash-in-two-minutes/index.html

    “It is for all these reasons that I believe that free trade is immoral and wrong, and should not be practiced in the 21st century.”

    “Immoral and wrong” as compared to what exactly? What are you proposing should be done? Apologies for not re-blogging one of your posts by now, I simply let other things get in the way. I intend to re-blog your post with my rebuttal to it, unless you can prove your points.

    -Dirk (a.k.a The Conservative Nuke)

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    1. Jonathan Nicholson says:

      This is pretty outdated. Greece and Spain are NOT a worker’s paradises. There are lots of influences on the Greek and Spanish economy.

      The main problem of the Greek economy is to do with the Euro, its “austerity” (cuts in government spending and the private sector not picking up the slack) as well as the level of migration its being told to cope with, until very recently, on top of its economic difficulties. Okay, in the long-run, the economy will improve, but at what political and social cost?

      Also, your definition of freedom is limited. John Rawls made a distinction between positive and negative freedom. Positive freedom is “freedom to…” and negative freedom is “freedom from…” They’re not the same. Negative freedom, which is the one I imagine you’re talking about, is a freedom from Government (the economic policy consequence of that mean little or no regulation, taxation etc) to fulfil potential. However, Beveridge argued that that people have the right to escape the 5 Giants of poverty (squalor, ignorance, want, idleness, and disease). In terms of policy that means the real and actualised right (rather than the Government standing back and allowing things to just happen) to education, health etc. Its the idea that in if the Government wants something to happen it needs to be active rather than passive – be that a market or regulatory framework.

      You can argue, successfully, that some Governments have epically failed. Others have not done so.

      Like

      1. computeruser6 says:

        So, was the Greek government supposed to continue spending money it didn’t have indefinitely? I believe in the rights to life, liberty, and property; not coveting someone else’s property. Why do you think that you have the right to someone else’s services? Unlike you, I believe in liberty and not central government control.
        What’s your idea of a proper “active” government? Denmark, where anyone making over about $7000 US is hit with a minimum of 38% national income taxes (in addition to numerous other taxes) and deals with a 25% VAT? In your argument you present no evidence. If massive government spending was a good solution, why is the E.U. the least dynamic trading block on Earth? Why are its economies stagnant?

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  7. Jonathan Nicholson says:

    Didn’t you previously write, in fact the post directly, before about how Reaganism/the trickle down effect works? Part of Reaganism is about allowing the free market to do what it will. You can’t have it both ways – letting the wealth trickle down because it works and then point out that it doesn’t.

    Its not ‘wrong’, but micro-economic (‘fairness’) and macro-economic (trade and growth) can often come in to conflict. Its why there are no absolute answers. However, the macro-economic goal of growth doesn’t exclude a micro-economic policy like redistribution of wealth or a minimum wage.

    The biggest in economics is not whether to improve ‘fairness’ or reduce inflation, but the problem of scarcity of resources (land, labour, capital and enterprise). Scarcity produces opportunity cost (the foregoing of the next best alternative). In the long-run its not a problem. Of course, how do you define long-run? In the short-run its a complete headache with very few, if any, definitive answers – you’re using stats from yesterday, to determine the policy today and you won’t know until tomorrow. Then comes the problem of “Had we done something different, how might that have turned out?”

    The economic gain of free/international trade is Adam Smith’s division of labour argument applied to any geographical unit (village, town, county, state, region, nation). Absolute Advantage which is to do with simple production numbers. A more refined theory supporting international trade is Ricardo’s Comparative Advantage which is to do with the opportunity cost. There are other advantages to free trade as well: commonly competition, a bigger consumer market, economies of scale and so on.

    Fair trade and environmental protections can be written in to trade agreements – the Maastricht Treaty is an example of this. The European Union actually has international free trade in pollution – its the “Cap and Trade System” and for some its a way of generating revenue.

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