It seems that the editors at The Washington Post are very concerned, The End of Globalization? The last three years the global economy has grown more than international trade. The last time this happened was in 1985. Oh. My. God! What are we going to do? I just looked outside and there are no flames as of yet, but clearly it is just a matter of time because the world is on fire. I’m sure that Thomas Friedman is hiding under his bed. How can we possibly survive without ever increasing international trade?! If people are buying more things locally, it must be a sign of Armageddon.
Dean Baker responded, The Trans-Pacific Partnership, International Trade, and Arithmetic Problems at The Washington Post. Because this is all about the Trans-Pacific Partnership (TPP). All our worries will supposedly be over if only we get the TPP — at least until the next trade agreement comes up. But as Baker noted, “The TPP actually will not do much to reduce trade barriers, since the barriers to trade among the countries in the pact are already low in almost all cases.” Like most trade deals these days, it doesn’t have that much to do with trade in a general sense and it has nothing to do with “free trade.”
This reminds me of an article that Noah Smith wrote a few months back, Free-Market Ideology and the Burden of Proof. It was about tax cuts and regulation reductions and their effects on the economy. He said basically, “Let’s assume that Reagan’s changes really helped the economy in the 1980s; isn’t it likely that making taxes even lower and getting rid of even more regulation will have — at best — a far smaller effect on the economy?” I feel the same way about trade agreements: getting rid of trade barriers in the past was doubtless a good idea. But are we really likely to gain much now? Reducing tariffs from 50% to 5% was a much bigger deal than reducing them from 5% to 0%.
And that’s why when we look at the new trade deals they don’t seem to have much to do with their stated intent. Baker has done everything but run through the streets banging pots to bring attention to this. We aren’t talking “free trade” when “one of the main thrusts of the deal is to increase patent and copyright protections.” That’s not about bringing prices down for consumers — quite the opposite, actually. That’s about providing certain industries with economic protection — industries that have a lot of political power.
There is a cargo cult aspect to this too. Thomas Friedman famously said, “I wrote a column supporting the CAFTA, the Caribbean Free Trade initiative. I didn’t even know what was in it. I just knew two words: free trade.” That’s true of most of the trade deal boosters who don’t have a direct stake in the matter: trade deals helped the economy in the past so they must always be good under all conditions. And in the case of Friedman: the deal didn’t even have to be about free trade — it just had to claim to be about it.
William Jennings Bryan once spoke about how the financial types wanted to “crucify mankind upon a cross of gold.” Well, now it is a cross of free trade. And the people advocating it today are no more well informed than the gold standard types were then.