Free Trade – or is it?

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The idea of Free Trade seems a rather Utopian one, and it’s usually portrayed as egalitarian, giving free opportunity to everyone to trade with anyone. But the sheer dominance of the most powerful traders, whether it’s a country or a corporate global power, does not always seem to support equality for poorer trade parties.

And the chain of impact is longer than a simple transaction of goods for money. For example, when cheap grain from the richest countries of the world is exported to poor countries, the result can be that farmers in the poor country lose profit and are unable to compete. This forces changes in their activity, perhaps a move to cash crops which won’t feed their own nation. Long-term this could be disastrous, weakening their potential for a sustainable national food supply. And how can North American grain, grown in countries with high wages, be cheaper than grain grown by much poorer nations? Subsidy. That’s how the USA, for example, enables its farmers to compete in the global market place.

This letter to The Times was interesting:

The Times Wednesday, 3 October 2007

FREE TRADE DOGMA

Sir
Religious leaders are often accused of doctrine and dogma, but the group of economists who rebuked church leaders for questioning “free trade” appear to think that they have monopoly over “The Truth” (letter, Oct 1). As an economist myself, I would like to assure readers that not all economists are so dogmatic and arrogant. There are many respectable economic theories showing that free trade between rich and poor countries can harm the latter, especially in the long run.

History shows us that poor countries are protectionist because they are poor – not poor because they are protectionist. Rich countries became rich through protectionist policies. Britain knows this. During its industrialisation, before it moved to free trade, Britain had the highest tariffs in the world. Protectionism doesn’t always produce good results, but has been crucial in spurring the growth of most European countries and more recently East Asia.

Europe is preaching what it never practiced and for UK economists to claim otherwise is tantamount to disregarding their own history. African leaders should be strong and resist the pressure from Europe and its economists. Future generations will thank them.

Dr HA-JOON CHANG
Reader, Faculty of Economics
University of Cambridge

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