Beyond Free Trade

Alternative Approaches to Trade, Politics and Power

K. Ervine, G. Fridell, K. Ervine, G. Fridell

• Publisher: Palgrave Macmillan
• Year: 2015
• ISBN:
  9781137412737
• Topic: Politics & International Relations
• Subtopic: International Relations
• Index: Politics & International Relations

The world of trade is changing rapidly, from the 'rise of the South' to the growth of unconventional projects like fair trade and carbon trading. Beyond Free Trade advances alternative ways for understanding these new dynamics, based on historical, political, or sociological methods that go beyond the limitations of conventional trade economics.

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Introduction: Beyond Free Trade

Kate Ervine and Gavin Fridell

This book comes at a time when scarcely a day passes that major news outlets do not carry some coverage of free trade deals being negotiated and signed around the world. Unlike five or ten years ago, that coverage now arrives to many of us through a number of social media platforms. Weaving together the narrative of the journalist with that of the social commentator, the activist with that of the NGO, the policy maker with that of the social movement participant, such coverage and analysis reveal a complicated, power-laden, and contested landscape. Upon its terrain, critical observers pursue distinct ‘wars of position’ (Gramsci 1971), in order to destabilize monolithic techno-representations of free trade as common sense, good-for-all, strategies to support human development. As this introduction was being written, the following headline appeared in our Facebook newsfeeds: ‘The truth behind the Transatlantic Trade and Investment Partnership’ (TTIP), directing the observer to the Sierra Club’s US website where the organization describes negotiations for the TTIP between the United States and European Union as ‘cloaked in secrecy’ and ‘dominated by corporations’, threatening, if approved, to ‘put corporate rights on steroids’, to ‘open the floodgates for fossil fuel exports and fracking’, and to ‘revise law-making in favour of corporations’ (Sierra Club 2014). Canada and the EU are working on a similar trade deal, the Comprehensive Economic and Trade Agreement (CETA), described by the Council of Canadians as an ‘affront to democracy’ and a ‘corporate power grab’ negotiated in secret. If approved, CETA would, among other things, ban ‘buy local’ policies, dramatically increase the cost of domestic drugs, and pressure governments to privatize common resources such as water, and energy and transport services (Council of Canadians 2014).

Shifting focus, the same newsfeeds included the following headlines: ‘Can the BRICS Build Something New?’ (Milanovic 2014), ‘BRICS Nations to Create $100bn Development Bank’ (BBC 2014), and ‘BRICS Nations to Form Development Bank to Rival World Bank, IMF’ (Bevins 2014). Sharing the same virtual space, these news pieces remind us that ‘tectonic shifts’ are underway in the global political economy, involving new and expanding patterns of South–South trade and North–South trade (UNDP 2013). China (the world’s second largest economy, and largest consumer of everything from cars to timber, gold, copper, and pork), along with other major developing economies like Brazil, India, and South Africa, has been at the forefront of new South–South trade relations that are altering world trade patterns, with the share of South–South trade of world merchandise trade increasing from 8 per cent in 1980 to 26 per cent in 2011. These changing trade patterns have been interwoven with new directions in international trade policy, including an array of new regional integration projects and increased action among wealthy countries to expand their relations with Southern trading partners. Emerging Southern trading giants have offered new opportunities for some – through trade, investment, and international cooperation – and challenges for others – in terms of fierce competition from Southern states and transnational corporations, much of it over these very same things (Girvan 2010, Shirotori and Molina 2009, UNDP 2013).

Seeking to account for the nature and prospects of the shifting sands of the global economy, Jan Nederveen Pieterse (2011, p. 27) has conceptualized the possibilities on the ‘table’ as ranging from a reformulated ‘global plutocracy’ with ‘Anglo-American capitalism and financial markets in the West back in the lead and emerging markets joining the club’, to an ‘emancipatory multipolarity’ in which ‘countries representing the majority of the world population [have] come to the head table’. The former implies a world controlled by elite interests and continued polarization within and between countries; the latter offers a ‘script’ for possible emancipations, as previously silenced voices have space to redraw the game plan. The current nature of negotiations at the World Trade Organization (WTO), we would argue, lends strong support to those who fear that a ‘global plutocracy’ appears to be the most likely scenario, given that its rules are inherently structured in favour of the richest countries, and that the emerging powers like China, India, and Brazil have increasingly pursued the further neoliberalization of the world trading system through WTO negotiations and tribunals (Bello 2009, Hopewell 2014, Jones 2010, Rosset 2006).

While one can never be certain of the direction things might head in international trade and trade negotiations and given that the contours of a reconfigured global order are only ‘dimly visible on the horizon’ (Nederveen Pieterse 2011, p. 26), what is more certain is that the global trade regime is likely to continue to be dominated by power and politics, rooted in contingent and sometimes contradictory social and historical structures, in a manner that offers little resemblance to anything akin to genuine ‘free trade’, despite its pervasiveness as the hegemonic public face of official trade policy. Recognizing and challenging the gap between official trade policy and the complex dynamics behind trade politics served as the conceptual starting point for this book, the product of a two-day workshop, ‘Alternative Trade: Critical Approaches and New Directions in Trade and Development’, hosted at Saint Mary’s University in Halifax, Canada, in November 2013. During that workshop, the contributors to this volume presented papers that examined ‘actually existing’ trade as a historically specific and structurally contingent complex of social, political, and economic processes. This was done not only with the intent of mapping the contours of a rapidly changing global order and its implications, but also with the goal of initiating an interdisciplinary dialogue. Specifically, this volume takes aim at conventional trade economics and trade theory that, contrary to the cases presented in this book, continue to formulate their postulates such that their world of economic modelling and their conceptual foundations bear little trace of the actually existing circumstances under which trade and trade politics occur.

Beyond trade economics

Conventional trade economics and trade theory, central to the shaping of the ‘official’ international trade agenda and its neoliberal free trade policy prescriptions, draw heavily on the tradition of neoclassical economics. Within this tradition, it is assumed that rapid economic growth derives from a nation’s pursuit of ‘free trade’ according to its ‘comparative advantage’ – in unison, the two are said to generate competition, technological innovation, and eventual specialization. Developed by British millionaire stockbroker David Ricardo in the nineteenth century, the theory of comparative advantage contends that, relative to other countries, each country ultimately enjoys or can construct an economic advantage in the production of certain goods. To draw from Ricardo’s (1817) classic example of comparative advantage, while Countries A (England) and B (Portugal) both produce wine and cloth, Country A produces both more efficiently. Nevertheless, Country A may find the greatest efficiency in producing wine, meaning that, from the standpoint of comparative advantage, it is in the relative interest of both countries if Country A does what it does best, producing wine, allowing Country B to produce cloth which can then be traded for wine to the mutual benefit of both (Chang 2008, Fletcher 2010, Kemp 2008). While simplified, these assumptions are harnessed by contemporary proponents of free trade to argue that, in order to optimize their comparative advantage, developing countries must eliminate trade-distorting barriers that impede competition and distort domestic production; this further requires the opening of their economies to Northern technology, products, and investment that can and will aid in the process. According to free trade proponents, all boats will rise if countries dedicate their productive energies to those goods for which they enjoy a comparative advantage (Bhagwati 2002, Jones 2010, Sachs 2005).

While beyond the scope of this introductory chapter to fully elaborate on the genesis of the theory of comparative advantage, it is nevertheless critical to acknowledge that it continues to serve as the foundation upon which contemporary neoclassical trade theory is based (Chang 2008, Fletcher 2010, Kemp 2008). As such, interrogating its core assumptions, which remain highly speculative when measured against the history of global trade and development, is of particular importance. To begin, contemporary trade models assume near-perfect market information, and market actors are expected to anticipate their relative comparative advantage in its vast complexity, elaborating subsequent market decisions from this information. In reality, determinants of comparative advantage are so complex, while simultaneously socially and politically constructed, that obtaining near-perfect market information is largely impossible (Stiglitz 1994, Stiglitz and Walsh 2006). Moreover, given the freedom independent firms have to make their own market decisions within a capitalist economy, firms in Country A can and do choose to produce both wine and cloth based on firm-level choices, whether or not this aligns to the assumptions of a country-level theory of comparative advantage. Monopolistic and oligopolistic behaviour, moreover, among firms is well documented – Microsoft, Apple, and Intel are amongst some of the more well-known examples – positioning themselves to use their market share to influence economic outcomes in their favour, such that the very ideas of ‘free market’ and comparative advantage are undermined (Forbes 2001, Kemp 2008, pp. 197–198).

Furthermore, the assumptions of neoclassical trade theory, including that the transition from one industry to another is relatively easy, are further complicated by the legacies of historical path dependence and the comparative disadvantaging wrought by colonial occupation and domination, geography, the existing and available technology, the fixed cost of physical infrastructure, and the skills and training of the existing workforce (Chang 2008, Fletcher 2010, Kemp 2008, Krugman and Venables 1995, Robbins 2003). Even in cases where capitalists are able to shift investment from one industry (wine) to another (cloth) with relative ease, workers frequently lack the resources, skills, and mobility to make a similar transition, generating waves of unemployment and/or underemployment; comparative advantage for capital may not necessarily result in advantages for workers.

In response to the uneven outcomes emerging out of the quest for comparative advantage, conventional trade economists refer to the ‘compensatory principle’ to argue that the national gains accrued overall through trade generate sufficient wealth whereby the winners can always compensate the losers through taxation used to fund a national social safety net, including unemployment schemes, skills retraining programmes, and so forth. Nevertheless, the demise of the industrial and textile bases in much of North America, as companies sought to lower production costs in the 1980s and 1990s by relocating production to countries whose comparative advantage derives from drastically lower labour costs and weak regulatory systems, demonstrates that comparative advantage often times engenders increased joblessness and widening inequality, with poor quality, low-skilled jobs replacing those that were lost. Nor is comparative advantage of this kind a guarantor of high quality development, evidenced in tragic disasters such as the Rana Plaza garment factory collapse in Bangladesh in April 2013, with over 1,100 dead and more than 2,500 injured (Parveen 2014). Indeed, as the real world comes to bear on decisions surrounding economic policy, highly complex social, political, and ideological battles are waged, with little guarantee that a ‘compensatory principle’ will win out over the desires of the winners of comparative advantage to horde more wealth. As Fridell (2013, p. 16) has argued elsewhere, ‘Free trade ideology can lead to a libertarian worldview among the winners of international trade, who are often fiercely resistant to compensating the losers and utilize their extensive economic and political power to fight against progressive taxation and redistribution’ (see Chang 2008, pp. 65–83, Lefeber and Vietorisz 2007, Quiggin 2010, pp. 136–173).

From an ecological standpoint, Ricardian trade theory suffers from a relatively static short-term approach to economic decision making that, states Chang (2008, p. 47), is good ‘for those who accept the status quo but not for those who want to change it’. This can be a particularly difficult bind for economies whose status quo involves dependence on non-renewable resources, high-energy-intensive industries, and a general reliance on a ‘fossil energy regime’ (Altvater 2007, p. ...

Table of contents

• Cover Page
• Title Page
• Copyright
• Contents
• List of Figures and Tables
• Acknowledgements
• Notes on Contributors
• 1 Introduction: Beyond Free Trade
• Part I: Historicizing Trade
• Part II: Politicizing Trade: Shifting Alliances and New Trends
• Part III: Trading for Change?
• Conclusion
• Index