Thursday, 16 November 2017

Killer Arguments Against Free Trade, Not (1)

PaulC156 left a comment here:

Not sure exactly what you disagree with or how N Korea gets a mention.

I do not argue above for or against free trade but simply refer to historical reality.

Britain absolutely was not remotely free trade until they achieved economic dominance well into its industrialisation period circa 1840's. Prior to that it was the most protectionist of nations. Even then it returned to protectionism in the 1870's! Alexander Hamilton came to typify the US approach to free trade in the 18th C. Protect nascent industries (tariffs, quotas) until they are strong enough to outcompete foreign producers. That policy stood until the second half of the 20thC. 

As for Korea, South Korea is typical ditto Japan and modern day China. Massive state led investments allied with protection was the story for all these countries whilst they were industrialising. Still the case in China. S. Korea only liberalised in the 80's well after its industries were well established.

Ho hum.

1. North Korea is very relevant because it has just about the least free trade in the world, and its economy is pretty much on its arse as a result.

2. I certainly wouldn't hold up British Empire as a model of free trade, pretty much the opposite as far as 'everybody else' was concerned. Ditto USA.

3. As to the ASEAN countries, let's agree for the sake of this argument that they protected they 'nascent industries' until they were ready to compete on a world stage. (With those countries, the distinction between government and private, or between society and economy is pretty blurred - are businesses partly state-owned or do business leaders control the government? If Prussia was an army with a country, South Korea is a vast conglomerate with a country. The ASEAN countries also seem to have a sense of national cohesion that allows this. So to say that 'the government protected its domestic industries' is a bit like saying that 'businesses looked after themselves' which is perfectly acceptable.)

But hey, even so, I'd hardly call the UK a developing country, so the justification simply does not arise.


paulc156 said...

I agree with a fair bit of that, I think? Only I'm not clear from your '2' what you mean when you say "pretty much the opposite as far as 'everybody else'".
My point was that the US and UK were johnny come latelys regards 'free trade'. Though they often espoused it for their colonies or in the US' case in Central and South America and Caribbean. . ie; they weren't too keen on the little countries protecting their fledgling industries against the might of British/US industry and commerce.

There is a blurring between business/trade and government even in the west not just ASEAN countries but really in China it seems 'the party'/gov is the main driver rather than business per se.

I think we're agreed that as the big economies(OECD)have developed they have been anything but 'for' free trade whereas once mature they regard free trade as something to aspire to, but still very selectively.

North Korea was subject to virtual destruction in the 1950's and it was never able or allowed to recover as it's main purpose has been to act as a buffer between China and the US. It's silly to talk about North Korea as if it's adopted autarky out of preference to free trade. It's simply a military vehicle for a cult leader.

The sensible comparison would be to look at developing countries today and ask whether the liberalised policies like 'free trade' and 'foreign investment friendly policies' that the likes of the IMF and OECD try to impose are the same policies that the mature advanced economies adopted in order to develop back in the 18th-early 20thC And the answer seems to me to be an emphatic NO!

Mark Wadsworth said...

PC, what other countries do is up to them, not you, me or the OECD. What the UK and USA did in the past is in the past.

Quite simply, the UK is a developed country, ergo, there is no reason for us to be protectionist.

paulc156 said...

MW. I did already make clear on Tuesday's post that I haven't argued about the merits of free trade. My point was only ever referring to historical record. Few currently advanced economies ever did 'free trade' 'on the way up'.

For an advanced economy like our own, free trade makes perfectly good sense. That is, between ourselves and other advanced economies it should be a win win.

Shiney said...


Ummm... why only "between ourselves and other advanced economies it should be a win win"

Surely buying stuff off poor people, rather than raping their countries' natural resources or sending aid to be stolen by their governments, is a 'good thing'.

Graeme said...

I would say that we are in a different world today. Two centuries ago the UK could prevent India from selling cotton fabrics on the world market and annexe the profit to Lancashire. Things could be different today. The EU could allow coffee producers to roast beans at home rather than send them to Amsterdam or Trieste and let the EU capture the surplus. Tariffs stop this happening. The world could stop sending profit to the EU and capture it locally. Free-er trade should be the better route for development than building shoe factories in Tanzania

paulc156 said...

Sh. Wondered if that might get a bite. From pure self interest we should buy 'stuff' from poor people but if all we buy from African banana republic is erm, bananas, bananas is all they're likely to produce. So those countries which want to develop should be allowed and encouraged (lend for the purpose) to import new technologies necessary to advance their industrial and commercial base and we should allow them the opportunity to adopt the same protectionist policies that served the 'now' advanced economies so well in former years. Rather than dictate to them the we actually do, except when they're called China :-)

Shiney said...


That was my point - buy stuff off other countries via free trade. Those countries get richer, we get richer. Their economies develop and then they consume more high value stuff - which they may or may not move to making themselves. They stop being banana republics.

I don't care if their governments want to protect their industries... it would be better if they didn't, but that is not my concern.

Plus, of course, the side effects.....

Generally you don't want to go to war with your customers, so trade enhances peace. Plus people can stay in their home country and make a better life for themselves and their family without schlepping half way around the world to clean toilets in Reading services.

Shiney said...


Oh and re banana republics - we can't buy bananas from said countries without tariffs anyhow, because of the EU.... another reason to leave!

Mark Wadsworth said...

Sh, G, we all know that trade benefits developing countries as well, but PC is in some sort of semi-denial about this.

To sum up what PC has said so far
- we shouldn't buy bananas from them,

- "countries which want to develop should be allowed and encouraged (lend for the purpose) to import new technologies necessary to advance their industrial and commercial base"

Lending money to developing countries is always a terrible idea because kleptocrat dictators will steal it. But PC accepts it is OK for western countries to sell them advanced technology.

- "we should allow them the opportunity to adopt the same protectionist policies that served the 'now' advanced economies so well in former years."

I'm not stopping them. This is traditional PC tactic, criticising people for things they never said. The Homeys do this as well.

DBC Reed said...

Funny how Germany can make a success of existing EU free trade zone but the Conservative Party has screwed it up for us and is advising jumping off a cliff.

paulc156 said...

MW. Stop telegraphing. Your last two paragraphs including my quote state that I criticised you for opposing 'protectionist' policies for developing countries. I certainly did not. What is your issue? Sometimes it seems you are hell bent on personalising every discussion.
As for your opening summation on bananas...the operative phrase I used was;"but if all we buy bananas". That's REALLY 'criticising people for things they never said Mark. ie. telegraphing.

As for deriding the notion that the advanced economies might facilitate technological transfers to developing countries because kleptocrats might cream off some goodies. This is sanctimony on steroids. The choice is sell them fish or show them how to fish. Kleptocracy went hand in hand with first world development but god forbid someone somewhere in a second world country might gain illicit riches along the way to 'their' development. It's really making them take the longest hardest route to development so we can't get ripped off. Bad samaritans!

Mark Wadsworth said...

PC, nonsense.

All I ever do is say what the UK should or shouldn't do. It's entirely up to other countries to set their own economic policies. I challenge you to find an example of me saying otherwise.

I refer you also to Graemey's comment on how the EU keeps poor countries poor.

paulc156 said...

MW...completely ignores first half of my post. You know, the bit about 'me' 'apparently' criticising you for something you 'never' said.

When I stated this earlier, that you quoted back at me in your post: "-we should allow them the opportunity to adopt the same protectionist policies that served the 'now' advanced economies so well in former years." It was in response to another poster.
So why the usual rude retort from you: "I'm not stopping them. This is traditional PC tactic, criticising people for things they never said."
It was in response to Shiney NOT YOU, and an opinion, nothing more, not an accusation. if you could be bothered to look at the 'Sh' in the top left hand know at the beginning of the post you would have understood that?

...and this from you: "To sum up what PC has said so far
- we shouldn't buy bananas from them,".

When what I actually wrote is "but IF ALL WE BUY from African banana republic is erm, bananas, bananas is all they're likely to produce"...not that we shouldn't buy them! jeezus wept

Mark Wadsworth said...

PC, I have re-read shiney's three comments. He does not say anything of what you are accusing him of. As it happens, I wholly agree with him.

Shiney said...


Who cares who said what.... if we in the UK just do unilateral free trade post Brexit we'll ALL be richer irrespective of what anybody else does. Its the only rational thing to do.

Of course the pols (from the right AND the left) the EU and the vested interests of big business/big unions don't want proper free trade and will just f**k it up for the rest of us.

Physiocrat said...

Protection and tariffs have the same effect as sanctions. The difference is that they are voluntary instead of inflicted by others as a punishment.

If protection is a good thing then North Korea should be one of the most prosperous countries in the world, together with Tristan da Cunha.

We could take protection further. Why not have tariff barriers around every town in the country, to restrict trading between, for example, Reading, Oxford, Newbury, Swindon and Bristol? People could be stopped for customs checks at railway stations and along the M4, M40, etc, at Cowley, Caversham, and other places along the routes, with duty being charged at each point.

It ought to cause an increase in general prosperity all round.

paulc156 said...

Oh boy now I've accused Shiney of something but who knows what? MW channels Kafka.
Sh. I won't pretend to know whether the theory of unilateral free trade will be a boon or a bust for the UK economy but when we import 40% of our food (on which WTO rules are rather unfavourable) and considering economics has few provable rules but double the distance and halve the trade is a pretty good candidate for one you'd need some of what MW is smoking to stake a political career on it. :-)

Mark Wadsworth said...

Sh, P, thanks for patiently explaining it again.

No doubt PC will deliberately misunderstand and throw some more nonsense into the mix just to annoy us... ah, here we go...

PC "when we import 40% of our food (on which WTO rules are rather unfavourable..."

What is PC talking about? Does he not realise that WTO recommend zero tariffs on everything, no quotas etc including food? There is not the slightest obligation on the UK ex-EU to impose tariffs on imported food. It is the EU which imposes relatively high tariffs on food.

paulc156 said...

Martin Wolf on unilateral free trade post brexit:
"in the modern world, “unilateral free trade” is a complex notion. The UK might, for example, abolish all tariffs. But would it “bind” those tariffs at zero, losing its future freedom? Within the WTO, this makes a huge difference. Again, the meaning of “unilateral free trade” for the regulatory barriers on which trade negotiations now focus is obscure. Free trade in services might, for example, include movement of workers needed to provide them. How would that go down in a post-Brexit UK?

This leads to perhaps the biggest point. The idea that the UK is going to reject EU membership only to eliminate all its bargaining chips unilaterally is surely a fantasy." That's the fantasy MW is peddling.

Mark Wadsworth said...

PC, as a member-state of the EU, the UK has zero "bargaining chips". What's your point?

The point which most sensible people make is that tariffs are bad. The UK can't influence the level of tariffs which other countries or trading blocs impose, that's their decision. But we can reduce our own. That helps our consumers and third world farmers - win win.

And goods, services and immigration are three separate topics. There's no need for you to try and jumble them.

Shiney said...


Ummmm.... why do we need 'bargaining chips'? If we are doing stuff unilaterally because its good for us we aren't bargaining, surely.

I'm confused.

paulc156 said...

Martin Wolf made the point. Were the UK to exit with no deal and go for unilateral tariff free trade it has nothing with which to bargain with in negotiating 'free trade' agreements outside of the EU. When you talk about 'jumbling HP's different issues you are simplifying to absurdity. All manner of other things such as health and safety standards for example will factor into any agreements the UK may want and whilst we can claim that we won't compromise on these that in effect would simply mean we won't get the great deals outside of the EU which all and sundry have been promising us these last 6 months. If we simply gave up any tariffs we have nothing left to bargain with. India say could simply say thanks very much for scrapping all your tariffs now we can sign a proper free trade deal so long as you grant full migration rights to all our software engineers. You played your cards when you gave up the tariffs!? Ergo no government would do it without being a preeminent economic superpower, not even this dumbarse lot.

So we either grant zero tariffs for one and all without any substantial agreements to follow and consumers get a windfall whilst agriculture and manufacturing wither on the vine as Patrick Minford forecasts, probably to be replaced by more financial services centred around London or get so called free trade deals with the US,India,Oz etc along with a whole load of other garbage that few want. Your Shangri la win win zero tariff shtick is about as plausible as flying a kite on the moon.