In economics, there are very few concepts with such a great ideological load as the term "free trade". If you advocate free trade today, then you will most likely be called an apologist for plutocrats, financiers and corporate vermin. If you support open economic borders, you will be labeled as naive, or worse, a puppet of the Chinese Communist Party who cares little about human rights and the fate of ordinary domestic workers.
As in any caricature, there is a grain of truth in this attitude of opposition to foreign trade. The increase in foreign trade in the last few decades has indeed contributed to the growth of inequality and the weakening of the middle class in the US and other developed countries. Free trade has come into disrepute because proponents of globalization have ignored its negative aspects and acted as if nothing could be done about it. This gap has been exploited by demagogues (like Donald Trump) who have used the trade narrative to demonize racial and ethnic minorities, as well as immigrants and economic competitors.
Antipathy towards foreign trade is not limited to far-right populists. You can also find radical leftists, climate activists, food safety activists, human rights activists, labor unions, consumer advocates and anti-corporate groups there. US President Joe Biden has also noticeably distanced himself from free trade. His administration's priority is not hyper-globalization, but creating a safe, green, fair, and sustainable American economy. All progressives seem to believe that free trade is an obstacle to social justice, however we understand it.
But it wasn't always like that. Free trade was one of the key ideas of the political reformers of the 19th century, who saw it as an auxiliary tool for victory against despotism, for ending wars and reducing terrifying wealth inequality. In his book "Pax Economica: Leftist Visions of a Free Trade World", historian Mark-William Palin of the University of Exeter reminds us that the economic cosmopolitanism of the time included progressive ideas such as the fight against militarism, slavery and imperialism.
It was not only political liberals who supported free trade. At the end of the 19th century, American populists actively opposed the gold standard and import tariffs, which they believed benefited only big business and harmed ordinary people. They advocated a fairer progressive income tax. And at the beginning of the 20th century, many socialists believed that free trade, based on supranational regulations, was the antidote to militarism, monopolies, and economic inequality.
Such contradictory positions, it seems, should lead to a dead end. Does foreign trade contribute to peace, freedom and economic prosperity or does it promote conflict, repression and inequality? This is actually more of an apparent than a real enigma - both outcomes (and any outcome in between) depend on who foreign trade makes stronger.
The liberals and reformers of the 19th century advocated free trade because, in their view, protectionism served the interests of retrograde forces, especially the landed aristocracy, business monopolists, and supporters of war. They believed that economic nationalism went hand in hand with imperialism and aggression. Palin cites a 1919 article by economist Joseph Schumpeter that described imperialism as "a monopolistic symptom of atavistic militarism and protectionism—a disease that can only be cured by the power of democratic free trade."
This concept influenced the international trade system created after World War II. The American architects of the International Trade Organization (ITO) followed in the footsteps of Cordell Hull, Secretary of State in the administration of President Franklin D. Roosevelt. They believed that through free trade they would help establish peace in the world. Hull was an economic cosmopolitan and follower of Richard Cobden, a radical free trade advocate of the 19th century. The post-war order, unlike previous regimes, was supposed to become a system of global rules that would put an end to bilateralism and imperial privileges. Although the US Congress refused to ratify the ITO charter, some of its key principles, including multilateralism and non-discriminatory practices, were retained in the General Agreement on Tariffs and Trade (GATT), which preceded the founding of the World Trade Organization.
However, foreign trade can just as easily be turned into a tool for authoritarian and militaristic goals. The most striking example of this is the so-called period of Antebellum America, when free trade helped strengthen slavery. When drafting the US Constitution in 1787, southern slave owners made sure that its text prohibited taxing exports. They were aware that free trade would ensure that plantation agriculture would remain profitable and that the slave system on which it was based would be protected. When the North defeated the South in the Civil War, slavery was abolished and free trade policies were replaced by protectionism, which better suited the business interests of the North.
A similar situation was with the British imperialists. After the repeal of the Corn Laws in 1846, the British government declaratively turned its back on protectionism and began to push Europe towards free trade agreements. However, in Africa, the Middle East and Asia, free trade was imposed across the board whenever the British encountered weak rulers in countries that had valuable raw materials and attractive markets.
In the mid-19th century, the British fought the infamous Opium Wars to force the Chinese authorities to open their markets to British and other Western goods (chief among them opium). As a result, Western countries were able to buy Chinese tea, silk and porcelain without depleting their gold reserves. Opium was grown in India, where the British monopoly (detailed in Amitav Ghosh's new book Smoke and Ashes) forced farmers to work in appalling conditions, with long-term negative consequences. Free trade served repression and war, and vice versa.
The multilateral free trade regime, introduced after World War II under the patronage of the US, fared much better. Under GATT, wars were replaced by trade diplomacy, and many non-Western countries, including Japan, South Korea, Taiwan, and especially China, were able to rapidly strengthen their economies thanks to access to global markets.
By the 1990s, however, this trade regime had become a victim of its own success. Large corporations and multinational companies, empowered by the expansion of the global economy, increasingly managed trade negotiations. The environment, public health, human rights, economic security, justice within the country - all of that has gone into the background. International trade again began to deviate from Cobden and Hall's original concept, becoming a source of international discord rather than harmony.
The lesson of history is - in order to make foreign trade a positive force, we must democratize it. This is the only way to ensure that it will serve the common good and not narrow interests. This is an important lesson to bear in mind as we re-engineer the global trade regime in the coming years.
The author is a professor of international political economy at Harvard University; is the president of the International Economic Association
Copyright: Project Syndicate, 2024. (translation: NR)
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