Free Trade

[imported_T.B]

The RL offseason is taking its toll on my sanity, so I need something alse to debate about.

Now I can't say I know too much about free trade. It seems that the mainstream media protrays it as the way of the future without much justification while those that point out the downsides are often quite emotional, but also without much fact.

So Firstly I'd be happy if someone could enlighten me as to what Free-Trade actually is? What are the drawbacks and what are the benefits?

Now, to jump the gun a little: my perception of free trade is that market forces would dominate the economy, there would be no interventon of national government or discrimination based on means or location of production.

This leads to the crux of the internal debate I've been having- if this is true, then what justification can there be for banning the drug trade or the human trafficking in a free-trade society?

TB

 

[legend]

Very interesting question. My idea of free trade was an econmy where no tariffs or sanctions could be imposed by governments to help some of their own ailing internal industries such as the U.S placing tariffs on Australian lamb exports to help prop up thier own lamb industry who could not compete with a superior product at a much lower rate(i.e our crappy exchange rate). Our governmnent did little to oppose this action from the U.S

 

[Cronulla_Mania]

Oh TB, we have had some ripsnorters of debates on economics in the past. Either way, i share your view that my sanity is taking a battering at the moment so i'll take a shot at this thread.....

But first off, based on previous experience, i better put my flame suit on

Basically, free trade is a system where by goods are exchanged between countries without any additional taxes or other barriers being applied. There are many barriers that countries have historically put in place in order to prevent the system of free trade occuring (eg:Tariffs,Subsidies, Quotas). The idea of free trade was actually agreed to by APEC a few years back. From memory, countries such as Australia, US and Japan agreed to establish free trade by 2010. The asian crisis occured after this agreement was signed, which has put a particularly dark cloud over the ability of Japan to achieve this...

The main benefit of free trade is that it allows businesses to export goods at a lower price. Theoretically, this makes their goods more competitive in overseas markets, particularly when they are in competition against the domestic products from that country. Australia have for a long time tried to achieve this in the primary industries, where they have major advantages over other countries. The lamb case in America recently was a typical situation where other countries tried to block this progression. Simply, the Americans knew that the Australians had a much better quality of lamb at a lower price and consequently, they pleaded to the US gov't for quotas to be put in place so that they could in effect eliminate the threat of Australian producers.

This is where the main drawback of free trade lies. Those who can produce at the cheapest prices will be the winners. This may sound good in theory, but it also encourages things such as slave labour, which is common place throughout much of Asia. Slave labour and other shady practices should not be encouraged, and free trade would just be encouraging this.

To answer the next section, discrimination would definitely still occur. Demand would be directed at the cheapest products (assuming similar quality). As i said before, this would give countries such as Indonesia a distinct advantage, as they use slave labour. Even ina free trade situation, government intervention would still need to occur in order to ensure the stability of the economy. A severely warped situation could occur in some countries if 99% of their export income comes from, say, tyre production. All countries need a variety of industries operating in order to ensure stability, and in a free trade situation, there would be a real attraction for ALL producers to shift to an industry where they can make mega profits.

The drugand human trafficking industries are clearly profitable ones. I dont think this is debateable. It comes back to ethical issues. Both industries would be considered highly unethical by most, in any sort of situation. The only real justification would come from ethical arguments. Undoubtedly, in a free trade situation, countries that produce mega amounts of drugs would shoot straight up the list in terms of GDP. But one thing stops this, the fact that there are laws in place that make the practice illegal. The legislation is related to ethical and moral beliefs, which thankfully, most people in most countries still believe in.If drugs ever become widely accepted within the global economy, i think we would see a huge shift in the countries that wield power in the global economy.

Moff.

 

[imported_Roopy4246]

The opposite to free trade is protectionism.
Protectionism nearly destroyed the Australian manufacturing industry during the sixties and seventies.
Basically, if an industry is protected, say the clothing industry for instance, that means all Australians pay more for clothing than they otherwise would. This means that a worker in an industry that is competitive, such as mining, needs higher wages to pay for clothing, thereby keeping workers employed in the clothing industry. The end result is that competitive industries subsidize uncompetitive ones, but that slowly drags the competitive ones down till they are no longer competitive, and then they need to be protected.
This vicious cycle dragged industry after industry to the wall in the sixties and seventies to the point where manufacturing in Australia nearly ceased. Even car manufacturing nearly died. Since the late seventies successive governments have cut tariffs regularly and Australia can now compete with most developed countries.
Free trade would especially benefit the poorer countries in the world, as they would be able to sell their goods, produced by cheap labour, into the richer countries. The end result of this would be to improve the standard of living in those countries.

 

[ozbash]

well, you lot have nothing to worry about, mike moore is the boss of the world trade organisation and he,s a kiwi !

we are safe.

apparently there is a stink on at the moment with the wto and the canadians subsidising their farming industry.the yanks got put in their collective places,, will the same happen to canada ?
steve ??

 

[CanadianSteve]

Ozbash: Free trade with the US has been a big topic in Canada since we signed an agreement with them in the late 80s, and added Mexico to agreement in the 90s. I wasn't following the WTO farm dispute, but I found the following article in the Toronto Star. Looks like we won:
"Canada wins appeal over dairy subsidies -
World Trade Organization overturns ruling
OTTAWA (CP) — Bessie, Elsie and the
other bovines can relax and get back to
business now that Canada has won a
long-running dispute over dairy subsidies at
the World Trade Organization.
"For Canadian producers and exporters, it's
business as usual," said a senior
government official as Ottawa relished a
rare agricultural sector win before the
trade tribunal.
A WTO appeal body in Geneva overturned
a ruling last July which had concluded
Canadian exporters unfairly benefit from
aid to the country's dairy producers.
If the original ruling had been upheld, the
United States and New Zealand would
have been allowed to levy more than $1 billion (U.S.) in trade sanctions against
Canada.
"It's very good news," Trade Minister Pierre Pettigrew said yesterday in
Montreal.
"We can continue our dairy exports."
At stake was about 10 per cent of annual dairy production — chiefly exports of
butter, cheese, skim-milk powder and other products valued at almost $400
million (Canadian).
Beyond that lurked a wider dispute over the supply management system, in
which provincial marketing boards set farm production quotas that help
determine domestic prices for milk.
Export prices, by contrast, are set privately in contracts between farmers and
food processors.
Dairy producers are relieved to be rid of the uncertainty that had surrounded
the WTO case, said Rick Phillips, director of policy for the Dairy Producers of
Canada.
Individual producers may now consider expanding their exports, he added.
"I think producers wanted to be able to have a choice of participating in export
markets and I think this decision will allow to them to do so."
The case called into question whether any government can maintain a
regulated domestic market for agricultural products without violating
international trade rules.
The key issue focused on whether domestic marketing boards, by their very
existence, constitute an export subsidy.
Yesterday's decision appears to give Canada legal grounds to fight future
challenges to its supply management system, said a senior government official
who spoke on condition of anonymity.
The ruling suggests, for example, that there must be a direct link between the
government financing program and the product being exported. "

 

[imported_T.B]

Hmm, very complicated.

I'm going to do a little more research over the next few days. Can anyone reccomend some websites with articles and cases that are pro-free trade. I have just found a couple against it for my research but want to try and be balanced.

Just a few points though:

Can ethics be singled out as the reason for a ban on Drugs and human cargo in a free trade situation? I don't think so as the trade in weapons (and alcohol and tobacco) would continue. However this argument could be applied to todays (quasi-free-trade?)situation.

Does the presence of internal laws override the international free trade agreement? I thought the whole point was that they do not - ie we cannot pass a law placing tarrifs on imports from other countries.ie into the drug trade - if a country (say Australia) decided it wanted to start selling opium to the consumers in America, would they have a free-trade case against America's laws.

Is the ban on drugs just a form of 'protectionism' - ie the American - Se Asia -Britain opium trade/ban. The hemp / American cotton bans. How would this apply to synthetic drugs? Don't think the people smuggling case would fit into this category.

Not sure I understand the Canadian case, but what about government sponsored industry? - ie American defence industry - how do these stand in relation to free trade.

Does the system really result in better standard of living for the poorer countries in the long term, or would continual shifting of manufacturing to even poorer countries be the result? Would a poor-fragile economy be able to cope with the withdrawal of a multinational in this way?

At the end of the day, would free-trade be on the agenda if it was to the relative detriment of the worlds superpowers?

And how can the rest of the world force superpowers to comply?

I admit I'm a bit negative on the issue both from a general cynical mistrust of those with 'absolute power' and from not undestanding how it all works in relation to the above.

TB
sorry about spelling - in a bit of a rush

 

[imported_Johnny Rico]

it not complicated mr T.B.
free trade works like this -
lets say we have 2 bugs.your bug is bigger thanmine buti want to make a even swap.you say "no way, mr rico - thats no fair. I want you to give me something more for my nice big bug"
i say "ok" and i pull out my xp750 sonic blaster and use it to evaporate you head. with you out ofda way, i take your bug and invite my friends over to laugh with me as we bbq your juicy bug.
thats what i call free trade.

 

[ozbash]

mr rico.
in new zealand they call that agravated robbery and will throw you in jail.
dont they teach you diplomacy in boot camp ?

 

[ozbash]

steve, nz had the same system for years. the principle of isolated producers exporting directly results in a govt eventually propping up the industry,(subsidising) because of the producers inefficiencies.
single desk marketing allows a group of producers to sell their product for the best possible price. the nz dairy board (now known as Fonterra) gaurentees farmers a return on their investment through healthy tradeing,not from a govt who hands out the shortfall.
it has to be fair worldwide.
why should a kiwi producer have to compete against his american counterpart,AND, the americans govt ??

 

[Cronulla_Mania]

Its very interesting Ozbash and Steve,

The farming industry is only one example. The orange juice industry and the apple growing industry are also very interesting examples of what has been happening in global trade recently. The ability of Brazil to produce at such low costs has virtually blown competitors from other countries out of the market. that is the negative side of free trade, only the strongest survive. It induces global monopolies, especially in areas where one country can produce at a prohibitively lower price than anyone else.

The merits of globalisation are still very debateable. Im not sure where you are heading with the whole 'trade in people and drugs thing' TB, but it would sure make for an interesting argument sometime down the track. I do think it is clearly a moral issue, because if morals wern't involved, then im sure it would become widely accepted activity, as it clearly profitable (sadly)

Moff.

 

[imported_T.B]

MFC,

I don't think I know if I am heading anywhere - just for the record I'm not pro-drugs or people smuggling.

These questions just popped into my head.

What is bugging me is that they seem a contradiction to the push of free-trade

Which means:
1) There is scope for them to be legitimate under free-trade, or (more likely)
2) I just don't get the free trade concept (even after the fine tutelage of Johnny Rico)

The arguments of ethics/morals do not sit-well with me unless all ethically debatable practices/trade was suspended ie weapons - cloning - pornography - tobacco - alcohol

And in the case of free-trade being anti-protectionist; from my understanding of the history of drug prohibition it was started as a protectionist strategy. The propaganda that surrounded the decisions at the time has evolved into the current dogma of why drugs are bad.

In the case of people smuggling -Is it possible that current laws ARE in contradiciton with free trade? ie governments select who can bring people to, and who can come into their country on the basis of who they are and where they come from - ie against the standard of non-discriminaory free-trade?

Just some food for thought,

TB

 

[legend]

I think Johnny Rico's explanation is by far the best we have seen to date. Very simple.

"Would you like to know more?"

 

[Cronulla_Mania]

Fair enough T.B., i do agree, the world is already full of hypocrisy. It is ridiculous to think that most drugs are illegal, whereas another substance that directly (or indirectly) probably kills as much people - alcohol, is legal. You have no argument with me there....
"The propaganda that surrounded the decisions at the time has evolved into the current dogma of why drugs are bad."
Quite true. You could even take that argument outside of drugs, the world has been so heavily influenced by propaganda in the past that has just turned out to be crap. Although on the drugs point, i think a lot of research has pointed to drugs being bad. The toll that drugs take on a lot of people mentally is enough reason for them to remain banned. Perhaps the line in the sand has been drawn at the wrong place though, as there are several 'soft drugs' that a lot of doctors have come out and said can be good for one.....
Its a tricky question, one that cannot be easily answered...
Moff.

 

[imported_Johnny Rico]

mr Ozbash., - i thought I wuz being diplomatick. if I waz not diplomutic, i would have fired first and asked the question later. i cun't be anymore fair than that.
thankyou me legend, i have a feeling you would do well in my century.

 

[imported_Lord Ted]

I admit to some ignorance about the topic.
It seems to me that the debate about free trade is red herring to horseshit.
I mean how can trade possibly be free when the exchange rates are so easily manipulated.A simple capitalistic exercise imposed by the International Monetary Fund.Exit free trade.
So all talk about free trade is psuedo-intellectual economic claptrap perpetrated by wankers who are not wage dependent and don't give a f**k about people.

 

[Cronulla_Mania]

Ted, its free in that there are NO additional barriers put in place to give producers in a country a particular advantage. Exchange rates are a separate issue mate....The trade is free RELATIVE to times when tariffs,subsidies,quotas and other methods put huge amounts of influence on HOW trade occured.
Also, i dont understand how you can say
" I admit to some ignorance about the topic."
and then go on to say in the same post.....
"So all talk about free trade is psuedo-intellectual economic claptrap perpetrated by wankers who are not wage dependent and don't give a f**k about people."
Interesting.
Moff.

 

[imported_Roopy4246]

Most of the trade barriers in the western world are maintained as a form of social enginerring (spell). A good example are the farm subsidies in europe and USA. Those countries can't compete with Australia or third world countries when producing primary produce because of the cost of land and labour, but millions of people live on the land in those countries, and the disruption to their societies would be horrendous if subsidies were to be dropped. The end result - thousands of peasents in the third world live in poverty to pay for French farmers to produce wine that tastes like vinegar that no one will ever drink.
Free trade must happen eventually. Unfortunately the big losers will be the richest and most powerful countries.
I once saw a cartoon on free trade - it showed a couple of huge, fat white men sitting on the shoulders of starving black men. They were drinking wine, smoking cigars and saying 'the third world has to help themselves, they are just not working hard enough.'

 

[Willow]

Free Trade:
I'm not going to go to the trouble of looking into definitions. I'm sure various encyclopaedias can do all that.
Basically, this is the way Iunderstand it:

Freeenterprise is the basis of free trade. Thatis, everyone has the opportunity to provide their goods for all to buy on the free and open market.
The competition this creates leads to producers being forced to provide the best product at the best price... this being the basis of capitalism in its purest form.
The concept of Free Trade suggests that we can utilise this new found freedom internationally without the burden of trade barriers.
In a system of true free trade, there would be no import duties and absoulutely no government subsidies (such as the US farmer subsidies).
The theory is that the consumer ends up being the winner and the poorer countries are able to compete on a level playing field.

Unfortunately, the idea of free trade doesn't take into account various 'human nature' factors which are based on greed.
I'm talking about monopolies, sweetheart deals, corrupt politics, insider trading and the 'profit motive'.... to name but a few.
The corporations and nations which can control this almost always have a military presence to back up their claims. They use this power to enforce their version of 'free trade'. The 'guns at the head' assessment from Johnny Rico is a joke but is actually not too far from the reality.

In short, under the current scheme of things, Free Trade is a dream.