Free Trade, Not the WTO, Will Enrich the Third World

Ilana Mercer, December 7, 2000

As an organ of the United Nations, the WTO should strike terror in the heart of any true freetrader. The organization is the concoction of international statists; a powerful bureaucracy concerned with managing, not freeing,trade; a central planner whose goal it is to harmonize labor, health,and environmental laws throughout the world ~ilana

The WTO protestors in Seattle enact an annual ritual that sees their troops descend on the city to commemorate—and re-enact—the destruction wrought in previous years. Like lower primates, the anti-traders hoot, throw rocks and bottles of gasoline, and generally do a good job of demolishing private property. In one riot, the louts even managed to relieve a police officer of an eye. The vandals who aren’t dragged off invariably beat a retreat, knuckles trailing the pavement and the debate not much more elevated.

The WTO must, of course, be opposed with vigor, but not for the reasons the protesters trot out. As an organ of the United Nations, the WTO should strike terror in the heart of any true freetrader. The organization is the concoction of international statists; a powerful bureaucracy concerned with managing, not freeing,trade; a central planner whose goal it is to harmonize labor, health,and environmental laws throughout the world.

Llewellyn H. Rockwell, President of the Ludwig von Mises Institute, surmises that had the WTO not incorporated the legal mechanisms for regulating the world economy rather than freeing its markets, the Clinton administration would never have supported its creation. Before the charter was ratified, Rockwell predicted that “the WTO would convert peaceful trade into policy imperialism. It would allow economic exchange with some countries under approved conditions, and impose a variety of sanctions on others. The conditions will include all the legislation beloved to the U.S. left-liberals…” In short, a mercantilist takeover that bears little resemblance to free trade.

The prophecy is not far off. WTO-directed practices consist in each country pushing for the next nation to abandon “trade distorting domestic support programs,” while insisting on its right to keep subsidies and tariffs alive in its own. It’s not free trade, but it bears a remarkable—if ironic—resemblance to the protesters’ version of a planned economy. The two solitudes—the WTO suits and the protesting simians—may be ideologically closer than the latter would like!

There are plenty of good reasons to reject the WTO, but those escape our ersatz humanitarians. Instead, the well-fed dilettantes who flock to Seattle target the very processes that sustain life on earth—commerce, and the division of labor that gives rise to voluntary exchange between all people.

No matter how self-sufficient a person strives to become, his particular aptitude coupled with scarcity of time and resources make peaceful exchange with others necessary. The top-notch lawyer maybe perfectly capable of repairing his car; he may, in fact, be better at it than the mechanic. Since his time is scarce, it is more productive for the lawyer to spend it in counsel; it pays him to hire a mechanic. Differences between individuals impel people—rich and poor—to cooperate and trade to mutual advantage.

The notion that this process must stop at the political border is nonsensical. Similar considerations direct nations—developed and undeveloped—to specialize in producing what they are best at and exchanging these products and services for the things they cannot produce or are less efficient at producing. Immutable differences resulting from climate and geography account for why, instead of erecting hothouses and paying exorbitant electricity bills, Norwegians are better off trading with Caribbeans if they want bananas.

In economic parlance, such trade confers an absolute advantage. International trade has the added benefit of allowing nations to  develop economies of scale. As economist Thomas Sowell explains in Basic Economics, some industries require the kind of capital outlay that is uncompetitive and unviable unless produced and marketed in especially large quantities. For small countries that lack a local demand, foreign markets are essential.

Free trade between nations also indirectly promotes peace, since economic interdependence is a powerful deterrent to war. How ironic, then, were the parallels drawn by some commentators between the mission of the WTO protest and the causes peace activists championed in the 1960s. It’s unclear how smashing Starbucks for creating jobs in underdeveloped countries compares, as an act of moral suasion, to picketing Dow Corning for manufacturing napalm. What’s crystal clear is that by protesting free trade, the agitators are opposing both commerce and comity.

Another myth has it that free trade suppresses local wages. Not so. Where inefficient industries are faced with competition—local or foreign—workers will migrate to more efficient industries. Free trade simply forces a more efficient allocation of scarce resources.

Vital to expose are the violation of real rights and freedoms buried in protester cant. To secure votes, government seeks to regulate trade for the benefit of domestic industries and special interests. To avert prosecution under our protectionist laws, a foreign trader must raise his prices. The local consumer is then forced to either patronize more expensive, less competitive local industries or pay the foreign trader’s new price.

Tariffs, quotas, anti-dumping rules or any other trade barrier mean that the consumer is forced to subsidize less efficient local industries, making him the poorer for it. Should hundreds of industries shrink or go under in order to keep politically efficient industries in the lap of luxury? This is not in the interest of the consumer and it violates his freedom of contract and association.

Another arrow in the protesters’ anti-trade quiver is to vilify the likes of Kathy Lee Gifford and Nike for investing in poor countries and creating jobs in places where few likely existed.

Let us deconstruct:

Nike or Starbucks is either offering higher, the same or lower wages than the wages workers were earning before the company’s arrival. A franchise would find it hard to attract workers if it was offering less, or the same as other companies. It must be then that these so-called villains are benefactors who offer the kind of remuneration unavailable prior to their arrival. If forced to pay Third World workers in excess of their productivity, the entrepreneur will go bankrupt, disinvest, and leave the locals to starve.

When Clinton called for sanctions on developing countries that don’t adhere to “labor standards,” he let posturing against corporations and pandering to armchair anarchists take the place of guarding people’s freedom to gain advantage through the use of the only resource they have, their labor.

Economies in which child labor is a sad fact are more appropriately compared to medieval England or Europe. Child labor is not the problem in Chad or Bhutan; poverty is. Child labor is merely a solution to this problem. Had a government in England of the 1500s outlawed child labor, the death of even more children would have ensued. If the protesters have their way, many children will perish. Alas, these realities are not for our street-fighting effete to entertain.

Not one among these environmentalists, union groups,and anarchists spoke for “the poorest of the poor.” While loitering about the streets, our cherubs chomped on their dirt-cheap tofu and Big Mac burgers. The cheap transportation that got them there and the technology that disseminates their sub-intelligent message were once luxuries reserved for few. Thanks to economic freedom and mass production these are now staples for the masses. Our humanitarians suffer no shortages, yet they want to prevent Third World nations from aspiring to the same plenty.

What whooshed past the protesters was not beyond the grasp of Kofi Annan. Writing in The Wall Street Journal, the Secretary General of the UN condemned rich nations for imposing tariffs on goods imported from developing countries, and for using quotas and antidumping penalties to stop poor nations from selling their wares bellow market prices. Even a central planner like Annan understands that protectionist policies are detrimental to the Third World. With some luck Annan may also come to realize that unfettered trade and not the debilitating welfarism of foreign aid is what will inch backward societies forward.

No such an epiphany can be expected from the protesters; they are, after all, paternalistic westerners who need to preserve their Hollywood image of the authentic—if starving—foreigner.

©2000 By Ilana Mercer
Calgary Herald & The Ludwig von Mises Institute
December 7

CATEGORIES: Business, Capitalism, Family, Free Markets, Free Trade, Labor, Regulation, Trade