controllingtrade

EDITORIAL
No More 'Free Trade' Treaties: It's Time for Genuine Free Trade
By Mises Institute - October 09, 2015

It is erroneous to believe that free traders have been historically in favor of free trade agreements between governments. Paradoxically, the opposite is true. Curiously, many laissez-faire advocates fall into the government-made trap by supporting "free-trade" treaties. However, as Vilfredo Pareto stated in the article "Traités de commerce of the Nouveau Dictionnaire d'Economie Politique" (1901):

If we accept free trade, treatises of commerce have no reason to exist as a goal. There is no need to have them since what they are meant to fix does not exist anymore, each nation letting come and go freely any commodity at its borders. This was the doctrine of J.B. Say and of all the French economic school until Michel Chevalier. It is the exact model Léon Say recently adopted. It was also the doctrine of the English economic school until Cobden. Cobden, by taking the responsibility of the 1860 treaty between France and England, moved closer to the revival of the odious policy of the treaties of reciprocity, and came close to forgetting the doctrine of political economy for which he had been, in the first part of his life, the intransigent advocate.1

In 1859, the French liberal economist Michel Chevalier went to see Richard Cobden to propose a free trade treaty between France and England. For sure, this treaty, enacted in 1860, was a temporary success for free traders. What is less known however, is that at first, Cobden, in accordance with the free trade doctrine, refused to negotiate or sign any “free trade” treaty. His argument was that free trade should be unilateral, that it consists not in treaties but in complete freedom in international trade, regardless of where products come from.

Chevalier eventually succeeded in obtaining Cobden’s support. But Cobden was puzzled by the complete secrecy surrounding the negotiations and, in a letter to Lord Palmerston, he attributed this secrecy to the “lack of courage” of the French government.2 Similarly, today, the lack of transparency concerning free-trade negotiations is problematic and it is often hard to know what the content of a treaty will be.

Today, while some of these treaties are currently being negotiated, there are already examples of similar agreements enforced. One could refer to the General Agreement on Tariffs and Trade (GATT), the General Agreement on Trade in Services (GATS), the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) or more regional agreements like the North American Free Trade Agreement (NAFTA) or the European Economic Area (EEA).

But why would protectionist governments who spend their time hampering markets by giving monopolies and other kinds of privileges at national level, open markets at the international level? The very fact that governments are negotiating in the name of free trade should be suspicious for any libertarian or true advocate of free trade.

Intergovernmental Agreements Enhance Government Power

Murray Rothbard opposed NAFTA and showed that what the Orwellians were calling a “free trade” agreement was in reality a means to cartelize and increase government control over the economy. Several clues lead us to the conclusion that protectionist policies often hide behind free trade agreements, for as Rothbard said, “genuine free trade doesn’t require a treaty.”

The first clue is the intergovernmental and top down approach. Intergovernmentalism is nothing more than a process governments use to mutualize their respective sovereignties in order to complete tasks they are not able to accomplish alone. Nation-states are entities which rarely give up power. When they finalize agreements, it is to strengthen their power, not to weaken it. On the contrary, free trade requires a decline of governments’ regulatory power.

Also, free trade does not require interstate cooperation. On the contrary, free trade can be and has to be done unilaterally. As freedom of speech does not need international cooperation, freedom to trade with foreigners does not need governments and treaties. Similarly, our government should not rob their population with corporatist and protectionist policies just because others do. Anyone who believes in free trade does not fear unilateralism. The simple fact that bureaucrats and politicians do not conceive of the international economy outside of a legal frame settled by intergovernmental agreements is sufficient to show the mistrust they express toward individual freedom. This reinforces the conviction that these agreements are driven by mercantilist preoccupations rather than genuine free trade goals.

Extending Regulatory Control Beyond Your Own Borders

The second clue concerns the intense conflicts between governments on these agreements characterized by a high degree of technicality. History shows that multilateralism leads toward deadlock. The failure of the Doha Round is the cause of the proliferation of bilateral and regional initiatives. The contentious relations between governments come from the will of some states to dictate their norms to other countries’ producers through an international harmonization process. But this is the exact opposite of free trade. As economic theory shows us, exchange and the division of labor is not based on equality and harmonization but rather on differences and inequality. Furthermore, the technicality and secrecy surrounding free-trade agreements favor mercantilism and protectionism to the extent that technical regulations are used to favor producers who are politically well connected.

The Trans Pacific Partnership (TPP) is a good illustration of this balance of power. It was at first an agreement between four countries (Brunei, New-Zealand, Singapore, and Chile.) which tried to resist some neighbors’ commercial influence, especially China. Then the United States came and convinced more countries (Australia, Malaysia, Peru, Vietnam, Canada, Mexico, and Japan) to join the negotiations. Let’s also notice that most of the countries invited are already bound by regional or bilateral agreements with the United States. China remains excluded from the process. This governmental drive toward regulatory hegemony is obviously the complete opposite of free trade. Indeed, free trade supposes letting consumers peacefully choose what products they want to promote rather than determining what is available through bureaucratic coercion.

Consolidation of Monopolies

The third clue concerns the vigor with which governments have tried over several decades to impose at the international level a more constraining legal framework for so-called “intellectual property.” The first initiatives appear in 1883 and 1886 with the Paris Convention for the Protection of Industrial Property and the Bern Convention for the Protection of Literary and Artistic Works. Amended several times during the twentieth century, the initiatives embrace, respectively, 176 and 168 states. These conventions are placed under the auspices of the World Intellectual Property Organization (WIPO), an international bureaucracy which joined the United Nations system in 1974. A turning point came in 1994 with the signature of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) administrated by the World Trade Organization (WTO). It is now incorporated as an essential part of the administration of international commerce and benefits from the WTO’s sanction mechanisms.

In 2012 we endured a fresh attempt by our governments to reduce our freedom to create and share intellectual works with the Anti-Counterfeiting Trade Agreement (ACTA). And, if we look at the negotiations mandates of these trade agreements, we can see they all include a chapter on the reinforcement of “intellectual property” rights. Intellectual property has become a key concept of the international economy. But this must not hide its illegitimacy.

As Vilfredo Pareto remarked, “From the point of view of the protectionist, treaties of commerce are … what is most important for a country’s economic future.” Each time a new “free trade” treaty is enacted, what is seen is the attenuation of tariff barriers, but what is not seen is the sneaky proliferation and harmonization of non-tariff barriers impeding free enterprise and creating monopolies at an international scale at the expense of the consumer. It’s time for genuine free trade.

NOTES:

1The original French version follows:

Si l’on admet le libre-échange, les traités de commerce n’ont aucune raison d’exister comme but. Il n’y en a pas besoin, puisque la matière qu’ils devraient régler n’existe plus, chaque peuple laissant librement, à ses frontières, entrer et sortir toute marchandise. C’est la doctrine de J.B. Say et de toute l’école économique Française jusqu’à Michel Chevalier; c’est celle qu’a reprise récemment M. Léon Say. C’était également la doctrine de l’école économique anglaise jusqu’à Cobden. Cobden, en prenant la responsabilité du traité de 1860 entre la France et l’Angleterre, s’est rapproché de faire revivre la détestable politique des traités de réciprocité et d’oublier les doctrines de l’économie politiques dont il avait été dans la première partie de sa vie le défenseur intransigeant. In Léon Say, ed., “Nouveau Dictionnaire d’économie politique” (Guillaumin: Paris, 1900): 1047.

2Gustave de Molinari, “Michel Chevalier, ‘Sa Vie et Ces Travaux,’” Journal des Economistes 4, no. 25 (1880): 30–39.

This article, by Ferghane Azihari and Louis Rouanet, provided courtesy of The Mises Institute.

Posted in EDITORIAL
  • dave jr

    This and the previous article (prison labor) are but two more good examples of why a lack of separation between Commerce and State, as excluded from the US Constitution, enables government to be used as a tool against the People, the ‘real economy’ instead of for, of and by the People, as sold.
    .
    It is bad enough when competing industry suppliers and customers form trade associations and meet behind closed doors. It gets worse when governments are called on to enforce their agreements through coercion, generally aimed at the larger market and economies.
    .
    Why the secrecy within the trade organizations? Is it is because they promote collusion leading to oligopolies and eventually monopolies? Perhaps free market players could sort them out and expose any unsavory practices. Not so when protected by layers of law and regulations which have little to do with protecting ‘free trade’. More so, governance often uses the false excuse of protecting consumers when in reality it corrals the consumers.
    .
    The Founding Fathers knew of the dangers and warned of entangling alliances. They knew treaties in commerce will lead to no good. Yet they left out this vital restriction on their newly formed government and is contributing to the downfall of the beloved Republic. World governance through trade organization and central banking is well underway.
    .
    Let the commercial and industrial monoliths stand on their own merit if they can. Let government protect life, liberty and property where it will. Recognize conflicts of interest and call them out when seen. Thanks DB for the efforts.

  • RED

    Excellent and timely Editorial

  • Just one example: Under EU trademark and copyright laws I cannot import any trademarked or copyrighted product from outside of the EU and sell it freely in the EU without the authorisation of the trademark or copyright holder in the EU. If I purchase a Rolex in Hong-Kong and sell it in the EU I am committing an act of trademark infringement the equivalent of selling fake branded goods. Trademark holders use government customs agencies to confiscate and impound goods they indicate as being ‘illegal imports’.

    Goods purchased within the EU trade zones are considered to have the rights to the trademark allowed implicit in the ownership of the goods, that is the trademark owners accept that a Rolex purchased in the EU must allow its owner the right to sell the watch under its brand-mark and with the logo and such intrinsic to the item.

    Should I imported a new Mercedes, for example, and removed all the manufacturers logos, all indications the car was a MB, did not advertise it in any way inferring it was a MB, I would still be infringing the manufacturer’s copyright because the car looked like a MB just the same as if I replicated the vehicle in my own factory.

    There have been test cases taken out challenging the original judgement on which the understanding on this laws implementation was formed, known as the ‘silhouette judgement’ a case involving re-imported German sunglasses. The No1 UK supermarket Tesco’s was found to be importing Levi jeans directly from Mexico and started to challenge the injunction served on them from Levi but backed down in the face of the fact they they realised would not win the case.

    Little is known or understood of this law in the EU markets and by the wider public, (and goods do continue, even so, to be imported in small ways independently, under the radar), but as soon as any company makes a serious commercial challenge to the monopoly of the trademark or copyright holder’s EU business and pricing policy a writ soon follows. I know, I have been there!

  • Bill Ross

    Oxford dictionary, freedom:

    noun 1. the power or right to act, speak, or think as one wants without hindrance or restraint

    the only “problem” is those who want to rent you YOUR peaceful freedoms.

  • 2prickit

    “Since I entered politics, I have chiefly had men’s views confided to me privately. Some of the biggest men in the U.S., in the field of commerce and manufacturing, are afraid of somebody, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it.”­­ __ Woodrow Wilson. In The New Freedom (1913):

    • dave jr

      I am familiar with that quote and always took the conspiratorial view of it. What if that ‘power’ that the biggest men in commerce were so afraid of was competition in a free market? What would happen to them if they spoke above their breath in condemnation of it? Hmmm.

      • Bill Ross

        lone deranged gunpersons, hit men for those who “follow the money” flows to and attacks on civilized and civilization spews from?

        just a wild conspiratorial guess:)

        • dave jr

          Guess I’m not following? Spews from a tiny minority criminal element always and everywhere prescient of their own deeds (the conspiracy), on which I won’t abandon the watch. I was referring to a wider prevalence more generally accepted by the populace, unwittingly.

      • 2prickit

        He said, “afraid of somebody;” and, “are afraid of something.” The statement then leads from the singular to the plural: typical political double speak postulating infinities and abstract phantoms. However, I maintain he was fearful or warned against any more direct finger pointing. I reference to the research of Eustace Mullins the phantom is none other than the subscriber s to the Bank of England and more specially the Rothschild-Five Arrows family, along with their agents,– those that created and now maintain the Federal Reserve System.

        • dave jr

          Yep, that is my understanding as interpreted by myself and others. Yet I feel as though I just had an epiphany. So shoot it down. I welcome it, though it will require real ammunition. I too am looking for suitable ammunition. Till then, read it again. I find it fascinating.

          • 2prickit

            The fellow who brought so much reading to me, an exchange for assisting the old timer, wears his epiphanies as slogans, each sewn onto ball caps; one of many, “Smile, the Government Will Take That Too!” I’m not suggestion that you, too, do so, because it is chilling, witnessing, when with him in public, that so many are ashamed to admit it—take it as a personal insult—cause they voted for it and receive their pittance from it.

    • They cannot all know my wife – can they?

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