The Free Trade Hypocrisy

By Geepu Nah Tiepoh

The Perspective
Atlanta, Georgia

May 14, 2002

In pursuance of global economic liberalization governments of the developed capitalist countries and the major international economic institutions, such as the World Bank, the International Monetary Fund (IMF) and the World Trade Organization (WTO), have been pressuring developing countries to desist from economic intervention and allow global markets to determine their national policies. International trade is one main policy area in which this pressure for liberalization has been persistent. Governments of the developed countries and the dominant economic institutions, in the spirit of neoclassical trade theories, have been demanding African and other developing nations to liberalize or open their domestic markets to the products of the former. Since the 1980s, such demands have become institutionalized in the form of IMF/World Bank stabilisation and adjustment lending programs linked to trade liberalization policy conditionalities. Even the new and stylized demand for “good governance” being made of the less developed countries is now broadly interpreted as including market liberalization.

It is hypocritical on the part of the world’s economic powers to try to impose on the weak countries a free trade doctrine that they themselves cannot practice. The fine predictions of the neoclassical comparative advantage and free trade theories have never been achieved in real life, because governments of nation-states have always had important internal economic and political reasons for not playing by the neoclassical assumptions. Just as the British, on the way to establishing their industrial predominance in the nineteenth century, not only protected their own industries from foreign competition but also destroyed those of other countries, most of today’s advanced capitalist economies benefited from protectionist polices. Even, as we write, there are serious trade battles brewing between the United States and its European, North American and other major trading partners, over US imposition of import duties on steel and lumber and President Bush’s plan to sign a new farm legislation that gives US$51.7 billion in subsidies to American farmers. The European Union, Japan, Australia and other countries have filed formal complaints to the WTO against the US for imposing tariffs of 8-30% on steel imported from these countries. Canada is also contesting the US’ decision to slap a duty of up to 35% on its softwood lumber exports to that country.

The above point underlines the difficulty, futility and hypocrisy of enforcing an ideal-typical global free trade system. Every nation-state has its own domestic economic and political priorities that will always weigh heavily in its public policy decisions. More than 30 US steel firms have gone bankrupt in the past four years, and the Bush Administration has blamed this on competition from foreign steelmakers which, it claims, have long been supported by government subsidies. And with the US Democratic-controlled senate approving the new farm bill, which gives billions of dollars in subsidies to its constituents, Bush must sign this bill if he wants to unseat some Senate Democrats and protect his GOP incumbents. Agriculture has been one of the most heavily protected sectors in international trade. Almost no developed country would have a sustainable agriculture without government subsidies. The US heavily subsidizes its agriculture, but because it is also a large producer and exporter of grains, it has an interest in lowering other countries’ tariff barriers against agricultural products.

Given the impossibility of achieving an ideal-typical global free trade order, it is an ultimate hypocrisy for the world’s economic powers to seek to impose such an ideal system on the less developed economies, when they - the advanced countries - are not able to practice it among themselves. Instead of pressuring these countries to adhere to such an unrealistic ideal-typical policy regime, through adjustment lending and other financial aid conditionalities, perhaps it would be better for all trade issues and problems to be negotiated with these countries, without the specter of financing conditionalities hanging over their heads.

© The Perspective
P.O. Box 450493
Atlanta, GA 31145