Acton Institute Powerblog

Samuel Gregg: Trade agreements are not free trade

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Free trade and trade agreements are not the same thing. In fact, they are often times in direct contradiction with each other. Acton Director of Research Samuel Gregg recently wrote an article about this at The Stream. Gregg explains how all trade agreements are ‘managed trade,’ not free trade. He explains how free traders should approach the issue of economic nationalism and the best ways to work toward freer trade. Concerning the issue of trade agreements and managed trade, Gregg says this:

There’s no-one-size-fits-all form of trade agreement. Some are bilateral arrangements between two nations. Others are multilateral and embrace several nations. Within that framework, there are several possible arrangements.

You can have, for instance, single markets like the European Union. These involve the free movement of goods, services, capital and labor between all member-nations of the single market. But barriers are maintained or created against all non-single market members. Another model is a preferential trade area. Participating nations give preferential access to certain products from all the area’s members. Tariffs are reduced, but not completely abolished.

Note, however, that all trade agreements involve two or more governments negotiating how their citizens economically interact with each other. That also means they’re indirectly deciding how the same citizens will economically engage with people from nations who aren’t part of the trade agreement.

Gregg continues to explain his thoughts on how a free trader should approach the ideas of economic nationalism, saying this:

So what should committed free traders do in an age of growing economic nationalism and often justified skepticism about trade agreements? Should they critique trade agreements for adding layers of complication to free exchange and creating new opportunities for cronyism? Or, should they promote those sections of a trade agreement which do liberalize trade, while simultaneously trying to limit its protectionist implications?

The answer, I’d suggest, is “all of the above.”

In the conclusion of Gregg’s article, he explains how why we should put our efforts toward making trade freer, not a utopia of absolute free trade.  He says this:

Expecting governments to agree to “free trade — period” is utopian. For one thing, legitimate issues of citizenship and sovereignty are part of the equation. That’s especially true with regard to the free movement of labor between countries, that is, immigration.

Second, free traders can’t expect governments to immunize themselves from pressures from the societies they govern. Brexit and the rise of Trump and Sanders illustrate what happens when political classes become sealed off from the people they rule. At some point, any people with an ounce of self-respect will revolt. And, at least in America’s case, it has resulted in a return of economic nationalism. Adam Smith himself favored gradually reducing, rather than immediately abolishing, trade barriers because he recognized that transitioning from managed economies towards freer trade could, if mishandled, easily backfire.

You can read Gregg’s full article at The Stream here.

Kyle Hanby

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