Acton Commentary

Trade Protests -- What Are the Real Reasons?


Woeful ignorance of the basic economic principles of free trade is preventing many American citizens from being able to assess the advantages of the very system that has made them prosperous. At the same time, political pundits are using this lack of knowledge to increase their power as the primary conduit of popular economic opinion making.

The United States is the largest free trade area in the world. As traders interact, they become mutually dependent on each other for goods and livelihood; because of that trust develops, services are provided, and prosperity results. The principle involved here is comparative efficiency. For instance, a skilled shoemaker who can produce shoes cost-efficiently, is better off making shoes full-time, and, with the proceeds from his labor, to buy his food from an efficient, full-time farmer. The same concept applies to international trade. Because of lower labor costs in less developed countries, many household and clothing items come to the United States from these foreign markets at very favorable prices. U.S. workers, in turn, produce the items at which they are more efficient and trade these items with foreign countries, causing interdependency, prosperity ,and a better standard of living for the trading nations. Traders who are mutually interdependent are much less likely to go to war with each other, as they would risk losing the supply of items they do not produce internally.

President Bush, in his May speech before the Council of the Americas , stated well the moral argument for free trade. “Open trade is not just an economic opportunity; it is a moral imperative. Trade creates jobs for the unemployed. When we negotiate for open markets, we are providing new hope for the world's poor. And when we promote open trade, we are promoting political freedom. Societies that open to commerce across their borders will open to democracy within their borders, not always immediately, and not always smoothly, but in good time.”

Today, however, this mutually beneficial system of free trade is being protested by the disruptive tactics of anarchists who have no constructive, workable alternatives. Also, militant socialists and communists are still pursuing their agendas even though socialism has proven to be unworkable. By choosing to ignore the benefits of free trade in maximizing the standard of living for participating nations, they are is stifling intelligent debate at such forums as the recent World Trade Organization meeting in Genoa, Italy.

In addition to these foreign adversaries of free trade, more important adversaries - in term of numbers - are domestic special interest groups such as labor unions and environmental advocacy groups. These groups are myopic - unconcerned or unaware of the unintended consequences of their demands. They perceive that they personally stand to gain by interrupting or preventing free trade. Union workers and, more importantly, their leadership, who are subsidized, in effect, by protective tariffs, gain temporary advantages. Unfortunately, tariffs lull protected workers, who are relatively inefficient, into a false sense of security and also remove the necessity for them to become competitive. Finally, when tariffs are removed, workers experience a more painful transition than would have happened gradually without tariffs.

Regarding the environmental issue, environmental advocates want rules attached to free trade that would specify environmental safeguards or actions to bring the traders up to the standards the environmentalists desire. The principle at work in this matter is a simple one - local people should set local environmental priorities, with “control” of these matters in local hands.

A recent example of the violation of this principle of local control has occurred in the Klamath Basin controversy . In this case, preservation of suckerfish has been given priority over that of the farmers' livelihood. Years ago, the farmers were guaranteed by contracts with the government access to water from the lake. In this recent debacle, the preservation of the suckerfish warranted breaking these water contracts that are central to the livelihood of the local farms. The Klamath Basin controversy is a sad and unfortunate misunderstanding of man's central and specific role in serving as the steward of the earth's resources.

The advantages of free trade are well established, and it should be obvious that a rising tide raises all ships. The protests against the World Trade Organization at the summit meetings are a clear reflection of the special interests that have an agenda that is not designed to benefit the bulk of the population. It is important to point out that the special interests that protest against the World Trade Organization are pursuing an agenda harmful to the very people they purport to protect. The solutions offered by WTO protesters would cripple free trade, which is the vehicle for raising the standard of living and diminishing the very effects protesters claim they are seeking to alleviate. As a result, it seems fair to say WTO protesters have a very suspect agenda, indeed.