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Foreign Policy
A Network Sampler
By Philippe Legrain
Free traders are growing used to copping the blame for all manner of ills. Everything from Third World sweatshops and environmental degradation to Chinese human-rights abuses and the destruction of local cultures is laid at their door. Clearly, they ought to be ashamed. Yet even these offenses may not be the full extent of their sins. Some now argue that free traders could be responsible for an upsurge in protectionism too.
The argument goes like this: Although trade has never been freer, free traders are forever bleating that protectionism is on the rise. But crying wolf is not only counterproductive; it also confuses the legitimate misgivings of trade unions, environmentalists, and others about globalization with old-fashioned protectionism. Unless free traders address these particular concerns, they could provoke a backlash that would undermine popular support for free trade in general. Thus, with terrible irony, their prophecies of doom would be self-fulfilled.
It is a beguiling argument. By casting free traders as politically naive zealots whose ideological purism is ultimately counterproductive, it appears to offer a Clintonesque Third Way between outright protectionism and unfettered trade that is both more reasonable and more effective at keeping trade free. Yet, for all this argument’s superficial appeal, it is profoundly misguided.
First the facts. True, world markets are far more open than they were 50 years ago. Eight rounds of multilateral trade liberalization have slashed import tariffs and abolished quotas in many industries. But the battle for free trade is still far from won. Whole swaths of the global economy-such as agriculture, textiles, aviation, and shipping-are still highly protected. Rapidly growing industries such as computing and telecommunications are too easily carved up in subtle ways, notably through standards that handicap foreign firms. And new barriers to trade continue to appear. Even e-commerce is vulnerable to trade restrictions such as the European Union’s data-privacy directive.
Thus, merely in order to preserve the status quo, continuous efforts to open markets are needed. Unfortunately, however, markets are being closed rather than opened. In the past year, efforts to agree on multilateral investment rules have come to naught. Meanwhile, protectionism is on the rise. Around the world, there has been a surge in antidumping cases against imports deemed "unfairly" cheap. Once imposed, antidumping duties are rarely lifted, so their cumulative impact grows each year. The United States now has about 280 in place. Even that figure understates their true impact, because the threat, explicit or perceived, of antidumping suits chills competition in many markets that appear open. The most worrying thing about the rise in protectionism in the United States is that it coincides with an unprecedented economic boom. Free traders who fret that protectionism could get much worse when the U.S. economy eventually slows are hardly scaremongering.
Most protectionist pressure is motivated by the age-old desire to limit foreign competition. But some of it is more complicated. As economies become more closely intertwined, new trade frictions are emerging. Government policies on sensitive issues that were once exclusively domestic, such as food safety and the environment, increasingly impinge on international trade. Consequently, a European ban on genetically modified organisms (GMOs), whose commercial production is already severely limited, would discriminate against U.S. farmers. Such a ban might be motivated by a genuine popular concern—well-grounded or not—for food safety and the environment, but it would also suit cosseted European farmers who fear U.S. competition.
In one sense, it hardly matters what motivates such a ban, because its impact on trade is the same. But in another sense, it clearly does, since trade barriers not motivated by economic protectionism might be deemed more legitimate. If public opinion perceives that food safety is being sacrificed on the altar of free trade, support for free trade will plunge. Most people prefer safe food to free trade. Fortunately, though, we do not face such a stark choice. For instance, rather than banning GMOs, Europe could require that they be labeled as such. More broadly, governments can, and should, pursue their aims in ways that disrupt trade least. If such measures do not satisfy environmentalists or trade unionists, then perhaps these groups’ motives are more protectionist than they make out. Perhaps the AFL-CIO, which opposed NAFTA for fear that U.S. jobs would move south, cares less about the welfare of Mexican workers than it professes. And maybe European farmers, who have given us mad-cow disease and polluted rivers, are less green than they now claim to be.
The real danger does not come from free traders. It comes from those who would gull us into throwing away the huge, and hard-won, benefits of open markets.
Philippe Legrain is trade correspondent for The Economist.