A Primer On Trade

Trump Declares TPP Still Dead. So Now What?
By Dave Johnson, Crooks and Liars
1/26/17

“Trade” used to be about countries that grow bananas and “developed” countries exchanging bananas for cars and toasters. The banana regions had a “comparative advantage” because the climate favored banana-growing, the developed countries’ advantage was a completed manufacturing ecosystem. Unfortunately “comparative advantage” today means companies moving their production to places that allow them to pollute and exploit workers to “lower their costs.” (The costs of pollution and exploitation are then instead borne by working people and the planet.)

It is a common misconception that we need to have a trade deal with a country before American companies can export to that country. This is partly due to misleading arguments used to sell corporate-favoring trade agreements, like saying, “Ninety-five percent of America’s potential customers live overseas, so closing ourselves off to trade is not a solution.”

Not having a trade agreement doesn’t “close ourselves off to trade.” American businesses trade with the rest of the world and the rest of the world trades with us regardless of trade deals. But without trade deals countries can set tariffs and barriers according to their own country’s needs and goals.

In places where people have a say, people say they want good wages and environmental protections (and public education and health care and infrastructure and parks and science and other things people vote for in democracies). These protections mean that working people and the environment receive a larger share of the economic pie. The economic pie is also larger as a result of that investment in public education and infrastructure and the rest, so the “investor” class does better, too. To pay for these investment those who do better are taxed more.

In non-democracies and other places where people don’t have a say people aren’t paid well, the environment is not protected and a few people at the top end up with a larger share of the smaller economic pie.

So a democracy might want a tariff to remove the price advantage of goods made at “less cost” in countries without those protections. With a balancing tariff those goods won’t undermine democray’s good wages and protections, and undermine the tax base along with them. These tariffs and barriers might be called a “democracy tax,” with the revenues used for investment to make the goods made in the democracy more competitive worldwide.

Business and “investor” interests want to pay lower wages and environmental protection costs, so they encourage countries to pass “free trade” deals that prevent governments from imposing tariffs and barriers in the future. They call the idea of democracy taxes and other decision-making by governments to protect national interests “protectionism.”

“Free trade” deals set aside each country’s political decision-making in favor of “more trade” — thereby placing business interests above national sovereignty. Governments are prevented from acting to “protect” a country’s interests and businesses are free to seek the lowest costs, regardless of what happens to countries and the people in them and the environment.

When corporate interests advocate for free trade deals they also claim the deals will “establish new markets.” Again, this falsely implies they can’t already export without establishing a trade deal. This language also makes it seem as though those countries don’t already have companies and industries in those markets. What they really want is a deal that blocks governments from using tariffs and barriers “protecting” their developing or strategic industries from being overtaken and knocked out by established or subsidized competitors from other countries. This “opens markets” to outside competition from giant corporations.

With open trade the largest multinational corporations are able to sweep into other countries — “new markets” — and buy up or knock out existing, smaller businesses. The larger companies use economies of scale, established supply chains, superior access to credit, and other advantages of bigness to become even bigger. The resulting “efficiencies” mean that people are laid off wages and benefits are cut and systems are set up to push profits to the “investors” in the corporation.