Talk:Free trade

From RationalWiki
Jump to: navigation, search
Icon economics.svg

This economics related article has been assessed as SIGNIFICANTLY PROBLEMATIC in one or more ways. See RationalWiki:Article rating for more information.

Jellybrain.png
This article requires attention for the following reason(s):
  • Introduction fails to adequately explain the background of the subject
  • Requires significant revision for unsourced statements
  • Several sources are of questionable credibility

--Erik Tiber (talk) 22:35, 18 April 2017 (UTC)Regardless of wether or not you favor the new Free Trade Agreements, it's wrong to assert they do not constitute a form of free trade. Different regulations can create costs for importers and exporters as much as any tariff. Thus, harmonizing them would be a removal of trade barriers, ergo a form of free trade. That's not to say that these FTAs also aim at removing more traditional trade barriers such as tariffs. A Student (talk) 14:51, 23 October 2015 (UTC)

It's wrong to assert anything called a free trade agreement, no matter their content, does not constitute a form of free trade? It's better to talk about specific agreements but in general the title of something does not always reflect the contents...like the Democratic People's Republic of Korea is none of those things in practice. -EmeraldCityWanderer (talk) 15:13, 23 October 2015 (UTC)
Not the point I was trying to make. You could as well call them "Restriction of Trade Agreements" for all I care. Harmonizing regulations is nonetheless a form of removing trade barriers. A Student (talk) 15:36, 23 October 2015 (UTC)
Okay, maybe not...but harmonization and free trade agreements are not always bound together. Sometimes, they also aren't always the best idea if a countries regulations are much different than another (i.e. China and melamine). -EmeraldCityWanderer (talk) 15:55, 23 October 2015 (UTC)
Sure, you can have a trade agreement without harmonization. Traditionally they used to be more about tariffs and quota. That's what makes TTIP, TPP, etc. new. And yes, sometimes regulations can vary so much that countries will hardly find any common ground for harmonizing them. That doesn't mean it's necesarilly a bad idea to do so, nor does it (as my original point was) that it doesn't fall under free trade. A Student (talk) 16:25, 23 October 2015 (UTC)

The Last Section[edit]

Hey, I'd like to point out some issues with the article, and some rather pseudoscientific additions to this article, mostly concentrated in the bottom section.


"Free trade" is often used as a guise for two or more countries' governments to impose really bad economic, social, and environmental policy upon their respective populations through treaties having nothing to do with actual free trade. The most obvious example of this in North America is NAFTA. Present threats of this nature, which all happen to be more global in scope, include the Trans-Pacific Partnership[1][2][3][4][5], the Transatlantic Trade and Investment Partnership[6][7], and the Trade in Services Agreement[8], all of which are currently being negotiated in secret, including their content. In fact, the negotiation texts for TISA (although not the final outcome) are not supposed to be released until five years after all parties have ratified it according to a Wikileaks release.

This is rather misleading and vague. It fails to define bad economic, social, and environmental policy and fails to actually describe NAFTA. Overall, NAFTA has had a negligible impact on the US economy. I'm unable to find the source for some earlier figures I used, but here's one from PBS. Overall job losses have been due to automation rather than outsourcing. The US did not see a major decline in manufacturing as a result of NAFTA, which actually ended up helping the sector.

Another view can be found in the article "Trade liberalization, unemployment and adjustment: evidence from NAFTA using state level data" by John Francis and Yuqing Zheng, from Applied Economics Vol. 43 , Iss. 13,2011. Here's an excerpt.

The demand elasticity of NAFTA shows that NAFTA increased labour demand by 0.27%. NAFTA, then, is predicted to have had a small but positive effect on the US labour demand. This small effect is consistent with previous research on the effects of NAFTA in the US. Hinojosa-Ojeda et al. estimate that NAFTA destroyed 37 000 jobs per month between 1990 and 1997. However, during the same period 200 000 jobs were created each month. In their survey, Burfisher et al. conclude that NAFTA's effects in the US have been small. They conclude that this should not be surprising since NAFTA did not significantly change traded goods prices in the US and Mexico's share of US trade was not as large as some other countries. This is also consistent with the simulation results found in Boyd et al.

(2000 Hinojosa-Ojeda, R., Runston, D., DePaolis, F. and Kamel, N. (2000) The US employment impacts of North American integration after NAFTA: a partial equilibrium approach, Unpublished Manuscript, North American Integration and Development Center, School of Public Policy and Social Research, UCLA.) (2001 Burfisher, ME, Robinson, S and Thierfelder, K. 2001. The impact of NAFTA on the United States. Journal of Economic Perspectives, 15: 125–44.) (1993 Boyd, RG, Krutilla, K and McKinney, J. 1993. The impact of tariff liberalization between the United States and Mexico: an empirical analysis. Applied Economics, 25: 81–9.).

Furthermore, the reason that these trade deals are done in secret is to allow for actual functional negotiation to occur. All of these negotiations are in secret. This allows the negotiating parties to look out for what will result in the best deal for their country. If negotiations were open, every single change in negotiations would impact the market one way or another, and outside parties would interfere in the process. Look at this comment.

In fact, the negotiation texts for TISA (although not the final outcome) are not supposed to be released until five years after all parties have ratified it according to a Wikileaks release."

The final text is released, obviously. You can see what the deal actually does. The negotiations texts are not released for five years after in order to allow for actual negotiations to occur.

Another common criticism is of the dispute resolution system used in the TPP. A frequent contention is that it could result in companies suing countries for environmental regulation. This is a lie. Countries would only be sanctioned if their regulations were being applied unduly to foreign companies. If a country enforces its regulations against both domestic and foreign countries it can not be sued. Furthermore, there are already over a hundred existing trade agreements which already feature such dispute resolution systems, and it is incredibly rare for a country to ever be ruled against in favor of a company. Valid criticisms of TPP do include issues with drug copyright, but the dispute resolution system is not at all an issue.

I really think that that whole section should just be scrapped and rewritten entirely with some actual reputable citations.

EDIT: Okay, I rewrote that whole section and managed to salvage some of it. Here's my proposed edit. It includes some actual criticism of fair trade too, since that isn't the panacea that it was characterized as.

Recent Free Trade Controversy

Free trade agreements have recently become the subject of increased public debate in the run up to the 2016 election. The most obvious example of this in North America is NAFTA. Several subsequent deals have also come under fire, including the Trans-Pacific Partnership[1][2][3][4][5], the Transatlantic Trade and Investment Partnership[6][7], and the Trade in Services Agreement[8]. Much criticism stems from the fact that these negotiations are being conducted in secret. For example, the negotiation texts for TISA (although not the final outcome) are not supposed to be released until five years after all parties have ratified it according to a Wikileaks release.

Free trade is not always Pareto-optimal. Thus, free trade should not be confused with fair trade, which could be argued as being a subset of free trade and which can be basically defined as international trade that is at the very least not detrimental to all stakeholders involved at every stage of the trading process - the definition of Pareto efficiency. Generally, some compensation or transfer has to be orchestrated to make whole the losers of a trade agreement, though fair trade does still have issues with placing the entirety of the burden on the poorer partners with regards to ethical sourcing.

The failure of the current US and other global governments in actually compensating the losers of free trade agreements (a comparatively trivial cost) is thought to have contributed to the rise of political figures like Donald Trump, Bernie Sanders, Boris Johnson, Nigel Farage, and Marine Le Pen. However, claims that free trade is primarily responsible for the loss of manufacturing jobs ignore the fact that automation took more jobs than free trade ever has. US manufacturing output has increased near-continuously, while manufacturing employment has declined. Even developing countries are encountering 'premature deindustrialization' as a result[9].

Erik Tiber (talk) 21:37, 18 April 2017 (UTC)

Offshoring vs Automation and Inequality[edit]

The recent edits to the article seem to seriously misunderstand the article they were quoting. In particular, there is absolutely nothing contradicting the idea that displacement in the manufacturing sector is the result of automation rather than foreign competition.

They are correct in that trade with China in the 2000's did cause appreciable decline in the manufacturing sector. OF course, then the question is whether you value the lives of the hundreds of millions of Chinese workers lifted out of poverty or the comparatively smaller number of American workers who were displaced, and who could have trivially been compensated regardless even while maintaining open trade with China.

Still, my edit to that section did not fully reflect reality. Neither does this one. I'm going to propose a modification to it. Saying that it's 'blustered' with the 'excuse' of automation badly mangles what the article actually says, as it states that although there was not an overall decline in employment you still saw significant displacement of workers from one profession to another, which is perfectly in line with the idea of automation contributing to the creation of the rust belt. The article also notes that worker displacement in the past two decades (the period of time in which China has had the most impact) are relatively small compared to previous decades.

If the decline in manufacturing employment were due to foreign competition then you would see it take the form of declines in manufacturing output. If it is due to automation you would see employment fall while output increases. Until the 2000's the decline came in the form of decreased employment coupled with increasing output. Trade has only been taking a large role since the 2000's, and that's due to China joining the WTO, not NAFTA or other trade deals, which had a negligible impact on employment in the US.

It is kinda shady to throw out NBER data on deindustrialization in developing countries. The source itself states that a combination of automation and international trade can account for the shifts in employment, so why act as if it is only trade which is at fault here?

Finally, if you want to consider the ethics of restricting trade with China it's best to go into the actual effects of free trade in developing nations, which I personally think would be a great addition to the article.— Unsigned, by: Erik Tiber / talk / contribs 22:01, 8 February 2018