Infreemation

Issues with trade “liberalization”

This is really big news: Wealthy countries brace for farming cuts as WTO makes historic step but is it good news?

Historically, although North American agriculture cannot compete cost wise with cheap labour and production costs elsewhere, we have heavily subsidized these industries (especially in the US) to allow them to continue to exist. North America’s push for international trade liberalization or globalization could be seen to be hypocritical by encouraging trade liberalization yet subsidizing one of the few industries that the 3rd world countries may be able to compete in.

Stepping back for a minute: trade liberalization and at its extreme, free trade such as NAFTA has a slew of benefits and drawbacks which is why it is so controversial. Most of the serious issues are due to the devil in the details of imlpementation. The international harm caused by the rapid trade liberalization dogma of the US Treasury and IMF is well documented by Joseph Stiglitz in: Globalization and its Discontents. If you want an idea of the major points in this book read this excellent synopsis. The bottom line is that globalization is not necessarily bad, but without proper checks and balances it will simply aid and abet the rich in getting richer and the poor will remain as such.

On the one hand excessively protectionist policies which at its extreme includes economic self sufficiency can deny a society the benefits that the rest of the world has to offer in terms of technologies and skills. Heavy tariffs on imports of a product or commodity can hurt the industry of a trading partner, such as the decades old softwood lumber dispute which is still unresolved despite NAFTA. One the other hand trade liberalization can threaten or eradicate local industries unused to competition, too immature to compete or simply unable to compete due to environmental factors.

When it comes to agriculture, it could be risky for a country to not have self-sufficiency for food and water, and therefore it could be considered essential to national security. Should such critical resources be subject to trade liberalization polices or should they be exempt. If you exempt certain goods where would you draw the line?

Let me know what you think.