Whatever Happened to Global Free Trade?

[Exarch]

i can still remember back in 2002 or even the alte 90s when most of the then G8 were all about globalisation and free trade; indeed, that was their warcry "Free Trade FTW!!" along with trade liberalisation as per the Washinghton consensus.

now, fast forward to 2010, and i see the very same governments who were all for Free Trade, now issuing protectionist policies and witch hunts.

what the heck happened?

[RollingWave]

because they realized that free trade wasn't actually as benifitial to them as they thought

Ok that's more of a joke answer than real, the problems is that while Free trade in a marco sense is usually good, the actual time span involved for the marco adjustment (which can be decades) and many other assumption (such as labor forces can always transfer to other fields without much problems) are very problematic in real implimentation sense. The assumption that all will be better in the longer run isn't going to be politically justifiable in most cases for decades of social turnmoil and unemployed people that have problem adjusting to dramatic shifts in economic structures.

Not to meantion even the strongest proponents themself have always practiced some aspect of protectionism, especially in agriculture, which have been one of the biggest sticking points in the whole thing.

So in the end, most other countries realized that all encomposing free trade agreements in a wide region is basically impossible in the forseeable future, and most have resorted to a case by case bilateral agreement, where individual countries talk with each other and agree upon a limited set of stuff to open up against each other , which will improve the economic competitiveness of their society without the potential dramtic social impacts.

[Viking Prince]

The short answer: Recession and populist politicians

The longer answer is that for there to be gains from free trade there also have to be some losers. The poor domestic firms that lose out on the sales to more competitive global concerns translates into lost income and probably lost jobs. In a perfect world the labor simply redeploys to competitive sectors that expand as other firms also expand production for export. But we do not live in a perfect world. People lose jobs and may not be trained for the new opportunites. During this recession we had a burst real property bubble. Many prospective job seekers cannot even relocate for jobs that they may be qualified for without taking a hit on an owner occuppied residence. Banks have also taken real property losses via loans and other financial instruments. Thus the banks may not be as willing to lend capital to firms to expand where conditions are more favorable.

[roy34543]

Also , a problem with free trade is that global free trade is good for consumers everywhere, But selective free trade (ie trade agreements between certain countries only) can actually be detrimental as it locks out competetive companies that arent from certain states. Theyre not neccasarily bad, but global free trade is what would lead to very real consumer benefits over time.

Some countries wield trade itself as a tool, for example most arab countries refuse to trade with Israel unless it makes peace with the palestinians and them, so a global free trade agreement would be inconvinient for them. America itself still doesnt trade with cuba.

[Exarch]

hmm, good points guys
so why do we have some leaders who believe that protectionist policies is the solution?
it just reminds me of the smoot-hawley tariff act that aggravated the Great Depression

[jankren]

Politicians wanna win votes.

+

Average people understand shlt about economics.

[dogukan]

Capitalism eventually hits a crises due to it's nature. And since these big countries have "concious" populations, they can't let the people go through hell much because that would trigger a massive change.

[removeduser_4536284751384]

free trade makes the government more money than taxed trade anyway.

[Vizsla]

Nowadays instead of calling it Global Free Trade we call it Globalization.
The main difference is that globalization is not under the control of states. This is upsetting to politicians and lobbyists who thought they were in charge of everything. It doesn’t matter what they say or do – eventually free markets in goods and services will result in rising prosperity everywhere that plays the game.

[Razor]

Capitalism eventually hits a crises due to it's nature. And since these big countries have "concious" populations, they can't let the people go through hell much because that would trigger a massive change.

I agree.

Nowadays instead of calling it Global Free Trade we call it Globalization.
The main difference is that globalization is not under the control of states. This is upsetting to politicians and lobbyists who thought they were in charge of everything. It doesn’t matter what they say or do – eventually free markets in goods and services will result in rising prosperity everywhere that plays the game.

But is it in the interest of nation states and us (not firms) to have a global free market and a globally rising prosperity? I highly doubt it. If a country is developing and businesses see opportunities they will move to such countries where costs will be lower, resulting in job loss in the other country.
There's a limit to how societies can compete with one another, because in one country the cost of products and services may be much lower than elsewhere, resulting in unfair competition. You'd need one world government to regulate it and that's a pretty tough job to say the least.

[Vizsla]

But is it in the interest of nation states and us (not firms) to have a global free market and a globally rising prosperity? I highly doubt it. If a country is developing and businesses see opportunities they will move to such countries where costs will be lower, resulting in job loss in the other country.
There's a limit to how societies can compete with one another, because in one country the cost of products and services may be much lower than elsewhere, resulting in unfair competition. You'd need one world government to regulate it and that's a pretty tough job to say the least.

The difference between us is that I trust the market and you do not.
German workers have skills and higher levels of education than cheap labour elsewhere. So not all jobs can be moved off-shore because they need skilled workers. In time the poor countries that supply the cheap labour will become richer and companies will have to go somewhere else for cheap labour. These newly developed countries will contain new markets for us to exploit.
The market will provide a virtuous circle, if we trust it.

There is no such thing as unfair competition.
British companies used to complain that state subsidized German companies were able to undercut them. This was seen as unfair. It all depends on your perspective.
Now we all face the same competition from cheap labour sources. This forces us to do what we do better than anyone else. If anything this is MORE fair.

[Koelkastmagneet]

Protectionist nonsense happened.

Well, not like it was ever gone or anything.

[Exarch]

i've always liked the idea of free trade, and the net effect of paying a better price as a consumer; as for ppl getting laid off because companies outsource ot other countries, well unless they want to compete for lower wages-which is incredibly unlikely-there's not much else they can do.

u get factory workers who're pissed cuz their companies outsource to other countries--well shouldnt get get all pissy at the company rather than free trade or globalisation?

ppl dont like change and that's pretty much what happens when u have a 45 yo family man who's been at the company for the better part of his life getting fired cuz someone else can do the job better...well of course that sucks, but it's life

[roy34543]

i've always liked the idea of free trade, and the net effect of paying a better price as a consumer; as for ppl getting laid off because companies outsource ot other countries, well unless they want to compete for lower wages-which is incredibly unlikely-there's not much else they can do.

u get factory workers who're pissed cuz their companies outsource to other countries--well shouldnt get get all pissy at the company rather than free trade or globalisation?

ppl dont like change and that's pretty much what happens when u have a 45 yo family man who's been at the company for the better part of his life getting fired cuz someone else can do the job better...well of course that sucks, but it's life

The problem is that employers arent a bunch of morons either, In fact in a dramatic shock to the workers of the world, they often have more buissness sense then the people they employ.
Would you make a company with the restriction that you cant fire anyone you ever employ? Some countries have exactly those restrictions that make it impossible to fire anyone (france is a big example) and most people never get fired its true, but most people dont get hired either, because employers know if they hire them then they could be screwed forever.
Thats why America which has very liberal hiring and firing laws does very well in terms of buissness, and most countries that follow the example will probably do better. Im not saying workers should be screwed over, quite the opposite, they should be given a lot of support to find a new job, but when in places such as France people actually try and get fired and enter into wars with their employer because they get something like several years salary if they get fired... Well its more destructive then productive.

[Mr. Scott]

u get factory workers who're pissed cuz their companies outsource to other countries--well shouldnt get get all pissy at the company rather than free trade or globalisation?

Ironically, the jobs get sent to mercantalist china.

[Denny Crane!]

Ironically, the jobs get sent to mercantalist china.

Yes and that is problematic if free trade isn't going all ways BUT there is no pleasing alternative. Being cautios is the only way forward. I can't think of any ways off the top of my head where opening borders hasn't had a long term good effect. I cannot possibly agree with total free movement of people while there is a welfare state though.

[Exarch]

Ironically, the jobs get sent to mercantalist china.

which means their american competitiors ought to try to compete for those jobs; that's the very essence of free trade, and if they can't hack it, then they ought to adapt or quit.

[RollingWave]

i've always liked the idea of free trade, and the net effect of paying a better price as a consumer; as for ppl getting laid off because companies outsource ot other countries, well unless they want to compete for lower wages-which is incredibly unlikely-there's not much else they can do.

u get factory workers who're pissed cuz their companies outsource to other countries--well shouldnt get get all pissy at the company rather than free trade or globalisation?

ppl dont like change and that's pretty much what happens when u have a 45 yo family man who's been at the company for the better part of his life getting fired cuz someone else can do the job better...well of course that sucks, but it's life

The problem is that if a significant portion of the population suffer this problem for more than a year or three, it will be followed by other social problems, including possibly riots, crimes, and outright rebellion and revolutions, and in that case everyone lose.

The biggest general problem of the assumption remains in that it assumes labor is generally freely transferable , that assumption includes not just fields of work, but also between countries, neither aspect is really anything close to reality. the 45 year old men probably can't do anything else other than the field he was in, or the alternatives of much lower skilled/wage job would be equally crippling as being unemployed anyway (due to the financial burden of a typical middle aged men), this isn't even going into the aspect of most companies aren't willing to hire middle aged people who isn't from the field, and/or his old job is now transfered oversea, where even if he was willing to go work there, the language barrier not to meantion potential legal issues could prevent him from doing so.

At the end of the day, economy is supported by people, anything that ends up screwing a large portion of the labor force (which is also the consumer force) simply won't work no matter what other benifit they bring.

It's the Henry Ford logic, paying guys less for jobs may be better for the company bottom line in the immediate short run, but even in the not too distant future (aka a year or 3). haivng one super rich guy and 100 poor guys, and the super rich guy might buy what... 10 cars? having the 1 slightly less rich guy with 80 relatively better off guys by upping their wages, you the slightly less wealthy guy may buy 1-2 less car, while the 80 better off workers now each buy a car of their own. this doesn't even get into further social implications.

[Exarch]

The problem is that if a significant portion of the population suffer this problem for more than a year or three, it will be followed by other social problems, including possibly riots, crimes, and outright rebellion and revolutions, and in that case everyone lose.

The biggest general problem of the assumption remains in that it assumes labor is generally freely transferable , that assumption includes not just fields of work, but also between countries, neither aspect is really anything close to reality. the 45 year old men probably can't do anything else other than the field he was in, or the alternatives of much lower skilled/wage job would be equally crippling as being unemployed anyway (due to the financial burden of a typical middle aged men), this isn't even going into the aspect of most companies aren't willing to hire middle aged people who isn't from the field, and/or his old job is now transfered oversea, where even if he was willing to go work there, the language barrier not to meantion potential legal issues could prevent him from doing so.

At the end of the day, economy is supported by people, anything that ends up screwing a large portion of the labor force (which is also the consumer force) simply won't work no matter what other benifit they bring.

It's the Henry Ford logic, paying guys less for jobs may be better for the company bottom line in the immediate short run, but even in the not too distant future (aka a year or 3). haivng one super rich guy and 100 poor guys, and the super rich guy might buy what... 10 cars? having the 1 slightly less rich guy with 80 relatively better off guys by upping their wages, you the slightly less wealthy guy may buy 1-2 less car, while the 80 better off workers now each buy a car of their own. this doesn't even get into further social implications.

with that being the case then, why dont governments stop companies from outsourcing?
thing is, it's a sign of the times, once upon a time factory workers used to get upset as more and more factories got automated, but even tech upgrades mean more jobs, eve if those very same workers have to go abck to school/college.

even company directors need to stay afloat,

[removeduser_4536284751384]

which means their american competitiors ought to try to compete for those jobs; that's the very essence of free trade, and if they can't hack it, then they ought to adapt or quit.

no, they shouldn't

they don't want the kind of jobs that are done by chinese labrouers, it will drag their economy down. They want the high-paying jobs created by those jobs moving to china