U.S. Free Trade with Mexico -- Is It Progress or Self-destruction?

Articles

By John Culbertson, The Social Contract, December 1, 2003

http://www.thesocialcontract.com/pdf/fourteen-two/xiv-2-122.pdf

Depending on the world-view and vocabulary used to depict it, US free trade with Mexico can seem anything from an obviously progressive step to an action ruinous to the United States and damaging to human prospects. The favorable interpretation now prevailing in both the political right and left in the United States proves, on consideration, to reflect a misleading conceptualization of the subject arising from a fashionable utopian ideology.

Seeking the truth on this subject thus requires first its depropagandization. The valid name for what is called free trade is foreign trade not subject to regulation by the nation's government, that is, mandatory deregulation of the nation's foreign trade — like deregulation of its savings associations, banks, airlines. The valid name for what is called barriers to trade is regulation of trade. The misleading labels present an image of regulation of foreign trade as unnatural and inherently destructive, a crime against the ways of the world. In truth, foreign trade has always been regulated by governments.

The human world always has been made up of many independent, or free, tribes, kingdoms, empires, or nations. Preserving this structure of human life requires the regulation of foreign trade. Unregulated foreign trade undercuts the independence of nations, prevents their developing along different paths. In the absence of effective supranational government, the deregulation of foreign trade leaves mankind adrift, its diverse and discordant societies merged into impotence, dropped together into a single pot, with no government at any level that is capable of preserving a civilized level of life or preventing the destruction of the earthly habitat. Far from being obviously correct, unregulated foreign trade is revolutionary; fashionably but irresponsibly revolutionary.

The free-trade fable exercises its mind-ruling power by exploiting the human weakness for making issues a struggle between Good and Evil. It provides a stereotype of regulation of foreign trade as protectionism, depicted as import restrictions that damage the nation and the world but are imposed through the power of evil `special interests'....

Is it true that the only options on foreign-trade policy are free trade or protectionism?... In reality, there are many kinds of trade policy available.

Posing the choice as free trade or protectionism illustrates a basic technique in the manipulative use of language, the misstated either-or, as in Hitler's proffered choice Nazism or Jewish communism; Stalinism's idealized socialism or Satanic capitalism. The stereotype of protectionism functions as a contrived Evil to be paired with free trade as the Good. Given the effectiveness with which such propagandistic use of language has been analyzed by Hayakawa and others, it is surprising that self-respecting Americans across the political spectrum, both Ronald Reagan and the editorial writers of The New York Times, rely on it to support the deregulation of foreign trade — with no consideration of the actual effects of alternative trade policies....

...A realistic consideration of the effects of alternative systems of foreign trade can well begin with the observation of the great liberal economist, J. M. Keynes (National Self-Sufficiency, Yale Review, 1933) that the system of foreign trade must be chosen to fit the political, economic, social, and international-relations realities of the times. Keynes, deploring his own zealous earlier support of the free-trade doctrine, pointed out that it made no sense to attempt to bring about laissez-faire foreign trade in the political and economic world of the 20th century — whether or not it would have been reasonable in an earlier era.

Keynes recognized the all-important point that unregulated foreign trade implied economic entanglement among nations. Unregulated foreign trade subordinates the goals, standards, powers of the nation to the interests of private parties in all nations. Deregulating its foreign trade costs a nation its freedom of action, its effective independence, its ability to chart its own course and to learn its own lessons from its successes and its failures.

The nineteenth-century vision of world-wide deregulation of foreign trade in the context of universal economic laissez-faire thus had no applicability to the political and economic world that arose from the First World War, in which nations explicitly adopted different theories, ideologies, and policy goals....

In Keynes' valid conception of efficiency, for example, shifting the production of telephones for the US market from a factory in Louisiana to an identical factory in Thailand does not increase efficiency; it reduces efficiency but is profitable because it replaces high-income labor with low-income labor. Shifting world manufacturing production from high-wage to low-wage nations does not increase efficiency and world output. An increase in the volume of world trade of this type is not progress; it may be ruinous....

Keynes thus favored a system of regulated foreign trade that would work constructively in a world of free and independent — non-globalized — nations....

The Free-Trade/Good - Protectionism/Evil view of foreign trade thus has caused enormous mischief. It has the world headed for worsening problems. Low-wage and low-labor-standards nations around the world expect to advance themselves by taking over rising shares of the US market, which is shrinking as a result of the trade-caused economic decline of the United States and its standard of living. The foreign-trade system is headed for crisis — a crisis that should have been easy to predict, but will be far from easy to cure....

One critically important consideration is that under a global economy, one world, or the rule of free trade, the effects of overpopulation-caused poverty and joblessness would fall not on the society that causes the problem but on all nations, as competition shifts capital and production to the nation with the lowest labor-cost. In a world of independent societies, the failure of any one does not drag down the others. The failures can turn themselves around by copying the successes. In a world of one global economy, failures anywhere drag all downward. The expected result is universal failure and degradation. On a planet critically threatened by human overpopulation, habitat destruction, and governments too weak or delusion-based to preserve the habitat and standard of living, the prospects of mankind as one single, globalized experiment are dismal....

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