Free Trade vs. State Corporatism

09/22/2004

The twin tenets of peace and free trade are mutually dependent. As French visionary Frederic Bastiat once said, "If goods don't cross borders, soldiers will." When countries rely upon each other in peaceful commerce, the people of those countries have every incentive to avoid violent conflict. Wars undermine trade like nothing else. The globalization of commerce fell dramatically during World War I, and we didn't see pre- war levels of international trade and cooperation until the 1970s.
Because of the importance of trade, embargos and trade sanctions are often seen as aggression and even acts of war. The punitive embargo on Germany after World War I impoverished the German people terribly, making it impossible for them to meet the demands of the League of Nations that they pay the full cost of the war. This was one of the major grievances the Germans cited in their vengeful desperation as they allowed Hitler to come to power. Trade aggression helped bring about the bloodiest war in world history.

More recently, we have seen the real effects of a trade embargo on Iraq, where hundreds of thousands died of malnutrition from lack of food and medicine. Iraqis were forced to import goods according to the rules set by the United Nations' Oil for Food Program, which we have since learned was utterly corrupt.

Although free trade is a blessing, managed bureaucratic trade is not. It is a dangerous misconception to think of the World Trade Organization, the International Monetary Fund, and other international quasi- governmental structures as free trade organizations. They rely on thousands of pages of confusing regulations and corrupt agreements between multinational corporations and oppressive governments. True free trade - the kind that fosters peace - does not depend on such organizations and rules, but is actually hindered by them. Managed trade - the kind that fosters resentment and poverty - is all that these organizations have so far delivered.

The managed trade that we see today, where politically connected corporations and favored nations get special deals, is anything but free; it is no more and no less than mercantilism, the same economic system that Adam Smith railed against in The Wealth of Nations, when he saw the inefficiency and aggression of imperial governments endowing special privileges to state-sponsored cartels and forbidding those without power to exchange with each other in peace.

Libertarians want to see free trade between individuals, where people become less dependent upon their governments and the WTO and IMF, where instead they become connected in peaceful commerce, where the power and influence of governments and bureaucratic trade agreements diminish to make way for a world in which there are relationships between people, rather than alliances and arm-twisting between states.

Managed trade is typified by President Bush's enormous steel tariff, and, more recently, with the obscenely high 198% tariff on Chinese furniture. Such policies hurt foreign workers and American consumers. They may help domestic industries in the short run, but they encourage irresponsible and inefficient business practices at home. The world economy and American prosperity suffer. Republicans and Democrats say such practices are necessary to prevent "outsourcing," but the reason business leaves the country is that government regulations make it prohibitively expensive for all but the richest companies to compete in America. Another layer of government regulations is not the answer. Indeed, high tariffs in the 1920s helped bring about the Great Depression.

Along with managed trade, we have foreign aid programs that force poor people in rich countries to send their money to rich people in poor countries. It is the poor people in all countries that suffer the most, whether they are taxpayers in the United States or peasants in the Third World who are forced to pay back debts racked up on their behalf - and against their will - by their own oppressive rulers.

Most protesters of the WTO oppose globalization of trade, but not globalization of government. They want to empower the United Nations and WTO further, so long as it is to advance their own agendas. They have in common with multinational corporations a glorified view of international government, disagreeing only on the specifics. Sometimes they compromise, as we saw in Seattle in 1999, where protesters, environmentalists, corporations, trade unions, and governments all contributed ideas on how the WTO should force its will on the world.

Libertarians understand that government is force. It is coercion and violence. It is not an answer to the world's problems or a way to bring about international friendship. We look forward to a time when state power declines, corporations and special interest groups no longer have an unfair advantage, and individuals are allowed to live and cooperate harmoniously and in peace. Free trade is a necessary component in ushering in a peaceful tomorrow.