Add a Comment   Listen to Podcast   Up to OJB's Blog List

Free Trade?

Entry 112, on 2005-01-08 at 19:53:32 (Rating 1, Politics)

Recently there has been some discussion here regarding a proposed free trade deal with Chile. New Zealand has been a leader in reducing trade barriers and entering free trade deals for about 20 years now. There has always been an opinion that free trade isn't always the best option, but in the best style of modern New Zealand politics (and, I guess, modern politics elsewhere as well) the reality has never got in the way of the ideology and the deals have gone through regardless of opposition.

So, the question is, what could possibly be wrong with free trade? Well, quite a lot actually. For a start, free trade is rarely totally free for all the partners involved. New Zealand imposes few barriers to imports here but encounters significant problems when exporting to many countries, especially since we are still mainly an agricultural economy and this is one major area where protection still exists in many countries.

Conventional wisdom dictates that free markets and trade create more efficient economic systems because they encourage appropriate investment in the countries with the best investment environments. The problem is, that in many cases investment is just another word for exploitation. Free markets often result in cheaper products (whether they are better quality is debatable), but also in lower wages (including sweatshops in some countries), out-sourcing and exploitation of workers in countries without reasonable labour laws. Many investors admit they prefer to invest overseas because they experience less guilt exploiting foreigners.

I accept there are advantages in free trade but I think the main winners are the big multi-national corporations (like Nike, etc, who I totally despise) and on balance I think countries should implement appropriate import controls, tariffs, etc, which maximise the efficiency of the commercial environment for the benefit of their own people.

Comment 1 (2549) by SBFL on 2009-11-02 at 01:57:48:

Interesting 2nd paragraph - you actually seem to imply what is wrong with non-free trade!!

Anyway Kiwiblog alerted me to this recent editorial from The Dominion Post

"The gloom merchants and flat earthers who dispute the benefits of free trade agreements should examine a set of figures.

They are the figures showing the difference between New Zealand’s trade with China before the FTA between the two came into force in October 2008 and after it came into force. In the year to October 2008, exports to China totalled $2.2 billion. In the next year, they were $3.5b.

At a time when New Zealand is being buffeted by shockwaves from the global economic crisis, the deal has buffered jobs and boosted incomes. The political parties that voted against it – NZ First, the Greens and the Maori Party – should hang their heads in shame."

Comment 2 (2550) by OJB on 2009-11-02 at 05:03:01:

My point in paragraph 2 is that genuinely free trade (which I suspect most so called free trade agreements aren't) is better than trade which is called free but really isn't.

I don't think its possible to decide on whether a wide-ranging policy is a good or bad thing based on just one number about one country for one year. A few questions: what would the trade have been if the free trade agreement hadn't been in place? How much trade did China do with us? What is the long term trend? How have other free trade agreements worked out?

That one number could be very misleading especially since, judging by the rhetoric, is has been used in an editorial written by a real free trade advocate.

Comment 3 (2551) by SBFL on 2009-11-02 at 07:29:49:

Your arguments are - quite frankly - pathetic. You ignore the hard numbers given, write-off the author (that you don't even know who it is) and in the process call in the integrity of the newspaper with no founding other than you don't like what it says, and demand a long term trend assuming the editor is precognitive.

You are precisely what the editor calls you - a flat earther!

For me the proof is in the pudding (which you choose to ignore) and while the review is only of the first year, it is indeed a strong indicator. That trade increased by 50% in just the first year is - if anything - a conservative value for longer term propects. Afterall it takes time for business to gear up to take advantage of the the dropping of trade barriers, and during this time we have been in the midst of a recession.

May the FTA live long, and may we prosper!!

Comment 4 (2552) by OJB on 2009-11-02 at 08:36:04:

I thought I had asked some fairly reasonable questions actually. Surely you agree that pulling a single number out and ignoring the big picture is no way to reach a fair and balanced conclusion. It may be that the answers to those questions do support this particular agreement over a particular period but that should not be used as support for the policy in general.

And the rhetorical use of terms like "flat earthers", "hanging their heads in shame", etc does indicate a bias by the writer (whoever that is), I think.

Comment 5 (2553) by SBFL on 2009-11-02 at 09:07:04:

Please do tell us about this ignored bigger picture....this picture that nullifies the gain made to the respective countries with the extra $1.3b/annum in trade...

I don't see the bias in using those (admittedly colourful) terms when he/she shot down their ideological opposition with the facts.

Comment 6 (2554) by OJB on 2009-11-02 at 11:41:22:

The bigger picture includes the factors I mentioned in my questions. For example, if we are buying an extra $1.4 billion of cheap junk from China then are we better off? If this is just a single good result (maybe caused by high demand for milk for example) then are we better off long term? Or if the extra sales would have happened anyway then why have the agreement? Do you begin to see my point now?

That nonsense was nothing to do with facts, but let's just leave it there. It was just an opinion piece after all, so we shouldn't have high expectations!

You can leave comments about this entry using this form.

Enter your name (optional):
Enter your email address (optional):
Enter the number shown here:
Enter the comment:

To add a comment: enter a name and email (optional), type the number shown, enter a comment, click Add.
Note that you can leave the name blank if you want to remain anonymous.
Enter your email address to receive notifications of replies and updates to this entry.
The comment should appear immediately because the authorisation system is currently inactive.