International Relations Free Trade Right

International Relations

Free trade right now is being shaped by a handful of dominant, interrelated issues. In essence, the concept is coming under scrutiny from both its opponents and its proponents. If the free trade era can be said to have begun at Bretton Woods, then the fifty-plus years since that meeting have given us the opportunity to evaluate the validity of free trade principles as they have been put into practice. Opponents have gathered seemingly countless examples of flaws within the system to support their case for its dismantling. Proponents, too, have examined the issue on many levels. There is a practical level, where issues such as the difference between European and American philosophies on free trade come into play; and there is a the theoretical level, whereby some significant economists are now calling into question the long-held theory of comparative advantage upon which our present capitalist economic model is based.

The international economic system, based on the principles of free trade and comparative advantage, is also under scrutiny. Concern is rising over the apparent spreading of the gap between rich and poor. Perhaps corollary to this is the issue of abuse of trade pacts and the WTO by the largest entities, the U.S. And the EU. The future of the international economic system will be guided by questions of just how free do the world's nations want trade to be, and are the costs of free trade worthwhile.

The call for free trade is ultimately based on the principle of comparative advantage. However, there is an increasing reluctance amongst economists to endorse this principle as a concrete truth. That perhaps there are certain circumstances where comparative advantage does not hold true, for example if costly military campaigns are required in order to keep trade "free." This has fit in with the political climate, and we now hear anti-free-trade rumblings from some of our presidential candidates.

Opponents to free trade have also become bolder. Their voices were highly marginalized for the first few decades after Bretton Woods, but began to grow louder beginning with the Seattle protests in 1999. It is natural that any economic system as complex as our present free trade model will have its moments of imperfection, and these have been seized up by groups and individuals as examples of systemic failure of the model. This issue will continue to be important, as the rapid and global flow of ideas in the modern era allows not only the goods and currencies of free trade to move quickly around the world, but also the ideas and protests of those discontented with the model.

For much of the free trade era, the essential objective of capitalist nations, the WTO and similar bodies was to work towards unfettered trade around the world. Now we are seeing many countries back off from that. There is evidence of a split between nations with a surplus of energy resources and nations with a surfeit. Whether wealth overall is a zero-sum game or not has yet to be determined by economists, but many nations are beginning to feel that energy is a zero-sum game and are beginning to take steps to secure their energy supplies. Russia, for example, has essentially seized control of its oil and gas reserves.

We are also seeing nations that have traditionally been net beneficiaries of free trade-driven economic growth become concerned with the preservation of this status. In comparative advantage, is it important to remember that the economic gains are on an overall basis - there is no guarantee that both parties will gain, much less gain equally. Thus, free trade is threatened by protectionism offered by politicians seeking to score points with an electorate that simply does not understand the subtle ways in which free trade benefits them.

The current model is threatened as well by a couple of its more glaring imperfections. The two largest players in the WTO have forged their ideas on free trade based on entirely different approaches to the issue. The U.S. has forged its own trade policy based on bilateral agreements and leveraged its economic might to operate almost independently of trade bodies. The EU, on the other hand, has built a trade policy on a vast body of overarching rules and organizations with the intention of these superseding U.S. dominance. It has been hypothesized that these two completely different approaches will eventually clash, bringing all progress towards free trade to a standstill. Should China emerge as some predict to become a third power, with its own perspective on the management of global trade, the risk of such a standstill becomes even greater.

Moreover, the present international economic system will only work if all parties involved have faith in it. At this point, there is an imbalance of power at bodies such as the WTO. Developing nations feel obligated to be a part of such organizations lest the economic benefits bypass them but also feel marginalized by the larger, more developed nations. The developed nations drive the policy, which then reflects their interests, which in turn are largely the interests of the large corporations who control the economic power in these countries. Moreover, developing nations feel that WTO rulings in their favor but against the U.S. Or EU are routinely ignored. This has lead to a certain lack of faith in the system, faith without which the system will not be able to continue to function.