Free trade shouldn't be a chore

It’s probably too soon to inter the remains of the Doha round of world trade negotiations, notwithstanding Monday’s collapse of talks. In trade negotiations, it’s never over even after it’s over.

Still, trade liberals will have to consider alternative approaches, if only until the round can be restarted -- which may be many years. More ambitiously, the hiatus is an opportunity to rethink the whole multilateral approach to trade liberalization, the focus of efforts to free trade since the Second World War.

This is, of course, heresy. If there is one thing everybody knows, it is that multilateral trade treaties, negotiated under first the General Agreement on Tariffs and Trade and then the World Trade Organization, are one of the triumphs of the post-war economic order. Never again would nations return to the pre-war, beggar-thy-neighbour policies that helped turn a cyclical downturn into a world-wide Depression.

Still, even free traders -- especially free traders -- must be aware of the absurdity of it. Look through any economics textbook: the case for free trade, as elaborated, tested and refined over more than two centuries, does not rest on its adoption by many nations at the same time. It does not depend on whether other countries reciprocate.

Rather, the argument rests entirely on the advantages a given country enjoys by removing its own trade barriers, regardless of what other countries do. Put another way, the barriers we erect to foreign imports do far less damage to other countries, who may as easily find another customer, than they do to ourselves. We pay, not them, in higher prices, weaker competition, lower productivity.

What are treated as bargaining chips in trade negotiations, to be surrendered only in return for similar “concessions,” are in fact burdens we should be glad to abandon. If these were arms talks, the missiles would all be pointed inward.

Well, fine. But let’s live in the real world, shall we? In the real world, the economists’ case for free trade remains unknown to most of the population. In the real world, people think of trade in terms of exports, how much we can sell to other countries, not how cheaply we can buy from them. And while the benefits of free trade are spread across the whole of the population -- and as such may be all but invisible to each individual -- the costs are concentrated on particular interests and industries, who have every incentive to organize in opposition.

Many free traders have thus been willing to indulge in the charade of negotiations, pretending to jealously guard that which they would happily discard, as a necessary piece of political theatre. Bound by treaty, politicians can plead with aggrieved domestic lobbies that the matter is out of their hands. “If it were up to me,” they can say, “you’d have that tariff, subsidy, or quota. But in the end, we couldn’t get other nations to agree...” In the real world, that’s how things are done.

But just how “real” is this world? What if the world the GATT and WTO were designed to address is in part the world they made? What if its underlying premise -- that free trade cannot be sold on its own merits, but must be smuggled in under protectionist guise -- is itself the product of the multilateral negotiating process?

Like many “lessons” of the Depression, the idea that nations, left to themselves, would inevitably drift towards protectionism is one that applies mostly in conditions of worldwide depression. That trade was greatly liberalized in the post-war era is beyond dispute. But was it because of the GATT, or in spite of it?

The bet the GATT/WTO architects made was that rules could substitute for will. Rather than persuade the public of the virtues of free trade, political leaders simply told them they had to accept it. Yet what message could the public absorb from these endless, often acrimonious negotiations, but that free trade was in fact rather a bad thing: that we were being asked to give up things that were of value to us, in exchange for things that were of value to them; that we were agreeing to harm each other, rather than to help?

It is an interesting counterfactual to consider whether free trade might have been further ahead without the GATT than with it. Consider the recent history of agricultural subsidies, the crux of the Doha round. We spend billions of dollars every year to “keep our farmers in the game,” in hopes that the next round of the WTO will bring an end to the decades-long farm subsidy war. Eight years later, there’s a deal to cut subsidies by perhaps 5 or 10%, after which they start climbing again. And that’s if there’s a deal. What is the return on our “investment”?

Imagine if the world had approached the issue of tax cuts in the same way. Rather than just cut their own taxes, every country had waited on all the rest, each insisting it would not give an inch until the others did likewise. Do we think taxes would be higher or lower today as a result?