Free Trade Myths
New Liberation News Service
/* ---------- "Ravi Batra's book" ---------- */
Reply-To: Progressive Economists Network <PE...@VM.USC.EDU>
From: shn...@SFU.CA
Subject: Ravi Batra's book
!
I just finished reading The Myth of Free Trade, by Ravi
Batra. For a conventional economist, this guy's really
interesting.
While I am far from dispassionate on the subject of free
trade, I found his anti-free trade argument compelling.
Batra traces the dramatic decline of the American economy to
the devastation suffered by competition from goods
manufactured more cheaply abroad. No surprise here. But
what is different is that he goes through the history of
American tariff law to demonstrate that, contrary to what is
commonly believed, the U.S. economy has traditionally been
highly protectionist. He argues that the sharp and
continuing cuts in traditionally high tariffs, starting in
the early 1970s, that opened the U.S. economy to this
devastation.
Ironically, we have been bombarded so relentlessly in recent
years by oligopolies and monopolies demanding
"competitiveness" (i.e. lower wages, broken unions,
deregulation, etc.) that the word's traditional meaning --
stringent government anti-monopoly action -- has faded from
our consciousness. Batra argues that free trade is being
driven by governments that have been captured by
transnational monopolies acting in the name of
"competitiveness," but that what we are really seeing is the
creation of a transnational regime of laissez-faire being
enshrined in international trade agreements.
As a cure for this, Batra calls for "competitive
protectionism" -- a programme to break up the biggest
monopolies in order to limit their power within the domestic
economy while protecting the resulting companies' activities
from foreign competition. Following on this, he argues that
investment by "foreign" corporations should be treated the
same way as investment by "native" companies: encouraged,
but taxed, regulated, etc.
Batra's convincing when he says that taxation, regulation
and higher wages are impossible as long as corporations are
able to escape social control by moving their operations .
Only when access to the domestic market is contingent upon
corporations carrying out production domestically can such
social control be exerted.
In the model of economic development that he outlines, Batra
shows how development is based on the growth of
manufacturing and the rise in living standards, based on
relatively high wages, that go with it. As the penetration
of foreign-made goods increases under free trade, however,
the domestic manufacturing industry is destroyed by cheaper
imports that utilize cheaper foreign labour. This, in turn,
forces a migration of job seekers into the low wage service
sector, which is increasingly dominating labour markets in
"developed" countries.
Batra sees this destruction of the domestic manufacturing
base and the parallel migration into services as being at
the root of what he terms the "agrification" of developed
economies; that is, the flooding of the market with cheap
commodities produced under conditions of high and increasing
productivity but lower and lower wages.
Pointing out that the application of free trade dogma led to
the destruction of the economy of the relatively advanced
economy that existed in East Germany, he makes an unusual
argument. Contrary to those who argue that it is North
America that stands at risk from a flood of cheap goods
manufactured in Mexico, Batra insists that if NAFTA is
allowed to proceed, the relatively developed sectors of the
Mexican economy risk a fate similar to that which befell
East Germany. In fact, this is exactly what is happening to
the textile industry in Mexico, where foreign-produced goods
are wiping out what was, until recently, a fluorishing
sector.
The book includes an interesting section on the
environmental devastation caused by trade. Batra focuses a
great deal of criticism on intraindustry trade in which
companies manufacture in more than one continent and then
ship part of their production from each continent to be sold
in the other. "The United States sends wine to France but
also buys some from it; America exports airplanes to Europe
but also imports from there. In 1978, intraindustry trade
made up nearly 60 percent of the trade of the G-7 countries
and 56 percent of world commerce. That figure is even
higher now.....Few economists question the need for or the
costs of intraindustry commerce. The Bush administration
proudly announced taht in 1990 U.S. consuemrs had a choice
among 567 automobile models. Are there no limits to
materialism? Would social welfare fall if auto buyers had
only 100 models to choose from?" (P. 227)
Finally, the introductory section of The Myth of Free Trade
includes a wealth of statistics that show just how enormous
the level of economic devastation has been in the U.S. over
the past twenty years, with the wages of 80% of the people
falling dramatically overall while the wages of people in
the retail trades have dropped to levels not seen since the
late 1930s.
My major complaint with the book is that Batra does a lousy
job of analyzing what has happened in Canada since the
advent of free trade with the U.S. Although his argument
fits the Canadian experience to a "T", he didn't seem to
take the situation in this country seriously to flesh out
the impact that free trade has had on us.
I would strongly recommend this book. It blows away any
remaining bullshit about how well the U.S. fared under
"supply side" Reaganomics and -- in my biased view -- shreds
any remaining credibility the idea of free trade might have.
Even if you don't agree with him on everything -- I don't
like his treatment of unions -- it's a very provocative
read.
Sid Shniad