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June 24, 2017

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Free your mind of free trade misconceptions

On the Tuesday, May 2 edition of "The Ed Show" on MSNBC, U.S. Senator Bernie Sanders (I-Vermont) reiterated, as he has so often, that what he insists on calling "unfettered free trade" has destroyed jobs in Vermont. At his official website he blames such "unfettered free trade policies" for our shrinking middle class, job loss, and ever-widening gap between the rich and poor.

Meanwhile, The Volokh Conspiracy blog's Ilya Somin writes (in a comment at Bleeding Heart Libertarians): "I think U.S. trade policy (which has done a lot to promote free trade, which even most left-wing economists see as beneficial to the poor) ... generally [does] a lot more good than harm."

This common conflation of "free trade" with the existing policies of the U.S. government, coming from seemingly opposite ends of the American political spectrum, bears some remark — especially considering U.S. trade policies are nearly the reverse of free trade.

The "unfettered free trade" which Sanders accuses of destroying jobs and polarizing wealth is actually highly fettered, corporate-administered trade. The majority of so-called "international trade" is in fact the transfer of finished and unfinished goods between national subsidiaries of transnational corporations — actually an internal process within the administrative bureaucracies of giant global corporations. And the so-called "free trade" polices promoted by the American state are highly authoritarian regulations that enforce these corporate bureaucracies' stranglehold on world trade.

Contrary to what Somin believes, not only does U.S. trade policy not "do a lot to promote free trade," it does the opposite. The centerpiece of American "free trade" agreements, far from simple tariff reduction, is the imposition of "intellectual property" monopolies through which corporate bureaucracies maintain control over international trade.

As I've frequently pointed out, "intellectual property" serves the same protectionist function for the global corporate economy that tariffs did for national industrial economies a century ago. Patents and copyrights — just like tariffs — restrict who is allowed to sell a given good in a particular market.

It's this monopoly which enables one transnational corporation's headquarters to outsource actual production to Shenzhen job shops while retaining control of marketing and "intellectual property," charging a US$200 brand-name markup for sneakers that cost US$5 to make. It does this by making it illegal for those same job shops to produce identical shoes, minus "the Swoosh," and market them domestically for US$10.

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