Infernal Ramblings
A Malaysian Perspective on Politics, Society and Economics

Unfree Trade Agreements

Written by johnleemk on 4:54:28 pm Sep 5, 2007.
Categories: , ,

Today, I read an interesting critique of bilateral free trade agreements by Joseph Stiglitz, former Chief Economist of the World Bank.

Stiglitz's critique actually was specific to recent free trade agreements signed between countries such as South Korea and the United States; he actually even went further to criticise the policies of the George W. Bush administration.

The main thrust of Stiglitz's argument was that bilateral free trade agreements aren't worth the trouble. With prevailing tariff rates of 3 to 5%, he said, the impact on the flow of trade between countries of a free trade agreement would be negligible.

Meanwhile, he pointed out, several clauses in American bilateral free trade agreements have furthered the economic interests of American firms at the expense of others.

While some give and take is always necessary, Stiglitz notes that this has come about through strict intellectual property protection (something I think is becoming antiquated).

This is not particularly surprising, and I think Stiglitz is correct — these deals propagated by the Americans are usually not all that desirable. It is quite common that the Americans insist on protection of intellectual property that goes beyond what they have at home.

But at the same time, tariffs of 3 to 5% are still tariffs; they still have a significant impact on trade. Uplifting the economies of both parties to a trade agreement can easily come about just from signing a piece of paper abolishing all tariffs, all protectionist measures.

The problem with most (if not all) "free trade agreements" is that they are actually unfree trade agreements, treaties which stack the deck in favour of one country or another.

A true free trade agreement is neutral; it creates a level playing field. The Americans should not be demanding any stronger laws than what they have at home, nor should they be demanding any special treatment for their firms as preconditions to a trade deal.

A true free trade agreement is what we need. What Joseph Stiglitz was criticising should not be termed free trade agreements; they should be called unfree trade agreements, because they serve to stack the deck and protect certain vested interests, instead of leveling the playing field, as an unfettered market ought to do.

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