When the U.S. House voted on fast track trade promotion authority recently, the issue of environmental havoc and mistreated workers surfaced as it has in similar debates over trade liberalization. Now, with the recession and increased unemployment, the protectionist sentiment is again trying to disguise itself in the clothes of global solidarity. But while some critics may be disingenuous in their push for so-called “fair trade,” others are doubtless sincere — and it is worthwhile understanding why their sentiments are misplaced.
As Jagdish Bhagwati, professor of economics at Columbia University, has noted, imposing limits to trade to promote moral or environmental concerns amounts to a kind of colonialism. Its principle is “might makes right,” with the larger, richer, most powerful countries lording it over the not-so-rich and not-so-powerful ones.
The United States can impose trade sanctions against India if Indian fishermen are nasty to cute dolphins. But India cannot realistically bar trade with the United States if Americans are nasty to cows. Similarly, the United States can punish Norway if Norwegians do not want to eat gene-manipulated beef. But Norway cannot realistically punish the United States if U.S. labor law is less generous toward union interests than Norwegian labor law.
Are contentious issues of governance — about which there is rarely consensus even within the boundaries of a particular country — really to be settled by trade clauses, rather than domestic politics and persuasion? Rather, we should accept as a basic tenet of trade policy that ethical choices must be made mainly by the producers and consumers themselves — not by politicians and bureaucrats acting in their name.
In any case, “ethical” trade restrictions rarely, if ever, achieve what they set out to achieve. The key causes of poor labor and environmental standards are poverty and despotism, and there is little that yet another bout of protectionism can do to alleviate poverty or foster freedom and democracy in countries like China, Pakistan and Burma.
In fact, trying to promote “core labor standards” via tariff barriers may well accomplish the opposite of its intention. Keith E. Maskus, an economist at the University of Colorado, has studied the issue of core labor standards for the World Bank. He concludes that attempts to stop so-called “social dumping” from poor nations pose a “real and serious risk” to the well-being of some of the most vulnerable members of Third World societies.
“The celebrated French ban of soccer balls sewn in Pakistan for the World Cup in 1998 resulted in significant dislocation of children from employment. Those who tracked them found that a large proportion ended up begging and/or in prostitution,” Maskus told me. Shutting down a non-optimal opportunity does not thereby install a better one in its place.
The true fear of many protectionists is that trade with countries with lower labor standards will engender loss of jobs back home. But in general, poor labor standards are a competitive disadvantage to an economy — or result from deeper problems that hamper the economy. The “race to the bottom” is a figment of imagination: It is not, after all, countries with the worst human rights records that top the annual rankings of national competitiveness, dominate export markets or attract the lion’s share of foreign direct investment.
This is hardly surprising. National leaders who pay scant attention to the rights of workers are unlikely to pay much attention to a host of other important civic protections either: private property rights, freedom of the press, the rule of law, etc. Governments that recognize legitimate social interests are more likely to respect private property and contracts. This makes for less arbitrary government, more predictable rules, and a better climate for investment and innovation.
It should be kept in mind that almost all countries that are today prosperous and democratic were once poor and undemocratic. Increased international trade is one of the factors that has led to rising prosperity — and to rising demands for political openness. In recent years the process has been evident in such Asian nations as South Korea, Taiwan, the Philippines, Thailand and Indonesia.
Concerns about labor and environmental standards are legitimate. What rich countries can do to help is dismantle trade barriers. Both the United States and the EU levy lower tariffs on unprocessed goods from the developing world than they do on processed goods. As a result, fewer jobs for educated youths are created than would otherwise be possible.
For those who feel concern for the fate of the developing world, giving the president the ability to expand trade gives those countries a hand up. Unfortunately, that’s the last thing on the labor-controlled left’s mind.