Free Trade or Isolationism: How Can Trade Wars Be Avoided in the 21st Century - Term Paper Example

Free Trade or Isolationism: How Can Trade Wars Be Avoided in the 21st Century This paper will make the case for free trade or liberalization as the means by which trade wars between and among countries can be avoided in the 21st century. Three arguments will be made in support of this point. First, this paper will argue that free trade is beneficial to the interests of both the developed world and the developing world. Second, it will argue that the stability of the free trade regime guarantees that crucial social concerns are addressed such as climate change, unemployment, the spread of diseases, and the like. Thirdly, this paper will look at how free trade regime facilitates the spread of information and helps stimulate research and innovation. However, cognizant of the limits of the free trade regime and aware of the risks that it still can pose, this paper will conclude by reflecting on some strategies and corrective measures in order to mitigate these risks and redound to benefits for all – the North and South alike. Ravenhill (page 347) was correct in the observation that there is nothing new about globalization. He said, “(i)n the sixteenth century, chartered trading companies established foreign production facilities for much the same reasons as firms did centuries later – internalization within the firm was a means of economizing on frequent transactions that inherently had to occur in a particular location, whether in order to access specific raw materials or markets.” However, what is new in this present juncture is the degree to which globalization has managed to permeate every single aspect of our lives. We have reached a stage when it is no longer possible to ask whether or not we should take part in globalization, but rather, what can we do to mitigate its possible risks (if any) and take advantage of its myriad benefits. The level of interconnectedness that the globe has reached at this conjecture where simply there is no turning back, where there is no recasting history. I argue that this question is of particular relevance to developing countries today, as those who oppose the free trade ideology often invoke the developing world and argue that the developing world are the hardest hit by the phenomenon of globalization. The evidence however demonstrates otherwise. According to Epping, et. al., (2009) “the farmers and producers in many countries in the developing world were not allowed in the lucrative U.S. market, making them much poorer than they would have been without trade restrictions. (p 45)” History has also shown how, in countries such as North Korea and Myanmar, the closure of trade borders as a result of the political despotism of their leaders has resulted in massive and acute poverty, unemployment and even hunger for the citizens. Conversely, countries like China which had transitioned from communism to capitalism, now enjoy widespread economic gains and a higher standard of living for its population. Its transformation is not yet complete, which is why the country has not yet been able to completely eradicate poverty and get its democratic institutions in perfect working order, but when it makes a complete transition to capitalism, it is highly likely that the gains will be tremendous and will have a trickle down effect on the population. Another interesting point is made by Rogowski (2000: 369) when they argued that in backward economies, free trade actually benefits the marginalized classes (for example, labor) while the dominant or elite classes wil resist it. To quote them: “the model therefore predicts class conflict: labor will pursue free trade and expanded political power (including in some circumstances, a worker’s revolution); landowners, capitalists and capital-intensive industrialists will unite to support protection, imperialism and a politics of continued exclusion.” (369.) Indeed, we can see here how the arguments presented by the activists against free trade are clearly wrong. They say that free trade prejudices (1) developing countries, and (2) the marginalized people in these countries. However, the analysis of the experts that have been presented here clearly prove otherwise. History and mankind’s capacity to address issues of inequality have proven that there is obviously no truth to Karl Polanyi’s famous statement, to the effect that: “(t)o allow the market mechanism to be the sole director of the fate of human beings and their natural environment, indeed, even of the amount and use of purchasing power, would result in the demolition of society… Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed.” (1944: 73). The second point that this paper wishes to make is that international free trade regimes provide a platform through which social concerns such as global warming and/or climate change can best be addressed. One thing that must be understood about global warming and climate change is that it cannot be addressed on a country to country basis. Because the effects of these take place in the atmosphere that knows no national borders, solutions to this must likewise take place through international infrastructure as well. A very good example of this is the Cartagena Protocol which hammered out the concerns over biotechnology released into the atmosphere or causing health concerns when hormone-enhanced food are transported into countries. The Cartagena Protocol was the result of a very massive trade dispute between the United States, Canada and Argentina and countries within the European Community (EC). It is my argument that such would not have been possible if there was no international trade regime and the trade interests of the powerful countries were not threatened. At present, the world can claim to have a protocol or a framework with thich to regulate a compelling environmental issue. It may not be perfect and it may be difficult to implement, but its presence alone is a positive step in the right direction as it acknowledges a global concern over this potential threat. A third argument that this paper forwards is the notion of globalization as stimulator of research and technology. We draw from Spero and Hart (date): The comparative advantage of many of the most competitive industries of the developed market economies became increasingly dependent on their advanced technology, which was expensive and time consuming to develop. Such technology coul sometimes be easily and quickly copied and used to produce products at a lower cost than that incurred by the developer, thus undermining the competitive ability of the firm that developed the technology. What are the implications of these? The implications of these are continued human innovation that will eventually (if not immediately) remand to the benefit of humankind. How is this so? Medicines that cure sick people in Africa, technology that reduce the emissions to the atmosphere, safe and clean biotech products that make life easier for the farmers do not develop randomly. They are the product of scientific innovation, they are developed in laboratories and universities. The logic of the market will make it so that it will be distributed eventually and will reach the beneficiaries who will need it the most, but first it must be produced. And that is exactly what the patents system does. It gives incentives for continued innovation and creation and expansion of human genius. In sum, this paper has argued that there are benefits to free trade that make it impossible to be ignored. Whilst we remain cognizant of the risks associated with it, there are certain ways in order to to mitigate these risks. An important thing to remember is that governance is absolutely important. Governance means both international and national – there must be regulations on the multilateral level, but there must also be efforts to diminish or reduce corruption in domestic governments. It is necessary to ensure that the poor and the marginalized are not excluded from the benefits of globalization and that they are consulted and made to participate in processes that determine the ways free trade will impact on their lives. It is possible to envision a world where free trade works for all – for the developed world as well as for the developing world, for the multinational corporations as well as for the farmers and workers. References Epping, R. C. (2009). Twenty First Century Economy. New York: Random House. Polanyi, K. (1943, original; 2001 ed.) The Great Transformation: The Political and Economic Origins of our Time / Karl Polanyi ; Forew. by Joseph E. Stiglitz ; Introd. by Fred Block. Boston, MA: Beacon Press. Rogowski, R. (2000). “Commerce and Coalitions: How Trade Affects Domestic Political Alignments” In Jeffry A. Frieden and David A. Lake, eds., International Political Economy: perspectives on global power and wealth. New York: Wadsworth Publishing. Spero, J. E., and Hart, J. (2010). The Politics of International Economic Relations 7th Ed. Boston: Cengage. Thun, Eric. (2007). “The Globalization of Production” in John Ravenhill (ed.) Global Political Economy 2nd Ed. Oxford: Oxford University Press. Read More