HH The Benefits Of Free Trade Are Being Canceled Out By Big Government At Home

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Foreign policy commentators live in their own bubble. The WTO’s credibility is gone and its survival uncertain due to its lack of impact on world trade over the last two decades. China vs. USA trade war is still growing and the economic community of European states is in its worst-ever shape. Yet no one stops to wonder if all these failures have anything to do with the kind of economic integration they propose. In fact, the media is now childishly excited about the ASEAN-led Regional Comprehensive Economic Partnership (RCEP), a Trans-Pacific Partnership surrogate many years in the making.

What no one recognizes is that the common reason for the breakdown of world economic relations is the combination of interventionist domestic policies and government-led, top-down, faulty trade integration, which serves only interest groups and is subject to perverse incentives. The positive effects of inter-governmental multilateral trade agreements are minor at best. Their negative effects, however, such as stifling global trade, diversion of trade flows, or increasing red tape, have been growing at an alarming rate.

Trade agreements have thus become obsolete tokens of negotiation in larger geopolitical disputes, protectionist tools for managing and interfering with global trade flows. RCEP’s tentative provisions serve as a great illustration of the adulteration and vitiation of trade deals. For example, RCEP would allow and encourage poorer members to “proceed cautiously and gradually in lowering tariffs on manufactured goods… [over] adjustment periods of up to 25 years” (The Economist, 2019). However, it is precisely the poorer members of such agreements who benefit from reducing their tariffs to zero. According to Mises (1990), “their own policies are the main obstacle to any improvement and economic progress. There cannot be any question of imitating the technological procedures of the capitalistic countries if there is no capital available. Whence should this capital come if domestic capital formation, as well as the inflow of foreign capital, are sabotaged?”

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Gary Anderson 1 month ago Contributor's comment

I can't imagine a nation that shoots itself in the foot over trade more than India.