Is it America vs. Poor Nations in Trade? No.

Ian Fletcher

Activist Post

Question: is there a fundamental us vs. them dynamic in America’s trade with the developing world? Is a sound trade policy for ourselves ultimately about nothing better than grabbing an economic advantage at the expense of other nations, especially poorer ones? 

Some people certainly seem to think so.  To them, ending free trade sounds like a mere invitation for America to become a global economic bully boy.

But they’re wrong. The serious economic rivals of the U.S. and other developed nations are “big boys” whom nobody needs to cry over. We need not have ethical qualms about taking industries away from Japan. 

This is true even of the advanced sectors of nations that are still poor overall, such as India and China, as it is not the Third World peasant sectors of these nations that meaningfully compete with us; it is the developed sectors of these nations, which are like islands of First World industry in the Third World. The yuppies of Bangalore are legitimate objects of our rivalry.

The real conflict in international trade isn’t so much rich nations vs. poor as mercantilist nations vs. non-mercantilist ones. Exposing the underlying economics that makes mercantilism work will tend to level the playing field between the former and the latter. 

What Third World nations really need is things like, in the words of the International Forum on Globalization, a left-leaning group:

The right to control financial flows across their borders, set the terms of foreign investment, give preference to domestic finance and ownership, place limits on resource extraction, and favor local value-added processing of export commodities.

None of this is a particularly meaningful threat to American prosperity, so there is no reason for us to object. 

The above-mentioned policies would bring significant benefits to poorer nations, but impose trivial or zero costs on us. Corporate interests in the U.S. will certainly complain—and doubtless dress up their complaints as the interests of the U.S. economy as a whole—but there is no reason to expect these policies to impose meaningful harm on America at large. 

In fact, any U.S. strategy based on exploiting poor nations will be a waste of time for us. It is a low-quality economic strategy that will be outperformed by better strategies. We should be battling it out with Japan, Europe and the emerging technological powers in high technology, not fighting to keep cocoa processing from migrating to Ghana. 

These facts all dovetail well with the kind of the economic nationalism America needs: not a predatory attitude of “America first and to h*ll with everyone else,” but an attitude that seeks the best for this country while accepting the right of other nations to seek the interests of their people, too.  If free trade is ended, the losers will be the trade-surplus powers from Beijing to Berlin, not starving children in Africa.

  

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank founded in 1933 and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.

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