The Myth of Free Trade

The concept of free trade is like a unicorn, they are lovely things to imagine but they don’t exist. The barriers posed by foreign governments, whether in the form of tariffs, currency manipulation, excessive bureaucracy, product certifications, market distortions, corruption, or (as is usually the case) some combination of all of these, make it impossible for a seller of a product in one country to easily market that product in another country. Therefore, while one hears the term “free trade” bandied about with great frequency, especially among global entrepreneurs, the concept is essentially a myth.

I do know of one laudable – and very real – example of free trade, though. It happens in a market that forbids tariffs of any kind for any product or service, one where it is impossible for anyone to manipulate or devalue currency, one where a strong ruling body monitors and regulates all commerce, and one where strong, enforceable laws exist to control banking, environmental concerns, labor rights, safety standards, and copyright and patent protection.

This market, of course, is the market between the fifty United States. Across a landscape filled with three hundred million consumers, products and services travel freely without any hang-ups at the borders and without any artificial inflation of prices. The state of Alabama cannot impose trade conditions that are disadvantageous to an entrepreneur from Vermont. If the goods fill a consumer demand, they will sell. Free trade amongst the states has served our country extraordinarily well and has led us to have the most successful and most consistently stable economy in the world.

Therefore, while acknowledging that truly free trade will never be anything more than a fantasy, we need to look no further than our own shores for a model of the kind of business relationships we should have in place with all of the nations we engage in commerce. Our interstate commerce laws identify virtually every issue that we need to address to level the playing field for American exporters and generate a healthier economy throughout the world while attending as well to numerous other social issues.

American lawmakers seem to be beginning to understand this necessity, at least in theory. What they’ve been able to put in place with a handful of other nations is something we call a free trade agreement (FTA). These agreements codify commercial terms with each nation. They address (and often all but eliminate) tariffs, they establish uniform rules of law, and they establish enforceable guidelines regarding safety standards, environmental issues, and labor rights.

In other words, they’re a good start. Let’s look at them a little more closely.

Before 2000, we had only four FTAs. Today, we have seventeen, with others pending. But while FTAs with Australia, Israel, Honduras, and Singapore, to name a few, mark a positive step forward, they mark only the smallest step. The cold fact is that we do not have FTAs with the countries that represent more than ninety percent of our trade deficit. And until we do, we cannot hope to have any chance of creating fair opportunities outside of our borders for American entrepreneurs and we cannot hope to improve living conditions for so many people at home and around the world.

Neal Asbury is CEO of The Legacy Companies and is a leading advocate for free enterprise. His first book, Conscientious Equity, is due out November 2010.

One Response to “The Myth of Free Trade”
  1. focusoninfinity says:

    Your article is well stated.

    I’ve long made a personally to me, distinction between (totally in theory) “free trade”, “protected trade” and “balanced trade”. Balanced trade as I use that term. To me balanced trade between counties can mean equal in approximate dollar or other currencies amounts, and/or like commodities (but usually not identical commodities), or dissimilar commodities of near equal value. Whatever the balanced trade forms, the primary balance is of near equal benefit to both nations.

    An example of an industrialized nation such as the U.S. after WWII in trade with an undeveloped, third-world nation. It sells woven cotton fabric balanced by our export to them of finished knitting equipment, or equipment and raw cotton. Balanced value flows equitably both ways whatever the commodities.I’ve never been in foreign trade, so likely I don’t see the weaknesses of this concept. What are the weaknesses? Any strengths, I hope?

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