An argument against free trade

OK, so, yes, NAFTA isn\’t in fact free trade, it\’s simply freer trade than what went before. Still, this is a pretty odd argument to use about it:

In agriculture, until the recent price spikes, cheap US corn flooded Mexican markets,

Consumers eat cheaper and are thus richer. And this is bad?

9 thoughts on “An argument against free trade”

  1. Interesting, especially when Jo Tuckman had an article in the Guardian just last month about food inflation in Mexico.

    The Mexican government has ‘frozen’ food prices. Like that always works.

  2. “And this is bad?”

    Well, it can be, as you would know if you expended any effort learning about the economics of poor agricultural economies.

  3. Tim,

    What might be bad about it is that Mexico’s agriculture areas might have become depressed, helping to induce the mass migration to the north which has been seen since the passage of NAFTA.

    Although some Mexicans might have cheaper food, when so many people might effectively be being forced into migration as a result then I’m sorry, but I can’t see how that is a good thing.

    The ‘cheaper food’ argument about free trade goes back all the way to Bright – his constituents sang a song about him, quoted by Asa Briggs in ‘Victorian People ‘ –

    “This broad brim’d hawker of holy things
    Whose ear is stuft with cotton, and rings
    Even in dreams to the chink of pence…’

  4. The matter of whether a particular case of a “cheaper” commodity is “good” or “bad’ does depend on the facts of the particular case.

    If the US can export corn to Mexico cheaper than it can be raised locally in Mexico, that translates to the US having a comparative advantage in that production and indicates that the mexican farmer should be concentrating effort on something else on which he can turn a profit.

    However, if the cheaper price of US corn on the Mexican market has achieved its competitive advantage by either US government subsidy or export subsidy (or both), it’s a potentially different story, with the US taxpayer being hurt for sure and the Mexican corn farmer suffering a competitive disadvantage financed by the US taxpayer. In some, perhaps many, cases, the whole point of subsidy is to overcome the inherent comparative advantages of some places over others. The result is a broad reduction of overall well-being for the benefit of the relatively few (but politically powerful) favored producers.

    The really bad news is that, unless there is a general tendency toward and an actual reduction in the number and size of these economically destructive policies, there will be a general tendency toward their increase (the proof of that is a different argument.), on a path that leads to increasingly autarkic existence, which wll cause those nations most affected to experience a number of hostility-inducing processes; the first of these is a lowering of the level of wage rates in the affected industries, for which a natural consequence is an expansion of emigration of those most unfavorably affected.

  5. Martin is pointed in the right direction. The enormous migration of Mexicans to the US is directly fueled by a variety of contrary-to-intended-purpose US policies, which broadly speaking, boil down to one: socialism.

    Mexico contributes mightily to this problem by making investment difficult and insecure for foreign (US and other non-Mexican nationals’) investment. If it were not for such policies, investment of many types would pour in, increasing the average capital per worker and raising wage rates; under such conditions, many more would opt not to leave their native environs.

  6. “that translates to the US having a comparative advantage in that production”: no, gene, that is not what is meant by “comparative advantage” in Ricardo’s sense.

  7. Actually I think the argument is spot on, for once. If there was a free market in corn in the US, you’d be entirely correct. But of course corn is one of the most heavily subsidized crops. Comparative advantage gained from artificially low costs doesn’t benefit anyone except the subsidees.

  8. Oh for fuck’s sake, Dan, that ain’t “Comparative advantage”, it’s mere bloody “advantage”. Leave Tim to toss around the technical terms.

  9. Nitpicking about the impact of subsidies and tariffs and whatnot ignores the basic disparity between the US and Mexico: if the Mexican-American War had never been fought, does anyone seriously doubt that there would be floods of impoverished Chicanos coming across the Oklahoma border instead of the Texan one?

    Mexico’s relative impoverishment might be partially explicable by US trade policy, but in the main it is thoroughly endogenous.

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