"The propensity to truck, barter and exchange one thing for another," was, Adam Smith argued, peculiarly human. "Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog." So much for trade 18th century-style, but what would Smith have made of trade negotiations in the 21st century?
Let\’s have a stab shall we?
At the heart of the World Trade Organisation (WTO) talks is a simple belief, held by economists since Smith and (especially) David Ricardo: trade should benefit all sides.
Erm, no. The point is that any specific voluntary trade will (note, will, not should) benefit all sides that take part in it. There most certainly can be disbenefits to those not taking part in it….but that\’s another matter. If I go to one pub that voluntary exchange of my money for their beer benefits (at least, it is my belief that it does) both me and them. But the other pub that I didn\’t go to loses from the way that I\’ve conducted this exchange.
This doesn\’t benefit all sides now, does it? But we don\’t say that I should compensate those pubs that I\’ve not gone to, do we? If I change my local I\’ve not got to pay a termination fee to the one I\’m abandoning, do I?
Tomato paste imports into Ghana benefit Ghanian consumers of tomato paste, the importers of such and the producers of those imports. Everyone involved in the actual trade benefits. But the local Ghanian producers of tomato paste lose out….why should compensation be due?
We most certainly do not say that trade should benefit all: we say that it will benefit those who take part in it. A rather crucial distinction.
Some are home-grown: protecting strategic or vulnerable industries. Others are foreign: persuading rival nations to lower the barriers to their markets so that your producers can get a foothold.
Most amusing to invoke Smith and Ricardo and then point to the remnants of mercatilism that infect the political classes.