On not understanding free trade areas

This is utterly untrue. In a continent where collecting direct taxes is nigh on impossible – because people don’t earn enough and the infrastructure is not in place – tariffs are essential if revenue is to be raised. But Cameron wants them abolished.

Yes, abolish them, create an African free trade area.

More than that – Cameron knows (or he should know) o country has developed without the benefit of tariff barriers. It’s how infant industries develop. But off goes Cameron to demand the creation of the Washington Consensus’ dream in Africa – a continent left open to Western exploitation without tax being paid in any local country.

Ah, no, not quite understanding the point about free trade areas.

For example, we have one in the EU. Internal free trade but but not external free trade. That\’s what an African free trade area would be as well. Internal free trade to Africa and not external free trade.

It\’s piss all to do with laying the continent open to \”exploitation\” by Western firms and all about getting some division and specialisation of labour, some comparative advantage going, between the African economies.

The thing here is (although I do indeed think that external free trade is a good idea) that even if you do buy the infant industry story, the need to develop behind tariff barriers, there\’s still bugger all point in having such tariff barriers between Zambia and Zimbabwe, Ghana and Gabon. Given the sizes of these economies, no more point in them than between Somerset and Dorset or Savannah and Charleston.

No, really, I\’m serious: Somerset\’s gross value add is some £6.5 billion. Call it $10 billion. This is about the size of the economy of Guinea, larger than that of Mauritania, twice that of Sierra Leone, thrice that of Burundi.

Forget all the crap about westerners, of course they need free trade between each other, just as only an entirely moronic idiot (or the nef) would call for trade tariffs between Taunton and Dorchester.

 

15 thoughts on “On not understanding free trade areas”

  1. One of the features of having no internal tariffs in an African free trade area would be to make it easy for horrible Western businesses to establish in the friendliest African country within that area and then be free to trade in the whole area.

    Generally that would be a good thing as it would provide a very strong incentive on all African countries to be as open for business as the most friendly. It would stop them being able to extort from such investors, such extortion generally going to line the pockets of corrupt officials and politicians, as the investment would all go in to the least corrupt, most observant of the Rule of Law and most stable countries.

    Unfortunately, there would be a (possibly long) interim period when those corrupt regimes fought to keep their rackets going. That fighting would probably lead to war as this would be easier to mobilise for against any small country looking to be the African Luxembourg than attempts at internal reform.

    Europe only managed to set this sort of thing up at a time when it was devastated by a continental war that left no large country as an economic winner and where the leaders and supporters of the most belligerent nations were punished by the political victors of the war.

    Disarming and dethroning the potential opponents of real free trade within Africa would be something that is neither within the power of any in Africa to do nor could be achieved externally without looking like colonialism.

    I think free trade in Africa is more realistically going to have to develop incrementally by bilateral agreements between those nations able to support it. Once they have reached a certain critical mass and perhaps started to align more generally in terms of stability, democracy, reliable and uncorrupt administration and justice, respect for property rights, it may be that peaceful accession by neighbours could start to happen.

    However, as alleviation of the consequences of the bad choices of the countries that don’t follow this path will be subject to a combination of the compassion and guilt of the West, it will be a long and slow route.

  2. It seems that any comment which contains anything remotely looking like a URL disappears into a black hole, as seems to have happened to my previous porting.

    Is called2account a Ritchie front organisation. If not who is behind it? NEF

    I wish called2account would provide permalinks for their articles, so that Tim can link to them properly. At the moment the main article is about hackgate, not free trade.

  3. called2account does indeed seem to be a Ritchie front. By following the links for the author archive I found an article on Ritchie’s TaxResearch blog for 2011/07/18 dealing with free trade in Africa. I hesitate to give the URL here or this comment will disappear into a black hole.

    The man is a numpty. Why does he not look at Hong Kong and Singapore which have both prospered mightily thorough mostly free trade.

    60 years ago Hong Kong was an overcrowded refugee settlement on a barren rock, and Singapore was a city on a swamp described as the worst slum in Asia.

  4. @ Dave Evans

    I confess, I do not know a great deal about the history, pros or cons of free trade relative to, er, unfree trade. Accordingly, I shall not offer an opinion, one way or the other, on that.

    However, I will say that I find it very odd when people cite Hong Kong and Singapore – which are, essentially, cities – as economic models for whole proper countries or even, in this case, continents.

    Maybe I’m missing something?

  5. …….Setting up a free trade area in Africa may have been helped if Gaddafi’s backing for the gold dinar as an international currency had not been blown off course by Nato…….

    What’s the relevance? You don’t need a single currency to have free trade. With the results of the Euro experiment firmly in the “Oh Bugger” range, one would think that a second opinion was unnecessary.

  6. There isn’t even free trade between one part of Lagos and another, let alone across Africa. Cooperation is almost non-existent outside family members in far too many places for an agreement to be reached, or indeed any meaningful development to take place.

  7. An example of a large internal mostly free trade area is the USA. Which is of course one of the wealthiest countries by per capita in the world. And I understand that it’s been an internal mostly free trade area since they set up the US constitution. (The states do manage to sneak in some protectionist behaviour).

  8. My jaundiced eye scans this issue thus: given that Murphy is quite possibly the stupidest cunt alive in this particular segment of the 21st Century, if he’s agin it, I’m for it. He could grab the wrong side of a Mobius strip.

  9. “Cameron knows (or he should know) o country has developed without the benefit of tariff barriers.”
    Poor old “Dave” – he was taught at Eton all those lies about Egypt and Babylon and Crete and Athens and Persia and Macedonia and Rome who developed from nothing into being the leading empires of their time without inventing tariff barriers.

  10. @Dave Evans – presumably the reason Tim links to calledtoaccount, rather than taxresearch.org.uk is to try to get back his #1 wikio ranking?

  11. On a slightly different but amusing note. Has anyone noticed how many views Tim Worstall’s top five articles on Forbes have received against Richard Murphy’s top five articles on Forbes? Tim’s top five average is 21,876 and Dick’s top five average is 575.

  12. I’m not taking Ritchie’s side here, but I am skeptical of the automatic acceptance of free trade areas that your response implies. Unlike universal free trade, FTA or a customs unions, belong in the world of the second best as a distortion (the external tariffs) remains. A priori their effect is ambiguous. In the terminology of the economic literature going back to Jacob Viner’s work in the 1950s a CU brings the benefits of trade creation from the removal of tariffs with the partner nation. However, there is also the loss due to trade diversion where former trade in an efficiently produce good from outside the CU, is replaced with trade in an inefficiently produced good (but zero tariffed) from the partner nation. There is quite a bit of evidence that a FTA or CU between less developed countries are detrimental and are worse that a FTA or a CU between rich countries. See this 2003 article from The Economic Journal for example http://cepr.org/meets/wkcn/2/2306/papers/venables.pdf
    Essentially, yes there can be a point in keeping tariffs between Zambia and Zimbabwe if you are keeping tariffs with the rest of the world. You are likely to lose extreme comparative advantages and have them replaced by intermediate comparative advantages.

    A free trade area should not simply be approved off just because it frees SOME trade. In almost all situations I would say abandon the FTA and adopt unilateral free trade with all countries instead.

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