G. 1.   FREE TRADE & THE WORLD TRADE ORGANIZATION

One might gather from seemingly bipartisan support for free trade today that everyone would benefit by eliminating all restrictions on international trade. This appears to have international support because such support was required to establish the World Trade Organization a few years ago to promote it. There are a few voices criticizing one or both. Can any light be shed upon this for the general public? Yes. Read on.

Economist David Ricardo conclusively proved in the early 19th century that any two countries could both benefit from free trade between them IF capital and labor moved freely among industries within each country but could not move at all between the countries, and at the time each country was better at producing some things than was the other.

No country then or ever afterward permitted totally free trade--all maintained some tariffs, or other non-tariff barriers, on some imports.

Yet economists talk as though the argument for free trade was sound today. But today capital moves between countries with the speed of a computer e-mail. That makes a huge difference. The old argument for free trade no longer holds if it ever did hold strictly. International trade may still benefit both countries in some cases, but not in all cases, and the matter must be decided by careful analysis case by case.

Capital does move now in large amounts between some countries. Sometimes a business firm even shuts down some of its operations in one country and establishes them in another country. This country has lost nearly 3 million jobs recently because the work was “outsourced” to other countries.

The free trade argument supposed that our imports were fairly soon matched by our exports. That need not be true either. The dollars other countries earn by our imports from them may not be used to buy our exports, but can be are sometimes used instead to buy ownership of some U. S. businesses, whose profits then also go to foreign countries.

The WTO (World Trade Organization) does not require free trade, but if a country does anything that restricts what has been normal trade, and thus adversely affects a member country's exports to another member country, the country whose exports have been hurt can take the matter to the WTO. It decides the case in meetings not open to the public or news media, and even without giving the country charged with restricting some import an opportunity to explain why it thought it was in its national interest to do so. The penalty can be allowing the country hurt an opportunity to impose a compensating trade restriction on the offending country’s exports. These highly objectionable WTO procedures should be changed now or the U.S. should withdraw until they are changed properly.