The Impact of Free Trade on the Soul

“…There are times when the sacrifice of [the benefits of free trade] is in the broader national interest, or in the interests of preserving some of the values that Americans see as their obligation to export to other, less fortunate nations.” — Irwin M. Stelzer, “The Limits of Free Trade,” The Weekly Standard, April 30, 2001.

The economic case for free and unfettered trade is already well made. Both economic evidence and theory strongly support the conclusion that free trade increases the economic well being of all participants. Much of the increase in wealth in the post WWII era and the post-Cold War period, in particular, were strongly tied to the protocols of free trade. There will certainly be people and industries that are dislocated by the discipline of economic competition. In aggregate, however, wealth is increased and resources are more efficiently utilized. However, economic efficiency and welfare are not the only values against which public policies ought to be weighed. Free trade is more an expedient than an ultimate value.

Domestic labor organizations argue against free trade citing the lack of worker protection in foreign countries, but many times such arguments are motivated less by a concern for foreign workers and more by a fear of competition from poorer people willing to work for less. The AFL-CIO does not spend much political effort fighting for workers’ rights in the Sudan. Sudanese workers are not a competitive threat to American workers.

There are legitimate concerns that different countries might have environmental restrictions that are less stringent than those in the US. Some argue that trade should be used as a lever to compel compliance with US standards. While there is merit in this concern, it must be balanced by the consideration that different countries in different stages of development might reasonably strike a different balance between economic growth and environmental concerns.

In an ironic way, trade restrictions can reasonably be used as leverage to persuade countries to open up their markets. Imposing trade restrictions on countries that erect walls around their markets will mean that in the short run both the US and the other countries will be less well off. However, if such a policy opens up trade, short-term trade restrictions might prove salutary in the long run. However, sometimes even this argument degrades into an excuse for old-fashioned protectionism.

Free trade true believers argue that such trade encourages different countries to become more like us under the implicit assumption that being like us is a good thing. As free trade helps countries become wealthier, they will generally increase both worker and environmental protections. From a political standpoint, the economic discipline of free trade encourages a stable and open legal regime to mediate contractual disputes. The competition caused by free trade forces countries and companies to become more transparent and to loosen up the flow of information, which undermines repressive regimes.

However, the converse is also true. As we trade with other countries we may become, for better or worse, like them. Edwin Black recently published a book entitled, IBM and the Holocaust: The Strategic Alliance Between Nazi Germany and America’s Most Powerful Corporation. The book charges that IBM tabulating machines sold the IBM subsidiary Dehomag were used in the 1933 to 1939 censuses to create a cross-referenced data base of names, addresses, and family histories the Nazis used in implementing their Final Solution. The information from the censuses made the Nazi extermination of Jews more thorough in Germany than in occupied countries. (See Beatty, Jack, “Hitler’s Willing Business Partners,” Atlantic Monthly, April 4, 2001.)

In the 1930s there were already reports of anti-Semitic repression in Nazi Germany, evidence that was overlooked by IBM (and other US companies). The promise of profits made it easier to deliberately overlook inconvenient information. Hitler awarded Thomas J. Watson, the chairman of IBM, the Merit Cross of the Germany Eagle for his efforts.

Even if companies who are involved in trade are not active participants in repression, the promise of profits can cause these companies to avert their gaze from activities as varied as the anti-Semitism of the Nazi to the present day religious repression in the People’s Republic of China. Willingness to engage in trade with repressive regimes may in the long run compel repressive regimes to become less repressive, at least we can hope so. However, the long run can be a very long time and in the mean time our collective souls can be at risk.

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