The Green Party’s hostility to free trade would if implemented lock the world’s poorest out of the global economy. Thus electing Green MEPs to shape the policies of the world’s largest trade block is a dangerous move.
The European Union long ago became something more than a simple free trade area. Economic integration has now been supplemented by policies that aim to produce a political and social union. That said, the creation of a Common Market stretching from Belfast to Bulgaria which unites 28 countries with a combined population of half a billion is still the better part of the Union’s achievements. It is the project from which everything else originates and preserving it continues to be central to the Union’s work. Therefore, trade policy should be a central concern for anyone considering how to vote in this week’s European Elections.
And that should make anyone planning on voting Green should think again. Their Euro manifesto explains their view that:
…free trade means freeing the powerful to exploit the vulnerable. We see this when chain stores squash local competition with loss leaders before raising prices. We see it between EU countries: the policy of blindness of the Common Market to asymmetry of trade within the EU must take its share of the blame for the European economic collapse. Germany’s trade surplus and Greece’s trade deficit are not unrelated.
We see this exploitation in the EU’s treatment of countries in the global South too, as too often we force them to accept terms which perpetuate their impoverishment. At the same time, trade deals with wealthy countries including the USA and Canada impose policies upon European citizens for which we have never voted.
Greens argue for a different approach. We support fair trade, not free trade. We support the rights of impoverished countries to protect their industries and their workers and to determine their own economic futures. Where goods can be supplied locally, trade for trades sake can be counterproductive – centralising power in the hands of middle-men and depending on fossil fuels. Where goods cannot be supplied locally, we should ensure fair exchange.
I’ve had quite a bit of contact with Green Party members over the years and that leads me to believe that their concern with the poor and the vulnerable is genuine. However, it is deeply misguided to think that the policy which will help them is paring international back to a minimum of “goods which cannot be supplied locally.”
We could indeed manufacture TVs in the UK rather than China or T-Shirts in France rather than Bangladesh but whose interests would that be in? Not customers in richer countries who would wind up paying higher prices. But it would be worse for producers in poorer countries who could no longer exploit the greater purchasing power of consumers in more affluent nations to boost their incomes.
This applies not only at an individual level but across economies as a whole. Being forced to compete not only with domestic but also international rivals means producers have to up their game and become more competitive. It also allows innovative products to disseminate quicker as customers don’t have to wait for a local firm to begin manufacturing them. So rather than undermining poorer countries, open international trade should be mutually beneficial.
So that’s the theory: how does it work in practice? This chart pilfered from the Economist reports a study showing that it is not only rich countries that benefit from membership of the EU and the Common Market but also countries that were relatively poor at the time of their accession like Spain and Portugal.*Greece stands out as a rather spectacular exception though that may have been linked to its joining before it was ready.
More broadly, the era of globalisation has actually been pretty good for the world’s poor. In the decades after WWII, they generally pursued policies of self sufficiency of precisely the kind the Greens would advocate. And the results were disastrous: while the West and Japan stormed ahead developing countries stagnated with their economies mired in corruption and inefficiency. As this failure became evident these countries slowly began reintegrating into the global economy. When Mao died in 1976, his successor Deng Xiaoping looked to the success of Singapore had had in using exports and investment from overseas to lift itself out of poverty. Following its lead restrictions on international trade were jettisoned to such an extent that companies like Boeing and Coca Cola were allowed to open factories in what remained notionally a communist country. India followed a similar path in 1991 when a balance of payments of crisis forced it to seek a bailout from the IMF. The conditions of this assistance were that India had to open up its economy. The results in both countries were dramatically higher growth rates that pushed down the numbers living in poverty.
This is particularly striking when you consider that global economic growth during this period has actually been pretty anaemic. Throughout this time growth in the developed world has lagged behind the poorer regions of the world. Therefore, the supposition that our era of free trade is benefiting the rich at the expense of the poor flies in the face of the evidence. It has heralded not greater exploitation but the fastest reductions in poverty in human history.
Given these benefits to those in the Global South, I regard the Green Party’s opposition to the Partnership Agreements which reduce trade barriers between the EU and partner countries with horror. The developing world need the barriers to trading with world’s largest economy reduced not increased!
Despite all that free trade has achieved both within and beyond Europe it has few friends. Successive attempts at a new global trade deal have faltered. The great recession has led many to scapegoat foreigners for their problems, a trend which afflicts not only immigrants but also those seeking to export goods. With protectionism on the rise, the last thing we need is to elect more opponents of the free trade to the European Parliament.
* the end date of 2008 is relatively flattering as it avoids the Eurozone crisis but as the Economist notes “for most members (Greece, again, excepted) the drop in real output per head since the crisis looks modest relative to prior gains.”