How I Learned to Stop Worrying and Love Trade Deals

By
John Engle
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trade

Support for free markets and free trade is one of the few ideological litmus tests most libertarians would agree to swear by. We may disagree on the military, the appropriate size and role of government agencies, and even on who should build the roads, but free exchange is an immutable aspect of what we believe.

Yet when the subject turns to formal trade deals, libertarians are deeply divided. Judging by discussions, articles, and speeches I’ve observed within the various libertarian communities, it seems like the opposition side is larger, or at least more vocal, than those supporting these deals like the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).  So why are so many libertarians opposed to these kinds of deals?

 

Two Problems with Trade Deals

Most of the criticism seems to revolve around two issues. The first comes from a common libertarian skepticism toward, and suspicion of, state actors generally and international organizations bodies that coordinate trade deals particularly. Many libertarians have a kneejerk animosity toward international organizations, whether the UN or the WTO, and tend to see such institutions as antagonistic to individual liberty.

That is a criticism I can understand and appreciate. Handing over authority to an adjudicating body does involve a loss of a kind of sovereignty. Yet it is a loss that, arguably, is compensated for by the creation of stable institutions that can facilitate agreements not just for states, but for firms of all sizes.

And that’s where the second issue arises. Many libertarians express the belief that these deals like TPP serve only to entrench the interests of an already established economic elite. They tend to favor certain politically connected industries, and sometimes even individual corporations. There is no denying that in any given deal, certain sectors will find favorable terms, and that concessions will be won due to political influence.

Despite these criticisms, these deals should still be looked on more favorably by libertarians. Allow me to explain why.

 

A Seat at the Table

To answer the first criticism, about sovereignty and accountability, we must ask what happens in the absence of a trade deal.

Take the example of TPP. With Trump elected president on a protectionist platform and a Democratic Party now deeply skeptical of free trade, it seems like this particular treaty is dead and buried. Yet it will not be the end of trade deals in the Asia-Pacific region. China has already stepped up its efforts to consolidate and expand its own multilateral free trade agreements in the region. This will serve to bolster China’s political clout and accelerate the decline of the United States as the regional hegemon and security guarantor.

Some libertarians might cheer that outcome. I would argue that such cheers are shortsighted. As other Asian countries see the rising China as the more committed partner, the norms the American regional order has maintained may start to break down. Our withdrawal from TPP does not mean that free trade bargains won’t be struck or that rules won’t be made. Rather, it simply means the United States won’t have a say in what the rules are.

Some libertarians have argued that abandoning trade agreements in favor of a general openness to the world would be preferable to the current system. Such an argument is foolish in the extreme, ignoring the realities of politics beyond America’s shores.

Barriers are still high and numerous around the world. If the United States were to exit organizations like the WTO and to roll back its bilateral and multilateral trade pacts, it would only serve to make trade less free. The United States, for all its faults, is a champion of open markets by comparison to most nations. Our stepping away from the institutions and systems that govern trade will not make us freer, it will only shut us out of the discourse and to make those institutions more hostile to the sort of world order we wish to see.

Having a seat at the table when rules are being made is essential if we want our goods and services to be treated fairly. Stepping away will only dampen our voice and force us to accept rules set by others and without our input.

 

A Gradualist Process

The belief that crony capitalists will be the only beneficiaries of these deals should also be dispelled from libertarian thought. Sure, well-connected firms and sectors will have more influence over the particulars of a trade pact than will outsiders and upstarts. But that inbuilt unfairness is a political reality worth accepting for the broader good of increased free trade.

It is a fact that America’s deals over the past several decades have lowered barriers and slashed tariffs across all manner of sectors. It is not just the well-connected crony capitalists who have benefited. Everyone has in the aggregate.

What we need to understand is that the process of negotiation is a slow, grinding process. It is not about big wins and sweeping away all barriers in favor of a global free market. It is about incremental changes and reforms that move us closer to that ideal. For many decades, these negotiations were carried out on a massive scale through the WTO’s rounds. Each round produced a world market that was more open than the one that came before it.

But progress ground to a halt as countries ran out of easy things to agree on. That has prompted the move toward country-led bilateral and multilateral trade pacts, deals that can be more easily struck because they involve fewer (though still many) interested parties. There is nothing particularly nefarious about this system. Trade deals still lead to comparatively freer markets than had existed before their advent. This has been the case in almost every major trade deal struck since the end of the Second World War.

Libertarians are thus looking at trade deals in the wrong light. They see favored industries getting sweetheart deals and the establishment of unelected arbitration panels, and they think that violates libertarian principles. Yet the end result is an incremental step toward what we want. In the iterated game of trade negotiation, trade deals are the only meaningful way to generate genuine progress.

 

Embracing Trade Means Embracing Trade Deals

What all this means is that libertarians have to learn to stop worrying and love trade deals. As the world becomes more isolated and nationalist governments turn away from trade and toward protectionism, it is absolutely essential that libertarians stand strong as a voice for open markets and free exchange.

That means embracing trade deals as the imperfect but serviceable tools that they are.

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John Engle

John Engle is a merchant banker and author living in the Chicago area. His company, Almington Capital, invests in both early-stage venture capital and in public equities. His writing has been featured in a number of academic journals, as well as the blogs of the Heartland Institute, Grassroot Institute, and Tenth Amendment Center. A graduate of Trinity College Dublin, Ireland and the University of Oxford, John’s first book, Trinity Student Pranks: A History of Mischief and Mayhem, was published in September 2013.

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