Question

Political reasons why people argue against free trade

Please illustarte answer with relevant examples from political perspectives

Answer 1

In theory, as long as countries are utilizing their comparative advantage, everybody benefits from free trade and that is why it has been adopted worldwide with great zeal in the past few decades. But the reality is often different.

Free trade allows some powerful countries to exploit countries rich in natural resources by importing from them at a very cheap price (usually these resource-rich countries are under debt obligations and have to submit to the trade deals of the more powerful countries). This never allows the underdeveloped country to realize its full potential. Most of the Latin American and African countries have faced such a situation when their resources are exported at a fairly small price since they are under a lot of pressure from organizations like the IMF or World Bank to follow such policies once they have lost the ability to repay loans.

Further, the poor workers in the developed countries involved in activities like manufacturing often lose out as their production is substituted by cheap imports. This has been the starting point for the recent trade war between US and China. President Trump has imposed a tariff on imports of steel and aluminum, two of the largest employment generating sectors in US, from China. Trump is working under the theory that avoiding cheap imports will allow these industries ti to develop at home and generate millions of jobs. There is nothing better to gain political popularity then creating jobs or creating an impression that you are creating jobs. Most trade theorists believe that the policy will only lead to a reduction in jobs actually.

Another major reason behind opposition to free trade is the trade deficit numbers. The deficit is often politically unpopular as people view this as a foreign country domination and domestic country debt. A layman can not understand that a trade deficit automatically means a capital account surplus. Politicians often get swayed by this rhetoric. Growing trade deficit is another reason why President Trump has targetted China in import restrictions as it helps in creating an image of self sufficieny irrespective of the economic damage it can cause.