The Real Real Problem

This must be my day to disagree vehemently. Now I disagree with Jayati Ghosh’s diagnosis of the real problem with free trade at Project Syndicate:

Some argue that free trade is being demonized simply because people do not understand what is in their own best interest. But that is both patronizing and simplistic. Even if free trade is ultimately broadly beneficial, the fact remains that as trade has become freer, inequality has worsened.

One major reason for this is that current global rules have enabled a few large firms to capture an ever-larger share of the value-added from trade. Specifically, the proliferation of global value chains has enabled powerful multinational firms to control the design, production, and distribution of traded goods and services, even as various segments are outsourced to smaller firms far from final markets.

Nonsense. The real problem with free trade is that there isn’t any. No government wants it. Free trade removes a powerful lever for helping their friends or punishing their enemies. To the best of my knowledge no government in the history of trade negotiations has ever negotiated a free trade agreement including the United States.

We have negotiated managed trade agreements, replete with winners and losers. Is it any wonder that under such circumstances most of us will be losers?

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