Because Free Trade Isn’t Free

Port of Seattle

The free trade crowd likes to roll their eyes at critics of the Trans-Pacific Partnership trade agreement as if we’re a bunch of idiots who just can’t (or won’t) understand the way markets work. But here’s the thing about “free trade” as defined by agreements like the TPP: it doesn’t create a free market.

Sure, goods are free to cross borders under TPP. And financial capital sure is free to cross borders. And since goods-plus-capital equals jobs, the TPP frees more jobs to cross international borders.

But you know what’s not free to cross borders? People. And since under TPP and NAFTA jobs are mobile and labor isn’t, free trade agreements like these end up distorting the economy in a way that advantages capital and disadvantages labor.

I’m not making shit up here. The same neoclassical economic theories that argue for free trade will tell you that if capital is free but labor mobility remains constrained, then the labor market can never reach a state of natural equilibrium. Capital can (and will) arbitrage the price difference between various labor markets, artificially suppressing wages for all.*

Good for profits, not so good for workers.

Of course, that doesn’t mean we can’t have free trade. We could open our borders to all comers, and vice versa, allowing people to move to where the good jobs are. Or, we could all openly acknowledge that trade agreements disadvantage labor, and insist that they come with policies designed to ameliorate the harm and redistribute the profits more broadly. You know, if we actually gave a shit about workers.

But let’s not pretend that, on their own, free trade agreements are good for American workers. TPP is great for the owners of capital, and it may be good for the economy broadly—if you broadly define the economy as GDP. But it will further weaken the relative power of labor in the United States, and thus push down wages for many workers.


* Not to be construed as an actual endorsement of neoclassical economic theory.

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Goldy
David "Goldy" Goldstein has written about politics for The Stranger, The Nation and the Huffington Post. He hosted “The David Goldstein Show” on Seattle’s news/talk 710-KIRO from 2006 through 2008, and has been pissing off readers at his blog HorsesAss.org for more than a decade.