Free trade has gained a high level of attention from special interest groups, the political front and labor unions. The primary arguments against free trade are centered on the negative impacts it has on developing economies. These economies need to be protected from pressure in the international market that hurt local industries and businesses. The employment sector is also affected by free trade that paves the way for the free movement of labor. Governments lose money that is gained through import taxes. Proponents of free trade argue against it as it causes political interference in developing countries (Chang 34). Different economists have proposed various arguments against free trade including Friedrich List, Joseph Stiglitz and Ha-Joon stating that emerging economies need to be protected to achieve meaningful growth. Free trade has been observed to harm developing economies and aids capitalist economies to take advantage of fair business policies.
Arguments against Free Trade
Free trade results in job loss in domestic economies which hinders growth and development. It can be seen that free trade paves the way for international companies to introduce its business in local economies leading to job loss. Foreign competitors take up job positions in local economies leading to unemployment (Chang 45). Further, the competition that is created by the availability of foreign products in the market gives consumers a wide variety to choose from. In some instances, the competitors offer improved products than those produced in the local markets resulting in redundancy in local industries that are forced to lay off some individuals. It follows that developing economies are the most affected by the unemployment that can be attributed to free trade. This is because the local businesses are adversely affected by free trade leading to closure and poor performance that is assigned to job loss.
Free trade hurt infant industries particularly in developing economies. These economies rely on the primary sector such as agriculture, fishing, and manufacturing to attain economic growth and development (Chang 47). These sectors are affected when goods from advanced economies are sold freely to the consumers. International competition harms infant industries, and this hinders economic growth and development. Free trade hinders the developing economies from developing sectors that can help them develop a competitive advantage.
There are environmental concerns that are associated with free trade that adversely influence the less developed economies. It follows that free trade causes the developing economies to use up their resources to support the multinationals operating in their market. They may also exploit natural resources to keep up with competition in the global market. Countries practice varying environmental regulations and consumers may import from countries with lenient laws. This contributes to pollution in the importing country (Chang 48). Concerning this, countries adhere to different labor laws and regulations. It has been argued that free trade results in the increase of harmful labor practices such as the establishment of sweatshops and child labor. Companies operating in the international market face a high level of competition and may work in countries that practice child labor and use sweatshops to lower the costs of production. As a result, free trade should be barred to curb harmful trade practices that are motivated by international competition.
Free trade paves the way for dumping that is a common practice in the contemporary world. It is practiced by countries and firms that practice unfair business practices to attain increased profitability. Dumping takes place when a state sells its products in the international market at a lower price while compared to local markets (Chang 52). The primary goal is to compete with the players in the local markets and could drive them out of business. China has been accused of being one of the countries that dump cheap products in the international market specifically in less developed nations creating unhealthy competition. Protectionism and dumping place domestic industries at a disadvantage and countries such as the US have come up with strict laws against the practice. For instance, the steel industry in the US where high tariffs are imposed against imports in the sector.
Countries work towards maintaining a positive GDP by keeping a balance between imports and exports (Chang 57). Free trade increases the rate at which money leaves countries. If the imports are more than exports, countries have a lower GDP. The argument is based on mercantilism that states that exports should be encouraged and imports discouraged. The balance between exports and imports is hard to maintain while adhering to free trade that causes imbalances in GDP. This is common in developing countries that import more products than they export owing to the lack of advancement in the manufacturing sector.
Free trade leads to the exchange of ideas that have been attributed to the loss of cultural identity in different instances (Chang 59). It can be seen that consumers in developing nations express a preference for goods that are produced in Western economies. This leads to slower economic growth and development as the local companies do not enjoy the same success with internationally recognized brands.
Economists in opposition to Free Trade
Renowned economists have argued against free trade indicating that it harms economies. To start with Friedrich List supported the case for protectionism and tariffs. List stated that reasonable taxes should be imposed to promote economic growth (Vizentini and Marianne 67). He pointed out that developed economies use free trade unfairly. He observed that developed countries support free trade when they benefit from it. List advised that states should not just focus on accruing wealth but should work towards facilitating means of production. He noted that moderate taxation could be used to improve the manufacturing sector in an economy. For free trade to work effectively, all countries should be at the same level of development which is not the case in the real world. List states three stages in which nations should follow to attain the conditions that are necessary for free trade. In the first stage, economies should trade with developed countries as a way of making advancements in agriculture. The second stage should be characterized by trade restrictions to facilitate the development of foreign trade, navigation, fisheries, and the manufacturing sector. In the last step, the country reaches the highest level of wealth and must practice free trade to maintain the supremacy gained in the international market.
Joseph Stiglitz expressed his concerns against free trade by asserting that the advantages of globalization were unequally distributed (Vizentini and Marianne 35). He adds that free trade benefits multinationals and has a negative impact on local companies. Concepts in free trade are based on the assumption that there are efficient markets in free trade, but realistically, labor immobility exists from old to new industries. The traditional theories ignored risk and purported that employees could move quickly between jobs. However, there is a high rate of unemployment specifically when they have been out of work for a long time. Modern trade arrangements focus on reducing rules and improving the power of multinationals.
Free trade has been identified to be a contentious topic in economics having divided views on its merits and demerits. The discussion shows that free trade has adverse impacts on economies as observed from the employment, manufacturing and market sectors. Free trade has been blamed for sluggish growth in developing economies as capitalists take advantage of them through exporting the products that are on high demand. Free trade should, therefore, be prohibited as it has an adverse impact on economies.
Chang, Ha-Joon. Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. New York: Bloomsbury Publishing USA, 2010. Print.
Vizentini, Paolo, and Marianne Wiesebron. Free Trade for the Americas?: The Us Push for the Ftaa Agreement. , 2013. Print.