The Original “Free Trade Agreement”
We are in the middle of a strong transition period. With Brexit coming soon, the term “free trade agreement” is frequently hitting the newspapers around the world. Now more independent, the United Kingdom, outside of the European Union, will have to negotiate its own agreements.
At first glance, free trade agreements are great news. International economic cooperation brings prosperity to all the countries involved: more trade freedom means greater productivity, lower costs, higher investments and, ultimately, greater welfare. Countries that open their economies expose their entrepreneurs to the global marketplace, something that forces them to be efficient, innovative and bold. In addition, the entire country is required to refine its education benchmarks and to build on its bureaucratic environment, lowering taxes and regulations, and improving its infrastructure.
Barriers to trade and all kinds of protectionism, on the other hand, not only worsen the living standard of citizens, but also privilege only small interest groups (powerful businessmen and large unions that do not want foreign competition) that have a good relationship with the government.
From this perspective, free trade agreements should be considered as the best tool for their economic progress. However, as always, the devil is in the details.
The Details
First, texts of this type of agreement are almost never made available to the public. They are usually made up of a thousand-page slab that specifies numerous regulations for participants. There have depth specific chapters dealing with environmental laws, patents, government procurement, new e-commerce regulations, textile sector specific policies, drug sector specific policies, product origin rules, verification requirements, and the imposition of labor laws.
All this tells us that the real focus of these trade agreements has long since shifted from trade liberalization (which simply means the removal of all import tariffs and trade barriers) to trade regulation. “Free trade” agreements are nothing more than agreements that implement government-regulated and regulated trade in favor of powerful interest groups (large government-linked entrepreneurs and large unions).
Trade agreements only broaden the regulatory power of governments and their ability to grant more privileges.
More Obstacles
In today’s world, the main obstacles to free international trade are not in the form of import tariffs, but rather in the so-called “non-tariff barriers” (national regulations that make importing foreign products highly expensive: licenses, technical or phytosanitary regulations, rules origin, antitrust legislation, price controls, patents, regional monopolies, etc.). A true free trade agreement should not only eliminate all import tariffs, but also minimize the deforming influence of all these non-tariff barriers.
Not surprisingly, treaties of this nature merely seek to standardize costly rules and regulations for all member countries, which in many cases may increase non-tariff barriers. Additionally, they often oblige all signatories to approve minimum wage standards, to extend the patent regime within their economies, and to adopt stricter environmental standards.
What is more, these types of treaty are also intended to politically alter global trade flows: if, on the one hand, they can reduce import tariffs between signatories, on the other hand, and indirectly, they can also raise import tariffs for all the non-signatories.
Conclusion
If a trade deal does nothing to really lower prices and increase the supply of goods and services to the public, then it really has nothing to do with free trade.
While these “free trade” treaties may even be inspired by correct principles, and while some signatory countries may actually make net gains, their implementation is beyond criticism: they should neither serve to institute new non-tariff barriers nor to create protectionist strongholds against non-signatories.
It follows that the real mechanism for generating such a beneficial free trade is not these government treaties, but the much simpler way: the unilateral deregulation and abolition of tariffs from each country to the rest of the world.
A genuine free trade agreement must, by definition, be short and even unilateral. All barriers to the free movement of goods and capital should be abolished. And point. Only this is free trade. No treaties or agreements are required. Only the unrestricted abolition of barriers, tariffs and governmental impositions.
Although it seems all too idealistic, we are witnessing the adoption of a free trade agreement in all parts of the world. Being used by entire countries to evade unjust economic sanctions, over-taxation and deprivation of liberty. This special free trade agreement safely allows, only when the two parties agree, the transactions to take place. Fully transparent and with no extra fees, no borders, no aggressive regulations, anonymously, decentralized and publicly accessible. This treaty is called Bitcoin. The original “free trade agreement”.
