I suppose I’m flattered to be picked out by Tim Worstall as an example of someone who is both left of centre and in favour of free trade (even if it is in a post entitled "crazed loons"). However, in a desperate attempt to put some clear red water between me and the real crazed loons, I should like to point out four corollories of this which I don’t hear much from the right-wing free traders:
- While economists agree that a world with free trade would be better than with trade barriers, we have consistently underestimated or ignored the human costs of transition. We should be prepared to invest much more in enabling people to move with dignity from one living to another; invest in skills, infrastructure and social safety nets for those who find the transition difficult. Time and again, we have willed the ends but not the means, both domestically and internationally. In the case of poor countries, those transitional costs will have to be financed externally.
- Economists agree that trade liberalisation will bring significant benefits to the world as a whole, but the dismal science does not allow us to make particularly good predictions about how those benefits will be shared. In general, the economically strong are able to capture the gains from trade more effectively than the economically weak. So the benefits from globalisation will mainly accrue to the rich world. Both rich and poor will get richer; but the rich will get much richer. In order to restore the balance between rich countries and poor, we must agree collectively and globally to redistribute the benefits to the poor.
- Rich countries should not use their own trade barriers to try to cajole change out of poor countries. We should open our markets completely and immediately to poor countries, and to each other, whether or not poor countries do the same. (As Joan Robinson famously said, just because other people throw rocks in their harbour, that is no reason for us to throw rocks in ours.) I hope poor countries will do the same, but they should not be blackmailed; and we should not use the language of negotiations and trade-offs which becomes an excuse for delay.
- If you believe in free trade, as I do, and you believe in free movement of goods and services and of capital, then it follows that you should believe in free movement of people. The economic efficiency arguments for this leg of free trade are just as compelling. So, consistent with my views on free trade, I believe we should unconditionally remove controls on migration. (Note that if trade liberalisation is restricted to some factors of production – eg capital – but not others – eg labour – then the theoretical arguments for the unambiguous benefits of free trade no longer hold. If an economist thinks that free movement of people is undesirable or impossible, then she may well believe that the second best solution is not free trade in goods, services and capital.)