Wednesday, May 8, 2024

Difference Between Fair Trade And Free Trade Hits Home

It is finally being acknowledged by main stream thinkers there is a difference between fair trade and free trade. Those who have taken for granted the notion they benefit from low-price exports usually pay a high hidden price for that gain. Today we are looking at a huge geopolitical shift that has the potential to crush countries such as China that are hugely dependent on exports.

Throughout history, trade policies have had massive long-term ramifications on the strength of a nation's economy. The promise that moving from producing products and increased trade will create wealth has turned out to be largely a myth for most Americans. Still, we hear the narrative spun by politicians and those profiting from exploiting unfair trade.

On Thoughtful Money, Michael Every, a Global Strategist at Rabobank, makes a compelling argument the world is at or near a tipping point. Every delves into the issue that the world is continuing to fracture geopolitically. Every gives the impression that the only way out of the global economic mess created by insane trade policies is to do "protectionism right" and that will not be easy to implement. 

A radical shift has been taking place in the way people think about trade and its long term impact on our economy. This has been a long time coming. The election of Donald Trump in 2016 unleashed this debate and the Genie can't be put back in the bottle. Despite his faults, Trump brought front and center the undeniable truth that America as a country was allowing some countries to massively abuse its trade policies.

History shows that planned economies often run into a wall. We witnessed this in the Soviet Union in 1990 and are now seeing it in China. Planned economies tend to be inflexible and unresponsive to supply and demand. That should be their problem and not ours. They should not be able to benefit by wrecking our economy. In the last 24 hours, CNBC put out a video about why American automakers are failing in China. This is a subject I have written several articles about, and hits on a much larger problem and that is, how China conducts business.

China's Economy Based On Exporting Cheap Goods And Labor Exploits Trade Partners

Free trade is given far too much credit for bringing prosperity to all, in fact, when it is not fair, trade can hurt the quality of overall growth. Trade between countries is not as big an economic driver as many people claim. The world can be divided into several trade sectors or groups. Every makes an effort to break it into the West, Europe, and the rest. The so-called rest constituting China, Russia, and a slew of underdeveloped countries. 

How Europe ultimately decides to with the coming changes in how trade is conducted will make a difference in the global economic landscape. Until now Europe has appeared to be giving in to the seductive promises cast out by China. This has placed Europe in a position where it may become subservient to China. Going forward, the most important factor, when all is said and done, may be recognizing there is a glaring difference between fair trade and free trade.

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

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