According to the Wall Street Journal of yesterday, the president of the AFL-CIO wants a renegotiated NAFTA to include Canada, but insists that its new (still uncertain) provisions must be seriously enforced. He says:
It doesn’t matter what’s in that agreement. If we can’t monitor it and enforce it effectively, then the agreement will fail for workers and it will fail for the country.
In fact, for the special interests his trade union represents, it does matter. From what we know, the agreement negotiated with the Mexican government includes many of the things the AFL-CIO wants, including a Mexican minimum wage that will reduce competition and erase part of Mexico’s comparative advantage. The Wall Street Journal notes:
Especially important to unions is how labor provisions including minimum-wage requirements are verified and enforced.
Basic free trade, which is unilateral free trade, does not need force except for the enforcement of general, standing laws against theft and fraud. From the viewpoint of a given country’s residents, the most basic requirement is that their own government does not prohibit or restrain their imports. The more numerous are foreign governments who adopt unilateral free trade, of course, the better; but that is partly out of our control, and it should generally stay that way. I have made this argument elsewhere, including in my EconLog article of November 17, 2017, “Taking Comparative Advantage Seriously.” A free trade treaty is mainly useful as a means of restraining one’s own Leviathan.
P.S.: As pointed out by Matthias Goergens in a comment below, I should have written that “From the viewpoint of a given country’s residents, the most basic requirement is that their own government does not prohibit or restrain their imports and their exports” (adding “and their exports”).
READER COMMENTS
Jon Murphy
Sep 3 2018 at 9:37am
I think it’s worth expanding on the point that this force is negative rather than positive. That is to say, it is only applied if someone violates the rules, rather than trying to control someone’s behavior. To use an example from Adam Smith (paraphrased from Theory of Moral Sentiments, Part 2, Section 2, Chapter 1, Paragraph 9): a man can fulfill the rules of justice (that is, against theft and fraud) by standing still and doing nothing. So long as one does not violate another person’s liberty (that is, mess with their stuff), they are free to act as they so choose.
Lack of an action is not grounds for punishment with negative force. Unlike, say, minimum wage which punishes if a certain action is not taken, force against fraud and theft is only taken if certain actions are taken.
This distinction between negative force and positive force is crucial for understanding the classically liberal and economic argument for trade.
Pierre Lemieux
Sep 3 2018 at 5:41pm
Right. “We may often fulfil all the rules of justice by sitting still and doing nothing.” (Adam Smith, The Theory of Moral Sentiments)
Matthias Goergens
Sep 3 2018 at 11:26am
Exports as well. Even if export restrictions are not much in the news under that name. But we still have sanctions and in earlier times eg Britain tried to restrict skilled engineers and technology leaving the country.
Pierre Lemieux
Sep 3 2018 at 12:21pm
That’s a good point, Matthias. I may add a post scriptum about this. (Export taxes are banned under article 1, section 9 of the Constitution, as pointed out by Doug Irwin in his Clashing over Commerce, pp. 5 and 63-64.)
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