Free trade? We all need protection: The Tokyo tariffs deal will cause widespread pain, say Tim Lang and Colin Hines

AN expression of interest in free trade used to elicit wide yawns from friends and the public alike. Things have changed. Last week's Group of Seven communique on tariff reduction achieved the kind of coverage that only Asil Nadir or royal debacles have recently achieved. But did the agreement warrant the hyperbole?

According to received wisdom, free trade brings wealth, a little of which can trickle down to the poor. And it is but a small step to the assertion that more trade means more jobs. And since Britain still boasts of being a trading nation, the General Agreement on Tariffs and Trade (Gatt) is thought to be A Good Thing. We are more sceptical.

Last week's headlines promised 2 million new jobs worldwide, with John Major anticipating 300,000 or so for the United Kingdom. This appears to be good news until it is realised that unemployment in the OECD countries alone is projected to reach 36 million next year. The Tokyo agreement seemed to be couched in such a way that each G7 leader could point proudly to some commodity whose sales would grow as a result. This made for encouraging headlines in G7 countries but little sense. A moment's reflection suggests that the British economy is not likely to be resurrected simply by encouraging sales of whisky to Japan.

Particularly wild claims were made for the vein of new trade that the Gatt would mine, ranging from a wondrous dollars 5.2 trillion to a more sober dollars 200bn. And Jean-Claude Paye, Secretary General of the OECD, which made the latter estimate, has pointed out that even that is 'highly theoretical', the putative gains will take place over 10 years and some developing countries will actually be hurt.

In promoting the acceleration of a Gatt deal and celebrating the role of the G7, politicians are asking their voters to keep taking the free trade medicine. After all, who can be against something that is free and removes barriers? Yet the intellectual basis for the original notion of free trade - that nations can have a 'comparative advantage' in some commodities compared to their competitors' advantage in others - no longer holds. Free trade theory assumed that nation states were sovereign within their borders, an obsolete notion now that few national controls exist on the movement of capital.

Today, the key free trade ideologues are the transnational corporations that bestride the globe in their search for cheap labour and markets. The World Bank says they control 70 per cent of world trade. Further deregulation may promise them an easier life, but the removal of trade barriers can also lead to a haemorrhage of jobs - such as at Timex in Dundee and Hoover's removal of production from France to Glasgow.

Even countries with anti-monopoly laws seem powerless before this concentration of power. The losers are the small and medium-sized firms that cannot compete, but whose existence is essential for a diverse economy.

Freer trade has also been a factor in widening the gap between rich and poor countries. According to the United Nations Development Programme, the richest fifth of the world earns more than 60 times that of the poorest fifth, and the gap is widening. Between 1980 and 1988, the developing nations' share of global wealth fell from 22 to 18.5 per cent. A global consuming class of 1 billion is over-consuming, and more and freer trade reinforces this inequity.

Some of the fiercest challenges to free trade dogma come from those who give priority to protecting the environment. More trade means more environmentally damaging traffic, using non-renewable fuels. The European Community's Taskforce on the Environment calculates a 30 to 50 per cent increase in cross-frontier lorry traffic as a result of the 1992 internal market.

Standards are another area of widespread concern. In theory, they can be 'harmonised' up or down; in practice, though, the new Gatt will lower them in many areas.

The proposals for arbitration in trade disputes about standards do nothing to allay this concern. Take the ones for food. As a Gatt draft of December 1991 coyly put it, 'influence' over food standards will be given to the Codex Alimentarius commission.

Participation in this august UN food-standards body leaves much to be desired: 26 per cent of the 2,500 members of committees, which decide everything from labelling to hormone or pesticide residue levels, came from industry, compared with only 1 per cent from non-governmental organisations.

Attendance was dominated by northern countries, 55 per cent coming from Europe and North America, home bases to the relevant transnational corporations. And Codex is not alone is giving cause for concern. The Gatt's proposals for a multilateral trade organisation would create an unaccountable, unelected body with immense powers.

So, is there an alternative to free trade? The mere mention of protectionism sends economists reaching for the cross and garlic, but for environmentalists, public health specialists and some consumer advocates, the notion of protection is their raison d'etre.

But the debate between free traders and Thirties-style protectionists is sterile and out of date. Rising consciousness about the implications of the Gatt Uruguay Round is forging a popular agenda around the world that could be described as the New Protectionism. This argues that free trade fails to cope with the key challenges of the 21st century: not just the economy, but also the environment and equity (the three Es).

Further trade liberalisation would take us in the wrong direction. It encourages the big players to seek cheap labour, undermines public demands for tougher environmental and consumer protection standards and widens the gap between rich and poor, while removing hard-won welfare safety nets in the interest of international competitiveness.

No one is arguing for Pol Pot-type autarky as the alternative to free trade. But there is a choice that does not involve the combination of further trade deregulation and crisis management hyped as the world's salvation in Tokyo last week.

If people want to protect their futures, they must press politicians to argue for more local trade and diversified economies. Consumers should be encouraged to buy, first, locally produced goods and services, second, regionally produced ones, and globally produced ones only as a last resort. For this to happen, the Gatt would have to be transformed into a General Agreement on Sustainable Trade.

The writers are authors of 'The New Protectionism: protecting the future against free trade', to be published by Earthscan on 19 July.

(Photograph omitted)