HERMAN E. DALY
The Perils of Free Trade
No policy prescription commands greater consensus among economists than that of free trade based on international specialization according to comparative advantage. Free trade has long been presumed good unless proved otherwise. That presumption is the cornerstone of the existing General Agreement on Tariffs and Trade (GATT) and the proposed North American Free Trade Agreement (NAFTA). The proposals in the Uruguay Round of negotiations strengthen GATT's basic commitment to free trade and economic globalization. [Editors' note: NAFTA was approved in late 1993 and took effect January 1, 1994. The Uruguay Round of GATT negotiations concluded in early 1994.]
Yet that presumption should be reversed. The default position should favor domestic production for domestic markets. When convenient, balanced international trade should be used, but it should not be allowed to govern a country's affairs at the risk of environmental and social disaster. The domestic economy should be the dog and international trade its tail. GATT seeks to tie all the dogs' tails together so tightly that the international knot would wag the separate national dogs.
The wiser course was well expressed in the overlooked words of John Maynard Keynes: "I sympathize, therefore, with those who would minimize, rather than those who would maximize, economic entanglement between nations. Ideas, knowledge, art, hospitality, travel--these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible; and, above all, let finance be primarily national." Contrary____________________