Free Trade

Tariff reduction stabilizes prosperity and peace. Isolationism has time and again led to disaster. We need the cultural values of liberalism…

When was the last time you heard anything about Doha? No, I don’t mean the capital of Qatar, but the world trade negotiations that took their name from that city. For many years, the Doha negotiations were headline news, at least in the business world. What began in a spirit of optimism was followed by a sputter, continued with a series of incremental failures, and then collapsed in 2015. Grand ambitions ended with a whimper. The Doha rounds were, in diplomatic phrasing, “suspended indefinitely”. But let us take a look back at these events, which have profound consequences for our lives today. Bilateral talks on the reduction of trade barriers were to substitute the Doha rounds and World Trade Organization negotiations. One such present-day example is the Transatlantic Trade and Investment Partnership (TTIP) – an agreement that now also appears to have foundered on the shoals of the inability to muster public support. Instead, politicians on both sides of the Atlantic – from Donald Trump to French President François Hollande – are urging their flock to “buy American” or “buy French”.
Regardless of Brexit, the true question in Europe is “nexit”. Which country will be the next to leave the association of states that began as a free trade association? Nowadays, free trade negotiations are the realm of technocrats and bureaucratic experts; politicians who have their fingers on the pulse of the people want little to do with them. Free trade with its promise of prosperity, globalization as the promise of liberation from the narrow confines of the nation-state – this narrative has lost its cultural hegemony. As described by the Marxist theorist Antonio Gramsci, this cultural hegemony is not a matter of force, but is something that resides in the conviction imparted to ordinary people that they live in the “best of all possible worlds”.

Brexit and Nexit

This best of all possible worlds began in 1947 with the GATT multilateral trade agreement, in which tariffs were lowered by nearly 25 percent. GATT thus helped establish the framework of the postwar global economic recovery. Over the next 60 years, this recovery brought with it an ever-expanding process of globalization, growth in international trade and ever-increasing international cooperation. Of course, this was not a straightforward story of progress; these years would also witness a host of setbacks, crises of decolonization, and the entry of China and finally also the Soviet-ruled East bloc into the globalized world.
Over the long term, however, these were years of steady improvement, measured in terms of the global decline in the proportion of people living in absolute poverty, decreasing infant mortality rates, and greater access to basic civilizational achievements such as education. But perhaps it will not be the collapse of the Doha rounds that historians of the future will cite as the turning point, the moment in which our present-day cultural continental drift commenced on a global scale. Perhaps it was instead September 11, 2001, the day on which the dramatic escalation of archaic conflicts would bring down both the World Trade Center as well as the symbolic edifice which it represented.
Gramsci died in 1937; philosophical questions, however, have no expiry date. The historic postwar forces of economic development, free markets, liberalism, world trade, and the dismantling of trade restrictions have been suspended, step by step. Europe is suffering under the embargo imposed on Russia and under the cultural hegemony of bureaucracy. New regulations are imposed in what has become a nearly self-justifying process, while deregulation has fallen by the wayside. Are we witnessing the death of the golden years of global liberalism?
Before answering this question, I will take a step back in history. The postwar era was not the first era of global liberalism. Free trade was also ascendant in the decades leading up to 1914. “German cattle are grazing on the la Plata River,” Reich Chancellor Theobald von Bethmann-Hollweg is supposed to have said. Even today, this slogan would bring German and French farmers out on the streets and the barricades. The gold standard functioned as a global single currency; any national currency linked to the gold standard could be printed under the rule of three and could compensate for appreciations or depreciations, a regime which was a boon to international trade. Transatlantic trade was brisk. Passenger steamers crossed the ocean like long strings of pearls, one after the other with such matter-of-fact confidence that the Titanic would assume that lifeboats were superfluous – after all, in the event of an emergency, another steamer could not be far away. According to economic historians, this global trade would remain unmatched in its intensity until well into the 1990s.
In between came the dark years of the great wars, and the almost equally gloomy interwar years. From the perspective of a free trade advocate, WWI brought with it one major result: the rise of new borders. Old empires had collapsed. The German Reich and Austria-Hungary shattered into a multitude of small Eastern European states, rife with border conflicts. The Ottoman Empire was overthrown, and the borders drawn with a ruler on the map of the Middle East would give rise to the brutal religious and territorial conflicts that are tearing the region asunder.
One of the first to recover was the British Empire, which presided over a market that spanned the globe, extending from Europe to Africa, India and Australia; another was the North American economic continent, which like the British Empire was large enough to support a kind of “domestic international trade” within its own sphere of influence. Italy and Germany – two states which were imprisoned by particularism and autarchic ambition and decoupled from the global markets – sought to cast off their shackles through violent expansion. As we know, this did not end well.

Desire and will as catalysts

The GATT negotiations of 1947 were a return to reason and an acknowledgment of global necessities. “The world is flat,” Thomas Friedman wrote, describing the new globalization that has become reality over the past several decades. But it would appear that the global pizza contains numerous hills, valleys and unbridgeable divides. In The Lexus and the Olive Tree, Friedman argues that global technologies will necessarily win out over the human tendency to hold fast to tradition and tribal loyalty. Globalization, Friedman believes, is inevitable. But at the start of the nineteenth century, the global rise of the telegraph, photography, steam engines, steel manufacturing and chemistry was no less spectacular and all-encompassing than what we are witnessing today – and it stoked similar fears. The world order is not determined by the achievements of scientists and engineers, but by the desires and the will of people and politicians. Free trade and liberalism are not an inevitability, nor are they the outcome of technological revolution. As history has shown, the archaic revolutionaries of yesteryear were unmatched in their ruthless use of technology. What began with Hitler has now culminated in the Islamic State, which employs both mobile networks and crowd-mobilization techniques to control and guide its band of murderers. Free trade and liberalism are cultural values. Without their cultural hegemony, we must fear the return to isolation and the inevitable cruelties to which isolationism gives rise. ■

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Roland Tichy is one of Germany’s most renowned business journalists.
He also runs the website “Tichys Einblick”
(www.rolandtichy.de)