The fallacy of free trade

 

Trump tariffs the whole world.

From the February 1999 issue of the Socialist Standard

‘The illusion that is peddled by sharp-suited government spokesmen on television about the benefits of the free market system is just that—an illusion. Every government in the world is in favour of free trade when their owning class is in a favourable position to compete and in favour of protectionism when some competitor from another country has the drop on them.

The British toadies of capitalism are bad enough but, in the USA the hypocritical posturing of the worshippers of the market system is truly nauseating. As the foremost industrial and commercial power in the world, the USA is loud in its praise of free trade as the cure-all for social problems. In practice, though, it often favours the strictest protectionism and some recent examples from the Press starkly prove this.

The notion that it is the soundest economic wisdom to “buy in the cheapest market” may be all very well for American academic economists to expound in the ivory towers of university and business schools, but in the USA when they find that their home produced commodities are being undercut in price the capitalists appeal to their government to protect US products from “unfair” competition. They call any competition at which they are losing “dumping”:

“Anti-dumping duties are a frequent recourse of the US government when faced with a trade problem. As the US trade deficit has mounted, pressure for duties has mounted, pressure for duties has increased rapidly and 36 petitions for anti-dumping have been received by the government so far in 1998, compared with 16 for the whole of last year. Most concerned imports of steel products . . . Ominously, William Daly, the US Commerce Secretary, has invited US manufacturers to make his anti-dumping staff ‘the busiest people in town’ . . . .” (Independent on Sunday, 22 November.)

The US exporters of Chiquita bananas, produced in Central America, used their political muscle to combat the European Union’s favourable trade terms for Caribbean bananas, and got the US government to slap 100 percent duties on such products as sheep’s cheese from the EU to the US. The American Financial Group, who own Chiquita, have recently given $1 million to Democratic and Republican politicians to fight the Caribbean preference which the they claim has lost Chiquita $1,000 million in earnings since the EC ruling of 1983 in favour of Caribbean bananas.

Behind the threats and counter-threats of a trade war the US and the EU are playing for higher stakes than are represented by bananas and sheep’s cheese:

“Andrew Hughes Hallett, professor of economics at Strathclyde University, believes we need to peel back the skin on this row to understand it. ‘I suspect it isn’t about bananas at all and it isn’t about protecting poor farmers either in St. Lucia or Honduras. It’s about political pressure in Washington and Brussels . . . In the EU this dispute is tied up with the power of the agricultural lobby. It’s like a bargaining chip. France is prepared to support Britain which is keen to get a favourable deal for its former colonies, so Britain will be more supportive of France on other issues affecting French farmers’.” (The Herald, 24 December.)

All over the world the US government pursues a policy of free trade or protectionism, whichever is most beneficial to US economic interests, but it is from New Zealand that we learn of the naked power of the US being used to force its products down the throats of unsuspecting consumers.

As the world’s biggest producer of genetically modified food, the US does everything in its power to protect the global ambitions of the agri-chemical firm Monsanto. It is increasingly concerned about European reluctance to accept genetically modified foodstuffs without proper labelling and testing.

In reply to criticisms of the British government that it was being pressured to accept US-produced genetically modified foodstuff, Tony Blair hid behind the cloak of secrecy when he replied:

“By convention it is not the practice of governments to make information on such meetings, or their contents, publicly available.”

In New Zealand no such convention applies and it was revealed in cabinet minutes that economic pressure was being applied to the New Zealand government to accept genetically modified food:

“The Cabinet Minutes, dated 19 February 1998, state: ‘The United States, and Canada to a lesser extent, are concerned in principle about the kind of approach advocated by Anzfa [part of the Australia New Zealand Food Standards Council], and the demonstration effect this may have on others, including the European Union. The United States have told us that such an approach could impact negatively on the bilateral trade relationship and potentially end any chance of a New Zealand-United States Free Trade Agreement.'” (Independent on Sunday, 22 November.)

So there you have it. Blatant economic threats, undisguised self-interest, and no recourse to such fine rhetoric, so beloved by US politicians, as the “free world”, or hypocritical cant about “democracy and the freedom of choice”.

Capitalism is a horrible society—let’s get rid of it.’

Richard Donnelly

https://socialiststandardmyspace.blogspot.com/2018/10/usa-fallacy-of-free-market-1999.html

The poor are still here

 'Even before the Labour government’s cuts to welfare spending, it was clear that poverty in the UK has been increasing (Guardian 27 March).

In April 2024 a record 4.5 million children were living in poverty, a hundred thousand more than the previous year. More children than before lived in families reliant on food banks, and were in food-insecure families.

The Domestic Poverty Lead at Oxfam said, ‘We live in the sixth-richest country in the world where billionaires alone saw their wealth soar by £11bn last year. It is morally repugnant that children, disabled people and carers are the ones who are taking the hit.’

This is life under twenty-first century capitalism!'

https://www.worldsocialism.org/spgb/

Socialist Sonnet No. 188

 Financial Statement

 

The chancellor stands to address the House,

Facing the vehemently disinclined,

Self-righteous, ambitious critics behind,

Knowing this financial statement must douse

Any ambition that needs might be met,

The reform fallacy will be laid bare,

Once again, the money is just not there,

No matter the targets set and reset.

Then some rogue state prepares to hinder trade,

Profits and growth begin to be expunged

And around the world stock markets have plunged,

Negating any financial plans made.

The chancellor, the statement completed,

Sits down again, utterly defeated.

 

D. A.

April 2025 Socialist Standard Now Available Online. FREE.

https://www.worldsocialism.org/spgb/socialist-standard/2020s/2025/no-1448-april-2025/

 

Tariffs

What special relationship Starmer? Capitalist protectionism is back in favour.

‘Britain will be hit by Donald Trump’s global tariffs, Downing Street has admitted for the first time, as hopes for a deal before the US president’s so-called “Liberation Day” fade. But there was a blow for Sir Keir today as Mr Trump confirmed that tariffs to be introduced on Wednesday will hit “all countries”. Stock markets tumbled around the world after the US president’s comments, with the FTSE 100 in London dropping by as much as 1.5p

The Prime Minister’s official spokesman said: “When it comes to tariffs, the Prime Minister has been clear he will always act in the national interest, and we’ve been actively preparing for all eventualities ahead of the expected announcements from President Trump this week, which we’d expect the UK to be impacted by alongside other countries.’

https://www.telegraph.co.uk/business/2025/03/31/ftse-100-markets-latest-news-trump-tariffs-putin-oil-russia/

‘UK automotive leaders are calling for immediate trade negotiations following the US government’s decision to impose a 25% tariff on imported vehicles, set to take effect next Wednesday. The move threatens a sector already facing declining sales and rising production costs.

The US is the UK’s second-largest car export market, valued at £7.6 billion. In 2023, over 101,000 UK-built vehicles—mainly premium and luxury models—were shipped to the US, accounting for nearly 17% of total car exports. The tariffs will hit major UK manufacturers, including Jaguar Land Rover, BMW, Toyota, Nissan, and Stellantis.

Jaguar Land Rover, which employs 11,000 people in the UK, relies on the US as its biggest overseas market. BMW’s three UK plants, which focus on Mini production and employ around 8,000 people, could also face significant cost increases. The US remains a key Mini market despite declining sales due to model changes.’

https://www.eastmidlandsbusinesslink.co.uk/mag/featured/uk-motor-industry-urges-urgent-talks-as-us-imposes-25-tariffs-on-car-imports/

The below from the Socialist Standard March 2025

‘Tariff’, Trump has repeated many times with typical exaggeration, ‘is the most beautiful word in the dictionary’. He seems to see it as a cure-all that will Make American capitalist manufacturing industry Great Again. This may just have been crude vote-catching but this illusion evidently caught the votes of quite a few workers.

A tariff is a tax on imported goods and is usually introduced to protect the profits of domestic producers of the same goods. These will have been complaining of being out-competed by ‘cheap imports’ and ‘unfair competition’ and will have lobbied politicians to do something about this. The tariff is paid by the businesses that import and sell the goods in question (it is not paid by the country from which the goods are imported, as Trump sometimes implies). In the first instance it is the importers who will be impacted. Because they will be making a smaller profit, they will import less and, in accordance with the law of supply and demand, the price of the good on which the tariff has been imposed will go up, whether imported or produced domestically. This will make domestic producers more competitive and so enable them to maintain or restore their profits.

This is obviously something that will appeal to the domestic producers concerned but what about other sections of the capitalist class? If the tariff-hit goods are sold to capitalist firms as materials or components for what they produce and sell, these firms will not be so happy as this will increase their costs. If they are consumer goods sold to workers this will increase the pressure on employers generally to pay higher wages (not to increase living standards, but simply to maintain them). If the consumer good is part of the basket of goods used to compile the consumer prices index, whose increase is regarded as a measure of ‘inflation’, then inflation in this sense will go up.

In terms of employment, the workers in the protected industry will keep their jobs for a little longer before automation catches up with them. On the other hand, some workers in other industries will lose theirs.

The overall effect of imposing a tariff will be to raise some prices and not just of the goods on which the tariff is levied. The main beneficiaries will be the domestic producers of the goods in question. Their profits will be ‘protected’.

However, there are other considerations. To be effective in protecting the profits of a particular sector, a tariff needs to be imposed not just on the good coming from one country but on it coming from any country; otherwise the importers of the good could still import it. Which will be why Trump has talked of imposing a tariff on some goods (steel and aluminium) wherever they come from. Another complication is that the country singled out will likely impose counter-tariffs which would harm sectors producing for export. The EU and China will be tougher nuts to crack than Canada or Mexico.

Although Trump gave the impression on the campaign trail that American manufacturing industry will expand and thrive behind protective tariff walls, his first use of tariffs has been as a bargaining tactic. To impose them and then open negotiations with the other capitalist state about what it needs to do to get them removed.

Tariff protection has unintended side-effects and, in any event, does not benefit all sections of capitalist business in the country imposing the tariffs. The working class of the country as a whole is not affected much either way, if only because their wages are tied to the cost of living and tend to go up or down as it does. It is not a working-class issue.’

https://www.worldsocialism.org/spgb/socialist-standard/2020s/2025/no-1447-march-2025/cooking-the-books-1-who-benefits-from-tariffs/

SPGB Meeting TONIGHT 28 March. 1930 GMT. ZOOM

 

HAVE YOU HEARD THE NEWS? (ZOOM)

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Event Details

• Date: March 28, 2025 7:30 pm – 9:00 pm

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Discussion of recent events
Host: Paddy Shannon

To connect to a Zoom meeting, click https://zoom.us/j/7421974305

War psychosis

 

Do you see a trend here? In the first piece the EU Commissioner for Crisis Management is quoted as saying, ’We want people to be ready, not to panic’.

Panic is exactly the emotion TPTB are trying to instil in its populations. The Bogeyman is coming to get you and we’re the only ones who can save you. Providing, that is, that you subjugate your rights, freedoms and survival to us without question and become totally subservient to us. Not forgetting the willingness to sacrifice how ever many lives we care -we don’t care in reality,- to offer up in the pursuit of our crazy quest for our insane goals. That’s capitalism folks! Are we going to change it before they destroy the world and all of us in it?

The ‘leadership’ of Western Europe are displaying a visceral hatred of Russia and are intent on destroying it. We hold no special approval for Russia, it’s part of global capitalism, capitalism being what we want the majority who run it on behalf of the minority ruling class to replace with socialism.

The current idea of the Western European elites that they can instigate a war with Russia – and its allies – and win suggests that they are aware in in a conventional conflict they could not win. The alternative is to therefore use nuclear weapons, either tactical or strategic. At that stage no one wins.

Obviously, most of us are not so stupid as to welcome the idea of mass destruction and the end of life on earth so in the period when arms, equipment and resources are being built up the propaganda ‘war’ will begin to increase in intensity. Better Dead than Red! This propaganda ‘war’ has already begun and its effectiveness will be seen over a period of time.

The solution? An awareness and understanding of, desire for, and implementation of socialism as the only sane social system which will be beneficial to the whole human race. The choice is yours.

‘The European Union has advised its 450 million inhabitants to stockpile essential supplies sufficient for at least 72 hours, citing increasing risks of war, cyberattacks, climate change, and disease.

EU Commissioner for Crisis Management Hadja Lahbib stated on Wednesday that the warning reflects a broader strategy to improve civil readiness across the bloc. While not mentioning Russia specifically, she stressed that the Ukraine conflict threatens European security.

"For three years in Ukraine, we have seen a battlefield of bombs, and bullets, drones, fighter planes, trenches and submarines. Yes, our European security is directly threatened by this," Lahbib said.

Several EU countries have consistently named Moscow as a significant threat to regional security. France, Poland, the Baltic states, and Finland have all raised concerns over alleged Russian cyberattacks, disinformation campaigns, and political interference. They have also described the Ukraine conflict as an example of aggressive behaviour that poses a military threat to the bloc.

Moscow has consistently denied any intention to attack NATO countries or the EU. Russian President Vladimir Putin has dismissed such claims as “nonsense” meant to scare European populations and increase military budgets.

“We want people to be ready, not to panic,” Lahbib said. “Preparedness is not fear mongering – it is common sense in a time of uncertainty.”

Under the strategy, the EU is advising households to keep essential supplies, including non-perishable food, bottled water, flashlights, batteries, first-aid materials, and key documents. Citizens are also encouraged to have access to a short wave radio in case of power or communication outages.

The EU is also planning to create a strategic reserve of key resources, including firefighting aircraft, medical transport, mobile hospitals, and stockpiles of protective equipment for chemical, biological, radiological, and nuclear incidents.

“Today’s threats facing Europe are more complex than ever, and they are all interconnected,” Lahbib said. “From war on our borders to increasingly frequent climate disasters, the EU must be ready to face the unexpected,” she added.

The initiative mirrors long-standing practices in countries such as Finland and Sweden, where civil defence preparations and emergency guidance are more established. Sweden, for example, recently updated its ‘If Crisis or War Comes’ handbook with modern scenarios, including how to respond to nuclear threats.

The Commission’s new plan includes the creation of an EU-level crisis hub to coordinate cross-border responses and ensure continuity of essential services, from healthcare to energy and telecommunications.’

‘Poland will urge its citizens to stockpile at least three days’ worth of supplies to prepare for a war or other crisis, Deputy Interior Minister Wieslaw Lesniakiewicz has said.

It comes after a proposal by European Commission President Ursula von der Leyen to push through an €800 billion ($875 billion) military build-up intended to counter an alleged threat from Russia, something Moscow has dismissed as unfounded.

Each citizen needs to be able to survive at least three days with no help from the state in the event of war or another extreme situation, Lesniakiewicz said. He urged Poles to stockpile supplies such as water, medicine, food, and power banks. People should also get transistor radios for emergency communication when other methods are unavailable, he added.

Polish ministries will cooperate to publish a guide on preparing for crises, basing it on a similar publication released in Sweden, he said.’

‘The German government should prepare hospitals across the country so that they are able to operate efficiently in case of a military conflict, Bavarian Health Minister Judith Gerlach has argued, citing a perceived threat from Russia.

In an interview to the Augsburger Allgemeine Zeitung the official claimed that the “military threat posed to Europe by Russia and the possible withdrawal of the new US President [Donald] Trump from the previous security partnership also mean a massive need for action on the part of the German healthcare system and the whole civil society.” She argued that simply beefing up the armed forces would not be sufficient to adequately address the challenge supposedly facing the country.

“We therefore need a comprehensive ‘civil operational plan Germany’” geared toward addressing a wide range of emergencies, including military aggression, Gerlach stressed.

According to the Bavarian health minister, in such a scenario Germany’s healthcare system would have to be prepared to provide services to more than 80 million civilian residents, as well as wounded military personnel.

“The state must set clear standards. This goes for the EU level, the federal and the regional [levels],” the official told the newspaper. She also emphasized the need to ensure Germany’s and the EU’s ability to produce all the medicines and drugs they may need.

Given likely personnel shortages in hospitals in case of a large-scale military conflict, Gerlach suggested that the German government should consider imposing mandatory civilian service, along with the military draft.

Moscow has consistently denied allegations that it intends to attack any NATO or EU member countries, labelling such claims as “nonsense” designed to scare people and justify increased defence budgets.’