Jayati Ghosh — The Real Problem with Free Trade

Even if free trade is ultimately broadly beneficial, the fact remains that as trade has become freer, inequality has worsened. One major reason for this is that current global trade rules have enabled a few large firms to capture an ever-larger share of value-added, at a massive cost to economies, workers, and the environment.... 

The only significant exception to these trends is China, which has designed industrial policies specifically to increase the share of domestic value-added and to improve workers’ conditions. Ironically, it is these measures, which have helped offset some of the negative effects of free trade, that Trump has condemned in his pursuit of policies that will do little to protect workers....

Globalization’s detractors are right that free trade has created serious imbalances. But a trade war completely misses the point. The problem is not that free trade has led to too much global competition, but rather that it has enabled a few companies to secure monopolies or near-monopolies. This has given rise to massive inequalities, blatant rent-seeking, and predatory behavior. Only by addressing these trends can the benefits of trade be increased and equitably shared. 

Project Syndicate
The Real Problem with Free Trade
Jayati Ghosh | Professor of Economics at the Centre for Economic Studies and Planning, School of Social Sciences, at the Jawaharlal Nehru University, in New Delhi