Libre comercio en contexto

In connection with Rafael Tamayo’s recent (20/10/2011) article on whether free trade agreements justify the moniker of free trade, I would like to briefly consider the term “free trade” historically, asking in effect whether reality has ever lived up to the ideal type.

Perhaps it will be useful to begin by distinguishing between free trade as a term of art historically deployed by merchants and bureaucrats, and Free Trade as an ideological construct of modern economic liberalism. The former notion—free trade writ small—in fact substantially predates the latter, grander concept of liberal Free Trade. In the European middle ages, a “free burgher” or “free trader” was the citizen of a free city-state: merchants of say, Hamburg or Venice were invested with certain liberties, including the right to marry their daughters to whom they chose, to will their money to whom they liked, and to carry on their trades in relative freedom within their cities’ walls. Outside those walls, feudalism and its rigid hierarchies prevailed.

During the sixteenth, seventeenth, and eighteenth centuries, when the medieval patchwork of free cities and feudal principalities gave way to transoceanic empires, merchants still conceived of free trade in much the way they had in the middle ages: as a form of corporate liberty. They accordingly resented royal monopoly companies that controlled foreign trade routes (the Dutch and British East India Companies are the most famous such examples) and lobbied for the freedom to sell their wares to whomever they chose. In 1606, for example, English merchants from provincial port cities successfully lobbied Parliament—against the interest of the Crown—for the passage of the Act for Free Trade into Spain, Portugal, and France. This enabled private merchants who were not members of the Royal Spanish Company to legally trade with southern Europe. At least superficially, this “Act for Free Trade” was very different from a modern “FTA,” given that it contained no provision for lower tariff barriers between states. Indeed, seventeenth- and eighteenth-century English merchant associations did not see the slightest inconsistency in simultaneously lobbying for “free trade” and for the vigorous protection of their industries from foreign competition. Similarly, the policies of “comercio libre” instituted by late-eighteenth-century Spanish and Portuguese colonial administrations were not associated with lower external tariffs, but with greater freedom of trade inside those empires (the policies were largely a sop to colonial merchants following the United States’ declaration of independence from Britain). Even the famous French notion of laissez faire, laissez passer, popularized by the reformist Physiocrats in the 1750s, really only expressed a modest desire for the elimination of tariffs on grain.

In fact, the concept of Free Trade writ large—the idea, that is, of borderless international commerce—only emerged as an article of policy (and faith) around the 1820s or ‘30s. What this emergence entailed, firstly, was a marriage of the old corporate notion of free trade with the newer liberal tenets of “self-regulating” markets and “comparative advantage” in foreign trade. The combined liberal wisdom that the price mechanism functioned as a regulatory “invisible hand” and that countries ought to specialize in exporting what they were best at producing naturally mandated that international tariffs be lowered or eliminated. As is well known, however, Britain did not begin beating the drum of Free Trade internationally until it had fully secured its place as the globe’s preeminent economic power. “Informal empire” and “empire on the cheap” are thus bywords for nineteenth-century Britain’s penchant for control of foreign economies (such as Argentina’s) via Free Trade rather than territorial occupation. What is less well known is that even according to its own terms, “Free Trade Britain” was not very free; import tariffs remained higher there than in France, for instance, until around 1870.

All of this is to say that when Free Trade emerged in the nineteenth century as a lofty article of liberal faith, it remained substantively almost indistinguishable from the older, shabbier mercantilist notion of free trade. The difference was really that the medieval opposition between “free” merchant cities and seigniorial fiefdoms, or the seventeenth-century opposition between royal monopoly companies and private merchant corporations, now no longer existed. Now, the interests of industrial capitalism, financial capitalism, and the state were more or less the same. Free Trade was the creed whereby these mutual interests were exported and realized. Beneath the glossy rhetorical surface, nineteenth-century Free Trade was no more about level playing fields than was its mercantilist forebear.

Today, as we contemplate the recent signing of the FTA between Colombia and the US, it is worth asking: do current US agro-businesses see any inconsistency in lobbying both for free export markets and internal subsidies? Has, in short, anything changed?