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Enslaved by Free Trade

The West became rich by ignoring patent rules and protecting its
industries. Poor countries should be allowed to do the same.
By George Monbiot. Published in New Scientist 31st May 2003


The founding myth of the dominant nations is that they achieved their
industrial and technological superiority through free trade. Nations which
are poor today are told that if they want to follow our path to riches, they
must open their economies to foreign competition. They are being conned.

Almost every rich nation has industrialised with the help of one of two
mechanisms now prohibited by the global trade rules. The first is "infant
industry protection": defending new industries from foreign competition
until they are big enough to compete on equal terms. The second is the theft
of intellectual property. History suggests that technological development
may be impossible without one or both.

Britain's industrial revolution was founded upon the textile industry.
This was nurtured and promoted by means of ruthless government intervention.
As the development economist Ha Joon Chang at the University of Cambridge
has documented, from the 14th Century onwards, the British state
systematically cut out its competitors, by taxing or banning the import of
foreign manufactures and banning the export of the raw materials (wool and
unfinished cloth) to countries with competing industries.1 The state
extended similar protections to the new manufactures we began to develop in
the early 18th Century.

Only when Britain had established technological superiority in almost
every aspect of manufacturing did it suddenly discover the virtues of free
trade. It was not until the 1850s and 1860s that we opened most of our
markets.

The United States, which now insists that no nation can develop without
free trade, defended its markets just as aggressively during its key
development phase. The first man systematically to set out the case for
infant industry protection was Alexander Hamilton, the first Secretary of
the US Treasury. In 1816 the tax on almost all imported manufactures was
35%, rising to 40% in 1820 and, for some goods, 50% in 1832.2 Combined with
the cost of transporting goods to the US, this gave domestic manufacturers a
formidable advantage within their home market.

Protectionism was arguably a more immediate cause of the American civil
war than the abolition of slavery. High tariffs helped the northern states,
which were industrialising rapidly, but hurt the southern states, which
remained heavily dependant on imports. The Republicans' victory was the
victory of the protectionists over the free traders: in 1864, before the war
ended, Abraham Lincoln raised import taxes to the highest level they had
ever reached. The US remained the most heavily protected nation on earth
until 1913. Throughout this period, it was also the fastest-growing.3

The three nations which have developed most spectacularly over the past 60
years - Japan, Taiwan and South Korea - all did so not through free trade
but through land reform, the protection and funding of key industries and
the active promotion of exports by the state. All these nations imposed
strict controls on foreign companies seeking to establish factories.4 Their
governments invested massively in infrastructure, research and education. In
South Korea and Taiwan, the state owned all the major commercial banks,
which permitted it to make the major decisions about investment.5 In Japan,
the Ministry of International Trade and Industry exercised the same control
by legal means.6 They used tariffs and a number of clever legal ruses to
shut out foreign products which threatened the development of their new
industries.7 They granted major subsidies for exports. They did, in other
words, everything that the World Trade Organisation, the World Bank and the
IMF forbid or discourage today.

There are two striking exceptions to this route to development. Neither
Switzerland nor the Netherlands used infant industry protection. Instead, as
the economic historian Eric Schiff showed in Industrialisation without
National Patents, published in 1971, they simply stole the technologies of
other nations.8 During their key development phases (1850-1907 in
Switzerland; 1869-1912 in the Netherlands), neither country recognised
patents in most economic sectors.

Switzerland's industrialisation took off in 1859, when a small company
based in Basel pilfered the aniline dying process which had been developed
and patented in Britain two years before. The company was later named Ciba;
more recently, after a series of mergers, it became Novartis and then
Syngenta. In the Netherlands, in the early 1870s, two enterprising firms
called Jurgens and Van Den Bergh nicked a patented French recipe and started
producing something called margarine. They later merged to form a company
named Unilever. In the 1890s, one Gerard Philips stole Thomas Edison's
design for incandesent lamps, and founded Europe's most successful
electronics company.9

The nations which are poor today are forbidden by the trade rules from
following either route to development. New industries are immediately
exposed to full competition with established companies overseas, which have
capital, experience, intellectual property rights, established marketing
networks and economies of scale on their side. "Technology transfer" is
encouraged in theory, but forbidden in practice by an ever fiercer patents
regime. Unable to develop competitive enterprises of their own, the poor
nations are locked into their position as the suppliers of cheap labour and
raw materials to the rich world's companies. They are, as a result,
forbidden from advancing beyond a certain level of development. While there
is no sound argument for permitting rich nations to protect their economies,
there is a powerful case for permitting the poor ones to follow the only
routes to development which appear to work.

George Monbiot's book The Age of Consent: a manifesto for a new world
order is published on June 16th by Flamingo.

uc

If you knew anything about NAFTA or any free trade agreement, Canada, under
NAFTA has been alot better off than Mexico just because of our natural
resources and educated work force. Fuck the commies, Liberals, socialists,
unionists. They know nothing about anything. Happy Indipendance Day to all
Americans. Except to Chimi Changa. Get your 72 virgins soon asswipe.

uc

If you knew anything about NAFTA or any free trade agreement, Canada, under
NAFTA has been alot better off than Mexico just because of our natural
resources and educated work force. Fuck the commies, Liberals, socialists,
unionists. They know nothing about anything. Happy Indipendance Day to all
Americans. Except to Chimi Changa. Get your 72 virgins soon asswipe.

uc

The super rich like the federal government, lawyers, politicians? You're a
dumbass. You know nothing of Canadian politics, the economy, let alone
anything about Canada. Except that maybe we have a bigger land mass and
that's it. Plus we sell you water. So there.

uc

The super rich like the federal government, lawyers, politicians? You're a
dumbass. You know nothing of Canadian politics, the economy, let alone
anything about Canada. Except that maybe we have a bigger land mass and
that's it. Plus we sell you water. So there.