Free Trade or Sustainable Trade? An Ecological Economics PerspectiveThe Holy Trinity of Traditional Economic ThoughtEconomic GrowthTechnological Progress“Free Trade”Dichotomy in Policy AnalysisThe Formal Model of Free TradeCritique:Assumptions:The Free Trade Fantasy“Perfect Competition”“Full Employment & Mobility of Labor”“Well-behaved Production”“Immobility of Capital”Free Trade and the EnvironmentPowerPoint PresentationSlide 17Free Trade Logic“Harmonization”ExamplesSlide 21Trade & Sustainability: An Alternative PerspectiveThe Ricardian ModelSlide 24Concept of Natural Resources as CapitalFree Trade Creates Winners & LosersThe Goal of Maximizing Short-term Welfare through Free Trade is in Conflict with the Goal of Long-term SustainabilityFree Trade:Slide 29Long-term SustainabilityRecommendations:Macroeconomic ModelsA Different Perspective“Dirty” vs. “Clean” Free Trade AssumptionSocial & Distributional IssuesSlide 36Example: NAFTAThe Free Trade Model Has Never Been “FREE”Trade & Sustainability“A Balanced View”So What Do You Think?Creation of a Global Environmental OrganizationSuggestionsMore SuggestionsSlide 45Slide 46Free Trade or Free Trade or Sustainable Trade?Sustainable Trade? An Ecological Economics An Ecological Economics PerspectivePerspectiveJonathan M. HarrisJonathan M. Harris22The Holy TrinityThe Holy Trinityof Traditional Economic of Traditional Economic ThoughtThoughtEconomic GrowthEconomic GrowthTechnological ProgressTechnological ProgressFree TradeFree Trade33Economic GrowthEconomic GrowthIs inherently in conflict with the limited Is inherently in conflict with the limited resource base & waste absorption resource base & waste absorption capacity of the environmentcapacity of the environment44Technological ProgressTechnological ProgressPoses unintended consequences & Poses unintended consequences & environmentally disruptive impactsenvironmentally disruptive impacts•Intensive, industrialized agricultureIntensive, industrialized agriculture55““Free Trade”Free Trade”Carries powerful ideological weightCarries powerful ideological weightThose who oppose free trade are Those who oppose free trade are labeled “protectionists”labeled “protectionists”Are objects of intellectual scorn & Are objects of intellectual scorn & moral approbationmoral approbation66Dichotomy in Policy Dichotomy in Policy AnalysisAnalysisIn practice free trade is the international In practice free trade is the international application of an unregulated free-market application of an unregulated free-market systemsystemThose who oppose unregulated free trade Those who oppose unregulated free trade in domestic policy often endorse in domestic policy often endorse international free tradeinternational free trade•Demand protection & subsidies at home, Demand protection & subsidies at home, competition abroadcompetition abroad77The Formal Model of The Formal Model of Free TradeFree TradeDavid Ricardo’sDavid Ricardo’s theory of theory of comparative advantagecomparative advantage is at the root of free trade: is at the root of free trade:•Free trade generates greater efficiency Free trade generates greater efficiency in production and higher consumptionin production and higher consumption•Overall national gains will exceed lossesOverall national gains will exceed losses88Critique:Critique:1. The model has inherent limitations:1. The model has inherent limitations:•Short-term equilibrium of the modelShort-term equilibrium of the model•Use of consumption as a sole Use of consumption as a sole measure of social welfaremeasure of social welfare2. The comparative advantage model’s 2. The comparative advantage model’s assumptions are unrealisticassumptions are unrealistic99Assumptions:Assumptions:Perfect competition Perfect competition Full employmentFull employmentLabor mobilityLabor mobility““Well-behaved” production functionsWell-behaved” production functionsImmobility of capital across national Immobility of capital across national boundariesboundaries1010The Free Trade FantasyThe Free Trade Fantasy1111““Perfect Competition”Perfect Competition”International trade is characterized by International trade is characterized by imperfect competitionimperfect competitionMonopoly & oligopoly control improve Monopoly & oligopoly control improve the well-being of one nation at the the well-being of one nation at the expense of othersexpense of others1212““Full Employment & Full Employment & Mobility of Labor”Mobility of Labor”Structural unemployment & labor Structural unemployment & labor immobility lead to income declines in immobility lead to income declines in import-competing industriesimport-competing industries1313““Well-behaved Well-behaved Production”Production”Industries with increasing returns to scale Industries with increasing returns to scale seize benefits & impoverish competitors seize benefits & impoverish competitors via government subsidiesvia government subsidies1414““Immobility of Capital”Immobility of Capital”Mobility of capital across borders leads to Mobility of capital across borders leads to substantial job losses & increased substantial job losses & increased inequality with low-wage trade partnersinequality with low-wage trade partners1515Free Trade and the Free Trade and the EnvironmentEnvironment““ExternalitiesExternalities”:”: environmental damage environmental damage is not taken into account is not taken into account •Pollution, long-term resource depletion, Pollution, long-term resource depletion, overuse of common property resources, overuse of common property resources, insufficient provision of environmental insufficient provision of environmental public goodspublic goods1616The Free Trade model argues that The Free Trade model argues that government policies will remedy these government policies will remedy these issuesissuesBut this assumes national & state But this assumes national & state governments have jurisdictiongovernments have jurisdictionOnce we enter the international arena, Once we enter the international arena, consistent policies across national borders consistent policies across national borders is difficult to achieveis difficult to achieve1717Nations with lowest environmental Nations with lowest environmental standards & least resource-conserving