The Perils of Free Trade; November 1993; Scientific American Magazine; by Herman Daly; 6 Page(s)
No policy prescription commands greater consensus among economists than that of free trade based on international specialization according to comparative advantage. Free trade has long been presumed good unless proved otherwise. That presumption is the cornerstone of the existing General Agreement on Tariffs and Trade (GATT) and the proposed North American Free Trade Agreement (NAFTA). The proposals in the Uruguay Round of negotiations strengthen GATT's basic commitment to free trade and economic globalization.
Yet that presumption should be reversed. The default position should favor domestic production for domestic markets. When convenient, balanced international trade should be used, but it should not be allowed to govern a country's affairs at the risk of environmental and social disaster. The domestic economy should be the dog and international trade its tail. GATT seeks to tie all the dogs' tails together so tightly that the international knot would wag the separate national dogs.