Back free trade, urges Fed economist

Dublin Economic Workshop: Economists must vigorously make the case for the further freeing of world trade, according to one of the governors of the powerful US Federal Reserve Board.

The experience of history shows that the continuation of the process of globalisation is not inevitable, he argued in a paper to the Kenmare conference, and the "myths" propagated by those calling for protectionism must be debunked.

"Some portray the process of globalisation as inevitable with a steady but sure opening of all markets over time. However, the experience of history shows that this is not the case," according to the paper, delivered to the conference by Dr Mark Wynne on behalf of Mr Robert McTeer, the outgoing president of the Federal Reserve Bank of Dallas.

"Globalisation ended once before (after the first World War) and could be reversed again," said Dr Wynne, vice-president at the bank.

In a wide-ranging paper entitled The Rhetoric of Free Trade, Mr McTeer, who is on the Federal Open Market Committee which decides on US interest rates, says: "Economists have something important to say on the topic of trade and we need to keep saying it over and over again."

Free trade is one of the "most powerful and enduring ideas in economics," he adds.

Free trade matters for three reasons, he argues. Firstly, it should be considered "an integral part of freedom proper... Those who value freedom as an end in itself should value freedom to trade across borders as part of that freedom".

Secondly, as traditional economic argument teaches, free trade enhances the productivity capacity of economies and hence increases living standards. And thirdly, free trade supports market-friendly reforms more generally. Open trade enhances competition and market economics.

Economists must be more willing to put these arguments in public, according to the paper. Too many academic economists see involvement in debate as being "beneath them".

"The stakes are high and could not be higher," according to Mr McTeer.