an alliance is often termed a customs union. The most important example
today is in theEuropean Union(EU), where there are no customs barriers or
tariffs that allow discrimination between producers from different member
states, and where a common tariff is imposed on third-party states. As an
example of just how hard it is actually to guarantee equal treatment of foreign
and domestic producers, even when tariffs are theoretically absent, one has
only to see the case load of theEuropean Court of Justice, the EU’s judicial
branch, which is largely taken up by complaints thatde factodiscrimination is
being practised.
The economic arguments for free trade are complex. In general the
economic theory known as the ‘theory of comparative advantage’ states that
the global economic product will be maximized by entirely open international
trade competition. However, in the short- or medium-term, it can often be to
the interests of some industry or economic sector in a country for it to be
protected. Protection may even be in the whole national interest, though this is
less likely. Typically the question of international tariff levels to be applied is a
matter of political conflict inside a country, as with the intermittent conflict
between capital-intensive and labour-intensive industry over tariff levels in the
USA. Whether free trade is a ‘left’ or ‘right’ wing issue in a country can also
vary from time to time, according to the sorts of political values that might be
protected by an economic protection policy. During the late 19th century in
Britain, for example, it was common for Conservatives to want to use tariff
barriers to protect trade between members of the Empire, with thelaissez-
faireLiberals the advocates of free trade. During the 1970s and early 1980s the
left wing of the Labour Party, disenchanted with the European Communities
(the precursor of the EU) which they saw as essentially capitalist and against the
interests of the worker, urged that the only solution to employment problems
in Britain was to protect domestic producers with high tariff walls. Largely for
personal reasons, US President Ronald Reagan during the early and mid-
1980s was a passionate supporter of free trade.Liberalism, however, is the
political creed which has traditionally been most closely associated with
freedom in trade.
Whatever the abstract economic theory, the imposition or not of tariff
barriers will always be inherently political, and their consequences will always
be as important in the domestic and international political arenas as in the
economic. In recent years free trade has become an issue in the developed/less
developed world conflict because of barriers, especially relating to agricultural
exports, that make it particularly hard forThird Worldcountries to earn
foreign currency. Because of this the Uruguay round ofGATTnegotiations
which ended in the early 1990s, became politically divisive, with most of the
world arranged against the EU, whose Common Agricultural Policy is one of
the toughest barriers to free trade ever to be imposed; failure in these talks
Free Trade