World Unity for Free Trade

Free trade is a domain that presents one of the most compelling cases for world government, and one of its greatest opportunities. The economics has long been shown to be clear in this regard: opening up global trade will, on aggregate, benefit all of humanity and all of its national subsets. Rarely in politics do we see such a win-win situation—full global trade liberalization should be a no-brainer if not for political obstacles. In this system of nation-states, we have politics getting in the way of economic sense, but a world government can overcome these political constraints to open up the global economy.

National trade policies are dictated not only by economic incentives but also by nationalist motives, such as aiming for self-sufficiency, achieving a favourable balance of trade, or shielding domestic industries from competition. Since these motives lead to policies which deviate from economic sense, they are economically suboptimal and ultimately harm the greater good of humanity. There is a direct opportunity cost of these nationalist motives, which is paid by society as a whole. Sometimes it is assumed that some level of artificial barriers will always remain to international trade—but such policies are entirely unnecessary in a world where there are no nations.

This economic suboptimality is most visible in the inefficiency of protected industries and the costs it imposes. A direct cost is paid by consumers when they have to buy at a higher price from the protected industry compared to what the price would be under free global trade. But an indirect cost arises from the fact that when nations shield industries from competition, they also remove the incentive for these to improve methods and to innovate, leaving the economy stuck with inefficient production even when the same product could be produced much more cheaply and of better quality. Free trade forces them to adapt instead; it weeds out the uncompetitive and rewards the efficient. Hence free trade is a public good for the entire world—even though at present nations lack the political will to drive it.

Further, those who are less competitive in the world have no inherent right to protectionism. Justice demands that those who are more efficient and productive should be rewarded, as would occur in a system of free global trade. Protectionism instead rewards the uncompetitive merely on the basis of them being in the ingroup. Consider a country hosting a sports event, which knows that its athletes cannot win against those of other countries, and gives its own athletes a head start so that they can win the race. Just as this is an unacceptable violation of proportionate justice, so is protectionism. Alas, nationalist politics has a persistent bias towards protectionism; ingroup favouritism combines with a preference for loss aversion over seeking gains such that the national system cannot fully liberalize trade.

Yet the literature has well established that the vast majority of the population, the consumers, stands to benefit far more as a whole than the narrower interests that could potentially suffer. Everyone shall have access to a broader variety, better quality, and lower cost of goods and services, rather than being limited to what can be produced in a national subset. Hence there is a utilitarian imperative, alongside the one from justice described above, towards free trade. Once again we must ask ourselves the not-so-difficult question: which should we pick between economic growth, justice, and utility on one hand, and nationalism on the other?

As with a number of other domains, nationalists fret that they would lose control over what they currently see as a sovereign prerogative of trade. Free trade under a world government could, for them, complicate the ability to protect and favour their nations’ industries. But by contrast open trade also protects the producers and consumers from the whims of other nations’ trade policies and selfishness. Similarly, where nationalists could argue that the ability to combat smuggling and illegal trade, a united world means that the whole concept would just vanish when the law is universal. In fact without borders the whole concept of trade becomes meaningless—it is just simply internal commerce, like the economic activity within nations today.

Discussions around trade in the 2020s are dominated by concerns around supply chain risks and shocks, fuelled by a series of conflicts around the world and the politicization of trade. These concerns have left governments scrambling to self-produce and diversify supplies of key items, from semiconductors to rare earths. These have also given fodder to autarkic nationalists calling for a decoupling of trade. Yet these ‘shocks’ and ‘risks’ are not extraneous factors that we cannot help—they are due to the conscious decisions of nationalist governments around the world. To ensure trade stability, we should not look backwards to undo economic globalization, but towards backing it up with political globalization that can de-risk global trade from the threats caused by nationalism.

In today’s world, and in fact for many centuries already, it is just not practically possible for a nation to be self-sufficient. No nation has the endowments to produce everything that a modern economy needs efficiently. The idea of autarky goes against the basic principles of division of labour and comparative advantage, seeking to undercut the specialization which has been key to modern productivity. Advocating autarky instead of free trade is almost like calling for reverting the Industrial Revolution entirely. It was only conceivable in primitive agrarian societies, which many political theorists have romanticized, but is firmly out of question in an advanced society. It is instead better to embrace global interconnectedness and back it up with solutions which eliminate the political risk, like world government.

With a world government all of these artificial risks to global trade will be put to an end. No longer will it be possible for puny nations to harass the global economy by imposing tariffs, blockades, export controls, tolls, sanctions, quotas, and wars. Trade will no longer be weaponized for nationalist and political motives, a situation that we not only see currently but have also witnessed repeatedly in history. Consumers and industries would not have to put up with supply disruptions at all – they can simply depend on the most efficient suppliers, confident in drastically lower levels of risk. Therefore, much of the effort and cost that currently goes into diversification, hedging, and storing large reserves can be avoided with reliable trade.

There will inevitably be some creative destruction in the establishment of free trade, but we should not let this get in the way of the greater good to the world. Many industries have been unjustly shielded from global competition by nationalist governments—some through their own lobbying, others through the supposed protection of ‘national interest’. In the national system these have an outsized influence on trade policy, but their interests should be placed on par with those of everyone else. Nationalism often chooses to protect the vested interests of a few at a cost to the wider population, but world government and free trade will shift away from this towards economic justice.

But rather than losing out on the potential gains because of a negative impact on some people, a better solution is to support the affected people and help them find alternative opportunities. Free trade does not necessarily have to be bundled with a neoliberal economic model—just because the push for the two coincided once does not mean it must again. We can always use the state to provide support for those navigating the economic transition, and create new opportunities in areas of comparative advantage. Free from the nationalist imperatives in trade policy, the state will be better equipped to facilitate opportunities for growth rather than preserve inefficiency.

This state support can be best realized through a world government, which has the ability to make the benefits of free trade truly universal. A world government, unlike nations, will take the view which maximizes the overall welfare of all humanity. Nations care only about their own populations and will readily direct harms outwards, but a world government ensures that no one is left out or unjustly harmed. World unity heralds a future where economic optimality takes precedence over the political whims of nationalism, where everyone stands to benefit from free trade. And this will also be a future of justice, where a level playing field ensures that the truly competitive can thrive, and incentivizes us to be the best.