The phrase free trade is a flashpoint for many people, particularly those involved in government,

international commerce or the media. Proponents perpetuate the view that foreign investment in
developing countries is so helpful to those countries that its practically philanthropy. Those on the
other side of the debate say that in reality, free trade and foreign investment are euphemisms, pretty-
sounding names for a nasty business, namely, the exploitation of developing countries by powerful
international corporations.

What are the basic arguments people use to attack and defend free trade? The attackers cite three
primary arguments against free trade. First, developed countries benefit by investment in countries in
which basic human rights violations are a fundamental part of the culture. Indeed, those violations
often make the free trade investment extremely profitable, with the result that free trade investment
tacitly encourages anti-democratic governments in countries in which workers suffering under corrupt
regimes are voiceless and desperate. Low wages and long hours for low-skilled work make global
companies financially viable. Profit-makers have little or no regard for human rights or social cost.

Second, say the attackers, the environmental damage caused to developing countries by Western
corporations resource extraction, ranging from guano in the Pacific Islands in the 19th century to oil in
Nigeria today, is appalling. Local populations dont benefit from the financial windfall created by the
free trade inspired investment; the resources and the profits all go offshore. Most of the skilled labor is
brought in from outside the country, leaving only the low-skilled jobs. After a few years only the mess
is left behind, along with a profoundly disrupted society.

Third, free trade is far from being the inter-governmental cooperative endeavor it may appear to be.
Indeed, the heads of government in powerful Western nations, who espouse free trade and foreign
investment as pillars of democracy, are indebted to business interests. International corporations
demand direct access to international markets and property in developing countries from their
governments, while at the same time demanding protection of their interests in the form of trade
barriers from their own governments.

The defenders, however, flatly reject the charge of economic exploitation all benefits accruing to the
investor and none to the object of investment. Nearly two hundred years ago, they contend, renowned
British economist and stockbroker David Ricardo proved definitively in his law of comparative
advantage that free trade benefits both parties despite disparities in wealth and power.

Defenders often point out that in developing countries, the so-called exploitative wages international
companies pay local workers are typically 50%-75% above prevailing rates in the host countries and
the work is almost always safer to boot. The workers are worth the premium paid above local wages
because the investing corporation has already made them more valuable as a result of their employment
and training in new industries. And new infrastructure built by international companies in order to do
business does not disappear; the roads, the telecommunication networks, the sewers and clean water
supply are permanent assets. They enable the country to support more new industry employing local
people at still higher salary levels. Hong Kong is the classic modern example of this cycle. Fifty years
ago it was one of the poorest places on the globe. Yet, by dint of hard work and by embracing free trade
and foreign investment, the people have lifted themselves out of their poverty to such a point that today
they are, by some measures, the richest on Earth.
As to the issue of environmental damage as a result of free trade, defenders say that this is pure and
simple nonsense. The simple fact is, they argue, that rich nations have clean environments and poor
nations do not. As countries get rich, they clean up their backyards. Poor countries will clean
themselves up if given a chance to become rich enough to afford the luxury of doing so. Concern for
the environment is a polemical dodge: wealthy is healthy. The real question is how best to bring wealth
to poor countries, and if rich countries also benefit by making that shift possible, what is the harm in
that?