Is the EU Truly a Free Trade Area? Or the Exact Opposite?

Like most things there are two extremes in the arena of free trade areas.

On the one side we have a true free trade area, governments would open their borders to each other to enable free trade and free movement of people.

As the relationship developed, governments could learn from one another with regards to what tax structure, what regulations, what benefits etc were the best and then adopt those policies in their own country.

Best being general wages, life expectancy, savings, trade account and so on, the usual methods of measuring the advancement of an economy.

This would be a mutually beneficial relationship with countries constantly learning from one another to understand the best way to increase the general well being of their populations.

This is the best way to improve the lives of the people in each country. This is true free trade and it is how free trade can benefit humanity

In the middle we have a semi open free trade area where countries carry on trade between one another but instead of learning from one another, the countries enact certain tarifs.

Tariffs would have a negative effect on the populations of both countries because it would demonstrate that the governments are not adopting best practice.

However given the government is not prepared to adopt best practice it is the next best thing to free trade because tarifs offer some protection to the industries in the country where the less than optimum taxes and regulations apply.

On the other end of the scale we have a controlled “free” trade area.

Before the borders are “opened” to free trade, the governments involved agree on the regulations and taxes they will use as part of this free trade area. They may also agree to bring in new regulations and taxes as a block in the future.

There are several huge problems with this approach.

1. It will not be possible to know what kind of tax structures, regulations etc, will give the populations the best quality of life.

Before trade starts, the countries lock themselves into an homogenised system which does not allow governments to experiment with different work structures to advance the economy.

2. By acting as a block governments can actively stop existing or potential ways of working that are proven to be beneficial. Because the government no longer has competition from other governments.

For example a country joins the trading block with a low level of VAT. The members of the trading block underestimated the effect of this low tax when that government was admitted.

The governments in the trading block could impose block wide limits on the minimum amount of VAT a country could impose on its population.

This is just one very simple example.

 

3. The power of this trade block would be a target for coercion and corruption. No longer would an entity have to lobby 10 governments for example, they can lobby the block as whole, making their lives infintely easier and cheaper and more effective.

 

4. Multinational companies. Like it or not, most countries have some massive businesses which dominate their industry nationally and in some cases internationally.

To give some examples.

The power industry. The block could specify a maximum amount of X emission from a coal fired power plant. To achieve this level of emissions a technology is required to be retrofitted to a power station. A technology that is patented by a large company.

The benefits of lowering X emission is debatable, but a large company has a motive to make the case if they have a patent on the technology that makes it possible. And going back to point 3, this company is massively more motivated to pass this law by lobbying the block, not only because they only have to deal with one government instead of 10, they also have a greater chance of success because they only have to deal with one government.

The most obvious real world example of this is gas for air conditioning systems. DuPont has the patent for the air conditioning gas that is now mandated by law for car air conditioning systems on the EU. This is despite that fact that Mercedes Benz has shown this gas poses a real fire hazard. Mercedes and other German car manufacturers have proposed a CO2 based gas for air conditioning systems that would extinguish any fire in the car but the regulations of the block are hampering this effort..

And you can multiply this type of problem many times, from small businesses looking for new ways to work to large companies which have an inherent advantage due to their location. In short, restrictions imposed by government effect us all and in ways we can not fully understand.

In short, any free trade “agreement” by definition is the exact opposite of free trade.

Real free trade allows governments to learn from one another. It forces government to compete with each other to give their populations the best possible life (unless of course a country decides to adopt a Soviet type attitude and stops its people from leaving, instead of reforming/improving)

A controlled “free” trade agreement does the exact opposite.

A real free trade area allows the governments involved to experiment with the best tax structure and regulations to make their businesses competitive and efficient.

A controlled free trade “agreement” completely stops a country from trying new things. It homogonises regulations.

It completely hides the best practices and it stops human development.

So where does the EU lie in this spectrum?

Unfortunately, the EU is firmly at the free trade “agreement” end of the spectrum. ie the exact opposite of a genuine free trade area.

The EU “free” trade area is there is help governments grow.

To protect government budgets and to protect government power.

To help governments increase the taxes, rules and regulations they can impose on their populations.

The EU helps government because it eliminates their competition.

Let me repeat. The EU eliminates competition between governments

Again, the exact opposite of free trade.

Real free trade would allow humanity to advance because we would be able to learn from one another.

A free trade agreement like the EU, completely stops this process of learning by homogenising rules, regulations and taxes.

Governments can continue to grow at the expense of the population, safe in the knowledge that the population has nowhere to run to.

The proliferation of free trade agreements throughout the world should worry us all.

If it continues there is only one logical conclusion, a worldwide “free” trade area where governments can pass whatever rules and regulations they wish because people cannot leave. We are closer to this distopian reality than you can imagine.

 

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