After the French referendum on the European Union, Sir James turned his focus to GATT, the General Agreement on Tariffs and Trade, which had still not been agreed.
He passionately believed global free trade would lead to the destruction of jobs and society in the developed world, and to impoverishment, pollution and social upheaval in the developing world. This belief formed a central part of his books, The Trap and The Response. He argued his case at the highest levels of government, appearing before the Senate Commerce Committee on Free Trade and debating with the senior economic advisor to the Clinton administration.
The Walden Interview
“[If GATT] is implemented, it will impoverish and destabilize the industrialized world while at the same time cruelly ravaging the third world.”
Sir James believed the ideas of early 19th century British economist David Ricardo, which recommended nations specialize in activities they excelled in to gain comparative advantage, exporting their surpluses and importing what they did not manufacture, were no longer valid with the rise of developing countries.
“The principle of global free trade is that anything can be manufactured anywhere in the world to be sold anywhere else. That means that these new entrants into the world economy are in direct competition with the workforces of developed countries. They have become part of the same global labour market. Our economies, therefore, will be subjected to a completely new type of competition.”
He often cited the example of an identical product being made in France and Vietnam:
“…both can use identical technology; both have access to the same pool of international capital. The only difference is that the Vietnamese enterprise can employ forty-seven people where the French enterprise can employ only one. You don’t have to be a genius to understand who will be the winner in such a contest.”
Global free trade would see developed countries “exporting jobs, and importing employment”, and the benefits of cheap imported products would be heavily outweighed by the attached social and economic costs bought about by rising unemployment and poverty, he said.
“It must surely be a mistake to adopt an economic policy which makes you rich if you eliminate your national workforce and transfer production abroad, and which bankrupts you if you continue to employ your own people.”
Sir James called for the rejection of global free trade in favour of “free and vigorously competitive regional markets”, at least until wage levels and standards of living in the developing world could be brought into closer alignment with the West. He also firmly believed in the importance of small businesses for creating a diverse economy.