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The Dartmouth
February 26, 2024 | Latest Issue
The Dartmouth

Bryant: Free Trade Isn’t Free

International cooperation requires cultural change, not only economic persuasion — the United States must recognize this if it wishes to be successful in the Red Sea.

Recent violence in the Red Sea has brought international shipping to its knees and challenged the idea that free trade brings global peace and cooperation. The United States must recognize that any short-term military involvement without the development of a long-lasting consensus on free trade and cooperation will only prolong violence.

The conflict in Gaza has spilled into the Red Sea, raising new challenges for trade through the Suez Canal. Iranian-backed Houthi rebels have launched attacks on cargo ships from Yemen in a show of support for Hamas, currently under retaliatory attack from Israel in Gaza. On Jan. 11, the U.S. and several Western allies responded in force to the Houthis in order to maintain safe passage for vessels traveling to and from the Suez Canal. 

The conflicts of the past year challenge the popular idea that globalization alone will encourage peace and cooperation between nations. Anti-Western groups that have been ostracized from the post-Cold War consensus on free trade can upset the global supply chains with direct military action. When global trade comes under threat in this way, the United States flexes its military might to defend globalization, as it has in Yemen. This geopolitical dilemma complicates the fruits of free trade: if the United States wants efficient global markets, it must take a hawkish stance towards those who dissent. While that hawkishness is in some cases warranted, it challenges the neoliberal belief that unfettered trade will always bring global peace. 

The Suez Canal on the northern end of the Red Sea is a vital conduit for international shipping between Europe and Asia. Before the current crisis, 30% of global container shipping by volume passed through the Suez. Since the Houthi rebels in Yemen began their attacks last year in solidarity with Hamas, the price to ship a container through the Red Sea has risen 178%, and trade volumes through the Suez have declined by more than a quarter. The macroeconomic effects of the crisis mirror other recent shipping snafus — the Evergiven’s 2022 mishap in the Suez Canal and, on a larger scale, COVID-19’s supply chain disruptions raised prices for downstream consumers of shipped goods and thereby posed an inflation risk. If not contained, the present crisis will similarly threaten livelihoods around the world. 

How did regional political strife on the Arabian peninsula metastasize into a global economic threat? In the short term, the Houthis have capitalized on the global focus on the conflict in Gaza — the message behind their attacks is one of solidarity with Hamas. In the long term, however, the Houthis have benefited from consistent financial and military support from the Iranian government, who support Houthi opposition to Saudi Arabia and other Western allies in the region. The great irony of Iran’s present threat to world trade — mediated via the Houthis — is that the country is only wealthy because of its participation in the international oil trade in the past century. Despite Iran’s unconscionable human rights record and nationalized oil industry, the United States and its Western allies have been consistently willing to purchase cheap energy from the country. The wealth Iran gained from the system of global trade is now funding a critical threat to that same system.

The tragic irony of the present crisis points to a weakness in the neoliberal consensus on free trade that finds its intellectual roots in the moral philosopher Adam Smith. In his critique of the zero-sum mercantilist economics that defined the colonial empires of the 18th century, Smith writes in “The Wealth of Nations” that trade should be “a bond of union and friendship” between individuals and between nations.

Free trade encourages union and friendship among nations because it is non-zero sum. When nations pursue their own self-interest, produce to their comparative advantage and remain open to commerce with other nations, Smith argues that all participants will be better off and international harmony will result. 

This line of thinking has been inherited by Western policymakers and investors of the past century, and the economic and diplomatic successes of many East Asian countries are proof of this. So long as trade remains free, economic success will motivate international peace. Iran’s actions challenge this idea. Despite their extraordinary gains from trade, Iran’s anti-Western cultural values threaten the very system that enriched them.

Smith’s simplistic interpretation of the past century’s neoliberal internationalism notwithstanding, he offered a number of reasons why, despite gains from trade, international wars persist. Sometimes, he argued, merchants can form powerful political coalitions that will malform national economic policy towards a mercantilist, zero-sum approach. Otherwise, the public can be suitably entertained by the spectacle of professional war and suitably numbed to the accompanying debt burden that violence remains popular. 

Though not directly applicable, these caveats from Smith allow us to understand the present violence in the Red Sea. When political and cultural conditions are in sufficient conflict, as we see between Iran and the United States, violence becomes inevitable, and the threat of economic austerity is overlooked. 

This perspective on the United States’s recent actions against the Houthis provides important context. A true resolution to the conflict requires cultural and political change on the Arabian peninsula, not simply economic suasion. Neoliberal thinking is quick to eschew these non-economic dimensions and point to the East Asian success stories as evidence that free trade can spur any amount of cultural and political change. It is clear that a similar strategy cannot work in the Middle East, just as China’s liberalization did not overcome the country’s authoritarian tendencies despite democratization elsewhere in Asia. International cooperation requires a shared political and cultural agreement that peace and free trade are worthy ideals. 

If the United States wishes to enforce such a cultural consensus in the Middle East, it needs to be self-conscious in this effort. By removing its military presence from Afghanistan in 2021, the Biden administration showed reluctance to enforce Western cultural norms on democracy and gender equality. Now, the administration seems more willing to defend international trade in the face of a similar threat. There are no ironclad solutions to these foreign policy dilemmas, but the United States must enforce a consistent set of cultural norms on the world stage if it desires international cooperation. The U.S. cannot expect a combination of short-term military intervention and laissez-faire cultural policy to create long-lasting peace.

Opinion articles represent the views of their author(s), which are not necessarily those of The Dartmouth.