Alejandro Chafuen, Acton’s Managing Director, International, published a piece in Forbes yesterday on the place of state-owned enterprises in international trade. The question also extends to industries that, even if not owned by the state, are significantly influenced by government interests, regulation, and so on. Oil is a prime example of this, but there are many other instances, more recently including the data and tech industry.
I have witnessed many harsh debates during off-the-record meetings between policy leaders and advocates who value free-trade and globalization but where one side seeks exceptions for the “national interest” or to create a more level playing field. It’s not all acrimonious, though. One topic on which I have seen consensus is the problem of state and quasi-state actors competing at par with the private sector. Many can profit from trade with state-owned enterprises (SOE) and other state actors, but is it just?
The principle that for centuries governed justice in contracts was that of “volenti non fit injuria”: if the contract is voluntary there is no injustice. This also implied that prices were just if untainted by fraud, coercion or monopoly. A certain degree of knowledge by the parties was required as well (that is why a price set between a child and an adult can’t always be considered just, even if both agree to it). Prices set in this manner were a pillar of “just price” theory.
How does this principle of justice apply to some of today’s examples of international trade contracts by state actors? A contract between the figureheads of Vladimir Putin and Nicolás Maduro, for example, might very well be voluntary on their part but would likely require many involuntary actions by taxpayers and other players in their economy.
Another factor that complicates the analysis of free trade is that many sectors of the economy today continue to lie in government hands. This is especially true in countries with little de facto division of power. Often only a handful of people, and sometimes even the executive alone, play a role in determining key aspects of multimillion-dollar contracts.
Read the entire piece here.
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