When we talk about global free trade, it’s important to understand that free trade is not the natural result of market forces. On the contrary, the global trade regime is the result of active state policies shaped by the world’s most powerful players. In the nineteenth century, Britain opened markets around the world with gunboats. In China, European empires fought two bloody wars — known as the Opium Wars — to prevent the Chinese from stopping the free export of opium across its borders.

The current trade regime was shaped during the so-called Uruguay Rounds in the 1980s, culminating in the creation of the World Trade Organization (WTO) in 1995. It is a product of American unipolar dominance after the fall of the Berlin Wall. This regime has focused on lowering tariffs but also on preventing countries from implementing other forms of regulation — so-called technical trade barriers, like environmental standards or labor conditions. Trade unions in the West have warned since the 1990s about threats to domestic jobs while developing countries have warned against being denied the protective measures that today’s wealthy nations used in their own early developmental stages.

It’s this regime that, for the past forty years, has overwhelmingly benefited large corporations in the United States and the West, which could save on wages and avoid regulations by moving production to countries in the Global South. Some Asian countries have used the globalization of production chains to strengthen their own industrial sectors and achieve economic development. In the 2000s, China especially combined strong state planning with free trade rules and managed to climb up the global value chain toward more advanced, higher-value technological production.

The theory behind the benefits of free trade goes back to nineteenth-century economist David Ricardo, whose theory of comparative advantage still dominates mainstream thinking about trade. The idea is that countries — regardless of economic development — can benefit from specializing in the things they’re relatively best at. This means that Country A, poorer and excelling only in a small handful of sectors, can still benefit from trade with the much richer Country B, even if B is more competitive in all sectors.

But the idea of win-win mostly only ever existed on paper. In practice, specialization in immediate comparative advantages meant peripheral countries were kept in a dependence on production of volatile commodities. The economist Ha-Joon Chang has demonstrated that countries that succeeded in using trade to drive economic development — such as his native South Korea — actively used state intervention to change their comparative advantages. Had South Korea followed Ricardo’s theory dogmatically, today it wouldn’t have industrial giants like Samsung and Hyundai. Instead, its economy would still be dominated by rice and fish.

But with financial globalization, any policy that challenged powerful capital interests was punished instantly by the market. This led to wage competition among workers, as companies could easily relocate to lower-wage regions. It also led to tax competition, with countries slashing taxes to attract investment. The results are clear: growing inequality worldwide, as wages lose out to capital. In rich countries, outsourcing hit the working class hardest, and in developing countries like China and India, the benefits of high growth mainly went to business owners. This race to the bottom in taxation has also strained public welfare systems globally.

For the Left, the key issue in the politics of trade is not the movement of goods across borders but the unrestricted mobility of capital. Since the 1980s, the liberalization of financial flows and production networks has allowed firms to relocate with ease, using the threat of exit to discipline labor and constrain democratic decision-making. This mobility has become a structural feature of the global economy, one that skews power relations decisively in favor of capital.

Trade, in this context, has served a disciplinary function. It has not merely facilitated exchange; it has reshaped the terrain of domestic politics by limiting the space in which states can act. The fear of capital flight has undermined collective bargaining, eroded tax bases, and forced states into a race to the bottom in wages, regulation, and social provision. The rhetoric of competitiveness has substituted for questions of justice, and economic policy has been narrowed to what is tolerable to markets.

What often goes unacknowledged in calls to “bring back” industry is that the social gains of mid-century industrial economies were the result of strong labor institutions, not merely industrial activity. Without high levels of unionization and political organization, the return of manufacturing is unlikely to deliver improved working-class conditions.

The real challenge is neither to restore a lost era of globalization nor to retreat behind national borders. A serious discussion on global trade on the Left must instead start with the ambition to transform the global rules so that trade no longer serves as a mechanism of coercion for capital.