The FT leads off with a blow against protectionism. The complete dog's dinner that the EU has made of quotas against Chinese textiles has a good side if its makes us less hungry.

This week found Peter Mandelson, the European Union's trade commissioner, in a pickle over pullovers. And indeed over a whole series of other textile imports from China. Yet the chaos that has descended on EU customs points - where millions of blocked garments are piling up - may have a silver lining. It should serve to expose the growing futility of protectionist measures, and the absurdities that such moves invariably throw up.

We have known for years that global textile quotas were to be lifted in January, and had plenty of time for our own industries to adjust (which they usually do by moving up-market). But many of them didn't, and screamed at the EU to do something to stem the Chinese tide. Foolishly the EU imposed a new round of quotas (take a bow, Mr Mandelson). Seven out of ten of these categories are already filled, with goods impounded and piling up in warehouses, while European consumers face shortages and price rises.

Mr Mandelson is a natural and very skilled juggler. He likes to control things, and is very good at it. The idea of letting markets do the work and allowing an order to develop that way does not appeal to his temperament. He'd rather manage things. He now concedes there was a "glitch" in the deal's implementation (take another bow). As the FT says,

Yet glitches and protectionism go hand in hand. Attempts to micro-manage trade are destined to backfire. As retailers pointed out, Mr Mandelson has shown a lack of understanding of their business practices and of the time lag that generally occurs between orders and deliveries.

The reason for optimism is this. One senses the end of an era, as protectionism collapses into a mass of contradictions and absurdities. From the current shambles people are learning that free trade tends to get the goods produced by those who do it best, and we all become richer as a result. It is also easier than trying to micro-manage. Perhaps those who learn will include Mr Mandelson, who is also a very good learner.

The EU's trade policy is scorned by Alex Singleton of the Globalisation Institute in an article in The Business newspaper. At issue are the textile quotas by which inefficient domestic producers are protected from competition by producers in poor countries, and which force EU customers to pay higher prices.

The EU's stance is perverse and immoral and will hit the weakest and poorest hardest, both in Europe and in China; it shows that Brussels' supposed commitment to economic development and solving world poverty is utterly worthless. In theory, since 1 January, the world has enjoyed free trade in textiles, a welcome development. But the EU is still allowed to impose anti-Chinese quotas until the end of 2008 as part of the Textile Specific Safeguard Clause which China agreed to as part of its ascension to the World Trade Organization.

Some charities like to play God, deciding which favoured countries shall be allowed to sell how many goods in which chosen markets. But, as Alex points out, this is a recipe for keeping poor people poor. The charge that free trade would lead to 'a race to the bottom' has been shown wrong. In fact the Chinese are comparatively well paid; their success has come about because they invested in more efficient production.

Not surprisingly, EU trade commissioner Peter Mandelson comes in for some stick.

The European Commission has no business interfering in trade. Mandelson's ridiculous and destructive quotas have brought confusion to the marketplace and raised prices for consumers.

He should hang his head in shame, says Alex. Maybe so, but he should also rethink the whole sorry mess and make swift and decisive moves towards free trade.

The EU's textiles policy is now such a mess that major shortages are expected this winter. Some stores report themselves unable to secure adequate numbers of items such as trousers and jumpers to meet anticipated demand. The reason is the quota system on Chinese imports 'agreed' with China after the previous system expired in January.

It is not as if Western textile manufacturers were caught by surprise. They had many years to prepare for the change. Instead they prompted their governments to rush through EU crisis measures to curb imports. Now EU Trade Commissioner Peter Mandelson has put together a deal to allow China to use part of next year's quota this year, if China agrees. Sarah Butler (Times) reports that

EU member states are divided on the problem. Those countries with big clothing manufacturing industries and some new members want quotas to be kept. Retailers in Scandinavia, Germany and the Netherlands fear they could be left out of pocket by the decision to change the rules on imports because they have already ordered goods.

This looks more like mayhem than a measured response. Some retailers have moved to suppliers from India and elsewhere, while others are buying unfinished Chinese goods to slip through the net by having them finished elsewhere. At some point someone has to end this madness. We agreed to end tariffs to allow a competitive market to develop, but on July 12th the EU introduced ten quotas on Chinese imports.

We should end that nonsense now. If we end subsidies as well, we’ll be buying from whomever can produce them efficiently, probably China. Valuable exports help them get richer, and lower prices make us richer. Few people except bureaucrats and politicians gain from the mess and muddle the EU causes as it tries to regulate and manage. The result for European customers will be shortages and higher prices, both of which we can do without.

Free trade rolls on, scoring a major success last week with the passage of the Central American Free Trade Agreement. It is boosted along slowly by the World Trade Organization, and more rapidly by bilateral deals and by unilateral action in countries like India and China. Alex Singleton has a good article on the subject in this week's Business newspaper.

The Central American Free Trade Agreement is just at the beginning of a century of trade liberalization, more significant and powerful than any previous wave of liberalization. Europe (and Britain) can either choose to follow the path of America, Asia and China, or it should prepare for a century of decline. If the EU is to avoid long-term economic stagnation, it has to welcome globalization - not fight it.

(The full text of the article can be read here.)

The outcomes of last week’s G8 summit were obscured by the 2012 Olympics decision and the horrific London bombings. This is regrettable. The politicians, protesters and NGOs wanting to 'Make Poverty History' had put forward an agenda that some libertarians and ASI personnel could put their names to (indeed, some of them have urged it for years).

Cancellation of debt is one example. We can spare the money, and it is cripplingly expensive for the innocent debtors. Yes to more and better aid, preferably targeted directly at disease, famine and dirty water, as opposed to government to government grants so easily siphoned off to those famous Swiss bank accounts. And, last but by no means least, is the call for trade justice.

Let us just be absolutely clear on the meaning and importance of this term. It is the most important. Trade justice means free trade, not subsidy, tariffs or government support for any foreign or domestic industry. It is Western insistence on subsidising their inefficient farmers and agro-businesses that helps sustain persistent poverty in Africa. It is the EU’s insistence on dumping its subsidized surplus in developing countries, pricing locals out of the market, which sustains persistent poverty. And it is the massive import tariffs on agricultural goods into the EU that prolongs the unacceptable poverty and hunger suffered in Africa. It is because the French have been particularly culpable in these respects that the Olympic victory seemed all the more appropriate.

Justice in trade does not mean subsidy or any other governmental or international support for African industry. It does not mean establishing a pan-African common agricultural policy, or undoing any of the good work of the WTO. Trade justice means scrapping the EU’s Common Agricultural Policy and the American and Japanese equivalents. It means ceasing subsidy to our farming sectors, scrapping ridiculously unfair trade tariffs, and perhaps most urgently, ceasing the grotesque practice of dumping.

Libertarians care for Africans, as they care for all of humankind, but they do not care for inefficient government interference or muddled incompetence. We should help Africa to compete in a fair and global market place and let their economies grow naturally and sustainably. We’ll see then whose produce we buy.

Markets are sometimes unforgiving when tastes change. Charles Bremner (Times) reports that a slump in sales of French wines has hit the producers of Bordeaux hard.

Bordeaux exports fell more than 22 per cent in value and 12 per cent in volume last year, under pressure from the New World, falling consumption and the high euro. Claret sales in the UK fell 25 per cent in value over the past year.

8,000 to 10,000 hectares of vines are being torn up, with farmers receiving £11,000 per hectare to reduce or stop their production. Meanwhile, for the first time ever, Appellation Controllée wines are being distilled into industrial alcohol.

What happened was New World vintners and a failure to respond to them. They entered the market at the low end about 30 years ago, selling cheap and cheerful wines with names like Kanga Rouge. Over the course of a generation they have educated British tastes, producing award-winning wines, and persuading the British to pay for them and enjoy them. The result is that the British now drink excellent wines from places like Australia, South Africa and Chile, and find many of the French ones to be bland and of poor value.

The French producers coasted on a belief that their wines were the best, and were slow to innovate and adapt wines to changing tastes. They were partly coddled by the French preference for domestic wines. The result is that wine quality in a UK supermarket is better than in a French one, and the English drink better wines than the French.

The wine industry over the last few decades provides a classic example of what happens when complacency overtakes a dominant producer. Upstarts creep in unnoticed with innovations and improvements, and the market share slowly erodes. Suddenly the once dominant brand leader finds itself in crisis. Either new management comes in to get a grip on things and turn it round, or it goes under. Bremner reports that other regions are fighting back, but that Bordeaux is hampered by its system of family vineyards and traditional methods. I am very partial to a good Bordeaux rouge (claret), but I am out-voted in this particular market, it seems. It can be a tough old world, but I hope Bordeaux pulls through.

Alex Singleton at the Globalisation Institute relays the very good news that the US is to end its cotton subsidies. The US announcement follows a WTO ruling against them, and complaints from Brazil, which threatened retaliatory action otherwise.

This is no small beer. The total US cotton subsidy between 1999 and 2003 has been estimated at $2.7bn. The US move is a significant step in freeing up trade and allowing cotton producers in poorer countries, including Africa, a chance to sell their goods competitively.

Furthermore, it removes some of the hypocrisy with which the US beats the drum for international free trade, while protecting and subsidizing some of its own producers. Mike Johanns, US agriculture secretary, said the changes would put the US in a stronger position in future global trade negotiations. Precisely so.

Dr Razeen Sally, LSE's Senior Lecturer in International Political Economy and Head of their International Trade Policy Unit, spoke at Tuesday's meeting of The Next Generation group. His theme was the importance of trade, and its role in the next 50 years.

Among his points was that the integration of China and India into the world economy is an event as significant as the entry of the US after the Civil War. It will transform the world economy beyond recognition. He also suggested that while NGOs are locked into the business of detailed trade negotiations, it is often the unilateral decisions of countries which have more impact on events.

He emphasized the fact that it is trade, not protected markets, which has provided the pathway to wealth, and will do so again. The fixing of quotas and prices is an attempt to regulate and channel something whose main value comes when it is untrammeled. He saw a need to reassert the 18th Century recognition of the value of opening markets, even acting alone and without reciprocation. He thought we could use a modern-day giant like Richard Cobden to assert trade's benefits, including its association with peaceful co-operation between nations.

Dr Sally stayed on for the reception which followed his address, discussing the issues with TNG members.

This week's EU paper Opening the door to Development asserts that the EU is the world's most open market for poor countries. This may be true, but the EU has for decades operated a system of preferential quotas and duties for the poor countries on its favoured list. This has not lifted those countries out of poverty, nor will it.

Countries such as China, India and Thailand are rapidly becoming richer through the route of diversification and trade, while those which have remained dependent on a protected market for a single main export are not.

There is a debate between the free traders, who basically want us to end subsidies and open our markets, and the NGO-led call for a system of quotas and guaranteed prices to sustain industries in approved countries. This is essentially a division between those who think markets bring the best outcomes, and those who prefer central planning, trying to achieve a planned and programmed result which they deem 'fair.'

Carl Mortished (Times) points out that NGOs are urging us to allow some poor producers, often inefficient ones, to have protected markets and prices, but not others. This is the essence of 'fair trade.'

For Oxfam, fair trade really means fair subsidy, a rigged market in which the poorest get more for their produce or a bigger share of the market than their weak position might otherwise command. It sounds nice and the EU obliges with a fiendishly complex system of trade preferences to regulate which poor countries get the sweetest deals.

A more accurate name for it would be 'managed poverty,' because it seeks to sustain existing producers in its favoured poor countries. Free trade, by contrast, offers opportunities to new and unknown producers in other poor countries to become richer by selling us their goods more cheaply.

As the free traders are winning the argument, and the EU itself moves to renegotiate its past agreements in favour of wider access, the NGOs raise strident voices against it. As with markets everywhere, the outcome of free trade is unpredictable. Some existing producers will lose their position to new ones elsewhere. But it is the countries that have seized opportunities and traded which have grown richer. Instead of maintaining a few clients in a secure poverty, we should be extending those opportunities to others.

President Bush chose to launch Free Trade Week by imposing quotas on the import of Chinese textiles. Now the EU Trade Commission Peter Mandelson has expressed European solidarity with America by introducing emergency measures to halt the imports, writes Ambrose Evans-Pritchard (Telegraph).

Mr Mandelson said Europe had a right to defend itself against "serious market disruption" Imports of T-shirts had surged 187pc since last year, forcing prices down 36pc.

Beijing is required to start 'voluntary' action within 15 days, thus saving us all from the low prices at which it can produce and sell textiles. To be fair to Mr Mandelson, he is acing under French and Italian pressure, and sees the measure as a temporary one to enable the affected industries to adjust. The problem is that interest groups often find it easier to campaign for the preservation of their favours than to prepare for their withdrawal.

China grows richer by selling us its textiles; we grow richer by spending less on our clothes. Yes, some of our industries have to switch, and many of our textile producers have been moving up-market into fashion and luxury. This is how wealth is created, and it is ultimately very much to our advantage.

Christian Aid has come out with another emotive report saying that liberalization policies are causing farmers in India to commit suicide. India has been liberalizing in a major way since 1991, but the latest figures available from the World Health Organization suggest that India's male suicide rate is lower than the USA, Austria, Belgium, Bulgaria, Canada, China, Hong Kong, the Czech Republic, Luxemburg, the Netherlands, Poland, Russia, Switzerland and many others. The most recent figures WHO has for India are only from 1998, but this helps us get some perspective. Even if you take Christian Aid's 2004 suicide figure for Andhra Pradesh, which admittedly only counts farmers, that still suggests a relatively low suicide rate when you consider that there is a population of 76 million people.

The report fails to explain why the 2004 figure specifically is abnormally high - in previous years and in the first three months of 2005 the suicide rate is much lower. Could the fact that Andhra Pradesh experienced droughts unprecedented in its recent history have something to do with farmers committing suicide?

It is totally regrettable when anyone commits suicide, but Christian Aid misses the point. Christian Aid ignores all the millions of lives saved from starvation in India because of liberalization. If saving lives were the point of the report, Christian Aid should be firmly backing liberalization. This report is about backing up ideology.

When the sort of policies Christian Aid advocates were followed in the 1960s and 1970s, India's economy stagnated and living standards fell. Many starved. Now, by following liberalizing policies, India's economy is experiencing some of the world's fastest economic growth. Christian Aid is effectively saying that India should grow more slowly. This would not be in the interests of poverty-relief.

Christian Aid seems to blame the suicides on Britain's Department for International Development for its support of Andhra Pradesh's privatization policies. Yet the report says the suicides are by farmers, not by workers at newly-privatized companies. Indeed, because India taxpayers are paying for fewer loss-making state industries, the government has had more money to spend on its priorities - including on helping farmers.

Alex Singleton is director-general of the Globalisation Institute, an international development think tank.

The US and the EU (rich) have been concerned to limit their import of textiles from China (poor but getting richer). Even so, Peter Mandelson, the EU's Trade Commissioner, has moved to berate the West for its defensive approach to imports from Asia.

The rich countries have used 'adjustment' clauses to limit imports while their domestic industries have tried to adapt. Despite years of preparation, the lifting of barriers at the beginning of the year has proved too much. It may well prove too much, suggests Graham Searjeant, for the less efficient but protected producers of South Asia, North Africa, and Latin America, who were given privileged but limited access to Western markets, but now face competition from China and others.

One approach is to try to preserve the status quo and to extend its artificiality. To this end we would keep out the new (poor) exporters in order to benefit the old (even poorer) ones. We would regulate even more markets, allowing in quantities we deemed right from countries we deemed deserving, trying to pour aspic over international trade so it would be preserved in a shape we felt comfortable with. This seems to attract NGOs such as Christian Aid, denounced this week by the Financial Times for "irresponsibility."

The other approach is to rate free trade the fairest, most effective road out of poverty. It is to end the subsidies and the barriers, to bring down our tariffs and financial support for domestic industries, including textiles and most importantly, agriculture. It is to allow poor countries to become richer by selling us their produce, recognizing that there will be short term losers along the way, and trying to help them adapt to the changes.

In this approach, people buy things they want to because the price and quality are right, not because some committee has allocated quotas. Poorer countries can expand, develop and become richer, instead of being locked into an approved status quo of permanent dependence. It may be bumpier, but it is more adaptable and open-ended. As the Globalisation Institute points out, this is fairer than any artificial definition of fairness. Furthermore, it leads to prosperity.

The Globalisation Institute today releases a report to coincide with what campaigning organizations such as Christian Aid, the World Development Movement, and War on Want, are promoting as 'the Global Week of Action for Trade Justice.'

It is, as the new report points out, nothing of the kind. They use the words 'trade justice' to promote centralist planning policies which would inhibit both trade and justice.

Remarkably, Christian Aid in its advertising cites the EU Common Agricultural Policy as an example of free trade. It is nothing of the kind, as the GI paper points out. Subsidies and tariffs are not only not free trade, they are the opposite of free trade.

The nations which have, by their own efforts, made their way out of poverty, have not done so in a way regulated and controlled by others. They have done so by using their advantages (usually price to begin with) to trade their way to increased wealth.

The ideologues talk of free trade as "a failed and discredited agenda," but the fact is that free trade is gaining ground daily as its role in wealth creation is acknowledged. It is only discredited among NGOs who cannot see through their veil of ideology to the real world beyond. If they really want trade justice they should join us in rejecting the subsidies to our producers, which prevent poorer nations from competing fairly, and the tariffs which effectively keep their goods out of our markets.

There are signs of agreement on international development, with a focus on ending subsidies and opening markets. A seminar on the subject at the Foreign Policy Centre last week featured a speech by Hilary Benn, the cabinet minister responsible. Many free marketers would agree with most of what he said. He wants policies which bring practical results, and he conspicuously avoided the old dogmas and clichés.

There are strong links between more open trade and growth. In a group of eighteen developing countries that became much more open to trade after 1980, the average growth rate has accelerated. This group included most of the world's poor people - among the eighteen countries are Bangladesh, China, India, Ghana, Nepal, Uganda, and Vietnam. Growth in turn has helped reduce poverty. As you know, poverty in China has decreased by two thirds since 1981 and in Vietnam, poverty was halved in a decade. I call that progress. However, in sub-Saharan Africa where trade and growth have fallen, poverty has almost doubled since 1981.

Mr Benn pointed out that the aid given by rich countries is cancelled out many times over by the economic damage which their subsidies and tariffs inflict upon poorer ones.

We need to tackle trade distorting subsidies and further open our markets. Total support to agriculture by OECD countries was US$318 billion in 2002 - roughly 5 times more than all of the aid which the rich world currently gives. Agricultural protection is damaging to developing country producers. It costs them $20 billion a year by shutting them out of EU markets.

He did not support protectionism for developing countries either, because it can lock countries into sectors in which industries fail to innovate and lose competitiveness.

Governments need to resist pressure from inefficient industries demanding permanent protection - governments, as history has shown, can't always pick winners!

Amen to that. The cross-party convergence which is emerging on development gives us a real opportunity to make 2005 the year in which we do something effective to lift humanity from the poverty which still afflicts too much of it.

Days after the Tsunami struck, the EU imposed crippling tariffs of $4,540 a ton on Thai exports of cumarin, a plant extract widely used in perfume. Fraser Nelson reports in The Business that the move is designed to protect the French company Rhodia, Europe’s only producer of cumarin. The EU claims that Thailand was re-selling backdoor Chinese cumarin, already subject to a heavy tariff. Nelson says that:

An "investigation" into the alleged China-Thailand trade did not involve a visit to Thailand. The EU noted that no one in Thailand had contacted it to object - on the presumption that they heard about an investigation. Thailand's guilt, its report said, "must be inferred, in the absence of contrary evidence".

Charities have denounced the action. Michael Bayley, an Oxfam spokesman, described the action as "criminal." Others point to the EU's hypocrisy in offering aid with one hand, while denying them access to its markets with the other. It is a formula which fosters dependence rather than development, and typifies the way in which the EU protects its inefficient producers at the expense of people in developing countries trying to lift themselves out of poverty. Coming immediately after the battering Thailand took from the Tsunami tragedy, this action exposes the EU's blinkered and selfish attitude to trade. The case for opening the markets of rich countries to the goods of poorer ones is now overwhelming, and must be one of the imperatives for 2005.

Napoleon famously sneered at Britain as "a nation of shop-keepers." Adam Smith had described them a nation whose government was influenced by shop-keepers. Napoleon subscribed to the soldier’s code, whose virtues included courage, honour, pride, and loyalty. The merchant’s code, by contrast, stressed honesty, fair-dealing, prudence, moderation, and calculation.

Soldiers have had a good press. They form the main body of history’s heroes, from Alexander and Caesar to Charlemagne, Napoleon, Rommel and Patton. Their dash and derring-do have been held up as positive role models, and young people fantasize about them. Their deeds changed the world, and they wrote their names into its history.

Merchants, on the other hand, have not been given much respect. They are thought money-grubbing, obsessed with material goods rather than honour and dignity. They shuffle around in furs muttering about prices and profits, instead of wearing shining armour and boldly wielding swords in pursuit of glory. Children play soldiers, not merchants.

Soldiers fight. They kill people and allow their leaders to impose their will with the sword. There have been good and honourable defensive soldiers, of course, but history tends to give its accolades to the conquerers. Merchants, on the other hand, trade. They bring goods to people and supply them with life’s comforts. They have been at times no less brave, enduring storms and shipwreck. Soldiers are natural gamblers, ready to risk it all on one last throw; but there are merchants like that, prepared to take awesome chances for the thrill of the game.

Where soldiers marched they left death and destruction in their wake. Their testament was burned villages and the field of corpses. Their glory left shattered lives. Where merchants passed they left wealth. They enabled communities to endure hard times and to add to life’s comforts. They enabled people to aspire to better things than survival, and brought the flavour of exotic things into the lives of people who would never travel themselves.

Merchants generated the surplus wealth which enabled the arts and architecture to prosper. They created the means whereby scholars and writers could earn a livelihood. If one looks at the advancements and improvements of humankind, only a tiny fraction is owed to soldiers. The great volume of human achievement is down to the merchants. They have left the world a better place. Perhaps it is time to shift our emphasis, and to write histories which honour the merchants and the qualities which put them at humanity’s service.