Free trade never was, never will be
Lebanon Daily News (USA) | 23 February 2007
Free trade never was, never will be
By Paul Heise
Life used to be simple for the advocates of free trade. America would lead the world to peace and prosperity through “trade, not aid.” Not any more: trade promotion is under attack, and it is a lot more than deficits and outsourcing. It’s your job and your standard of living.
Congress is shortly going to have to vote on something called “fast track.” This is the constitutionally dubious rule that permits the president to submit a negotiated trade agreement that will be rushed through Congress with no amendments allowed. In the past, Congress has given that authority to the presidents of both parties. That authority expires in July, and prospects for its extension are not good because the people are now more aware of what free trade really means.
The corporations, the banks and their faithful economists support free trade and fast track because they will profit from “trade-promotion” agreements. Their lobbyists argue that the opposition to the World Trade Organization, the Doha Round, CAFTA/NAFTA and such are selfish protectionists who want to prop up out-of-date industries and to deny to consumers the benefits of expanded markets. Workers are portrayed as bad, dumb protectionists who are afraid of the modernized and globalized world.
When you frame the question that way, free trade holds the moral high ground, and opponents have to argue against the wealth-creating efficiency of markets.
But this whole program has, for the past 50 years, assumed that the rules which GATT/WTO and NAFTA/CAFTA are imposing make world markets more open and efficient. That is simply not the case.
Free trade is now and always has been something of a fraud. No one ever advocates, much less implements, real free trade. With real free trade, you end up with a warlord economy like the oligarchs and President Vladimir Putin run in Russia. Free trade becomes a world without law.
Markets have to be managed, and everyone knows it. The question is, for whose benefit? The rules that the WTO imposes divert benefits, as you would expect, to those with the power to set the rules. At home, the corporations and banks own the negotiators and legislators. Internationally, the rich countries call the shots. Others get a godfather-like offer that they can’t refuse.
No one, not even the United States, obeys the rules, but the classic example is Japan, which has always protected its consumers and industries from the predations of GATT/WTO rules. In 1969, when I was a Labor Department trade negotiator, a Japanese trade official in Tokyo stated quite frankly: “We will never liberalize computers (allow US companies to freely sell computers in Japan) until we are on an export basis.”
I, just as bluntly, said: “That is not acceptable.”
I was later chewed out by the head of our delegation for being too blunt with the Japanese, and I was never allowed to go to Japan again. The Japanese still do not allow American computer companies to sell freely in Japan.
The developing world has openly shown the power of managed trade. The export-platform model, which is the pattern for post-World War II economic development, violates every free-trade principle there is. Domestic markets are protected, exports are subsidized, domestic industries are managed and all of this with a carefully undervalued currency. This model was pioneered by Japan, then used by the Asian Tigers - Hong-Kong, South Korea, Taiwan and Singapore - and now it is being perfected by Indonesia, India and China.
But things have changed. While it lasted, developed countries sold their high-tech products abroad, but at the same time all of them protected, subsidized and exported many basic manufactured goods and their farm products. Now the world is globalizing to a new pattern of trade, or rather investment, in intellectual property like patented pharmaceuticals, trade-marked logos and copyrighted, software, music and movies.
The developing countries are smiling all the way to the bank, notoriously pirating everything in sight. The way they see it, rich countries are abusing the system so that enforcement of patents denies life-saving drugs to the developing world. So Brazil and India just said no and ignored the patents and thereby threatened the status of all intellectual property.
These new, so-called trade-promotion agreements are really investment agreements designed to protect those endangered patents, trademarks and copyrights which, by their very nature, restrain trade. Or they protect the investments of American firms who are moving production overseas.
The American people are awake to what is happening. Let us hope Congress wakes up and stops fast track and all this hypocritical nonsense misnamed free trade.
A resident of Mt. Gretna, Heise holds a Ph.D. in economics and is professor emeritus of economics at Lebanon Valley College. His column appears every other Thursday. He maintains a web log at weboped.com, and he can also be reached at: heise@lvc.edu
