The interests of powerful nations and corporations are shaping the terms of world trade through free trade agreements. Pursuing and entering into free trade agreements is a disastrous policy which has had the effect of enriching large corporations while not only devastating segments of the American workforce but also exploiting the vulnerabilities of third world nations. Over the past several decades, the United States has entered into numerous agreements with other nations in an attempt to enhance the export of American made products and lower prices by importing products from various other nations. Of course, that is the wonderful scenerio that those supporting free trade agreements would have you believe.
The agreements are based on a market model in which trade in goods and services between or within countries flows unhindered by government-imposed restrictions such as taxes, tariffs, and other non-tariff trade barriers. The theory is that any voluntary trade must benefit both parties, otherwise it would not be made.; more precisely, for a trade to occur both parties must expect a benefit. Furthermore, the advantages of free trade, according to classic economic theory, is that free trade achieves maximum economic efficiency and overall productivity gains.
Free Trade can be contrasted with protectionism, which is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over or competition. Opposition to free trade has existed since the creation of our country: the 1st Secretary of the Treasury, Alexander Hamilton, advocated tariffs to protect infant industries.
But, despite the pros and cons, we are left with an ongoing struggle – how to protect the jobs of our own workers and citizens yet provide reasonably priced products and export markets for American companies. In addition, consideration of the issue of responsibility to those nations exploited by free trade must be discussed.
One of the most well-known agreements, the North American Free Trade Agreement (NAFTA) was signed into law in 1994 during the first Clinton administration. Not surprisingly, the supporters of NAFTA included many of the world’s largest corporations while opponents included labor, environmental organizations, consumer groups, and religious groups.
As a former foreign minister of Mexico once remarked, NAFTA was “an agreement for the rich and powerful in the United States, Mexico, and Canada, an agreement effectively excluding ordinary people in all three societies.” It should, therefore, be no surprise that NAFTA rules protect the interests of large corporate investors while undercutting workers’ rights, environmental protections, and democratic accountability. Hence, NAFTA should be seen not as a stand-alone treaty, but as part of a long-term campaign by the conservative business interests in all three countries to rip up their respective domestic social contract.
Americans were promised that NAFTA would generate large numbers of net new good jobs. Instead, over a million jobs that would otherwise have been created were lost, and wages were pressured downward for a large number of workers with less than a college education.
Public Citizen, a national, non-profit organization, had this to say about NAFTA:
NAFTA requires limits on the safety and inspection of meat sold in our grocery stores; new patent rules that raised medicine prices; constraints on your local government’s ability to zone against sprawl or toxic industries; and elimination of preferences for spending your tax dollars on U.S.-made products or locally-grown food. In fact, calling NAFTA a “trade” agreement is misleading, NAFTA is really an investment agreement. Its core provisions grant foreign investors a remarkable set of new rights and privileges that promote relocation abroad of factories and jobs and the privatization and deregulation of essential services, such as water, energy and health care.
Over the past 13 years since the passage of NAFTA in 1994, the United States has experienced growing trade deficits with Mexico and Canada which have displaced production that supported roughly 660,000 (manufacturing only) and 1.0 million (total) U.S. jobs. Workers with at most a high school education were particularly hard hit by growing trade deficits—they held 52% of jobs displaced; these workers make up 43% of the workforce. Export growth since 1994 supported an additional 1 million U.S. jobs, while imports displaced domestic production that would support 2 million jobs – a net loss of 1 million jobs.
Defenders of NAFTA have two main responses. One is that its damage to workers is exaggerated. But NAFTA was supposed to make thing a great deal better for workers, not—even a little—worse. The second response is that the problems of inequality are largely the result of domestic policies and have nothing to do with globalization. Yet that ignores the enormous increase in bargaining leverage over workers that the ability to shift production out of the country, and then sell the products back home, gives the transnational corporation. Witness the increasing number of corporations which demand that workers accept decreases in wages and/or benefits or they will simply relocate to another country. With that leverage, corporate influence over economic policy has greatly expanded in all three nations since the agreement was signed.
The 1 million job opportunities lost nationwide are distributed among all 50 states and the District of Columbia, with the biggest losers, in numeric terms: California (-123,995), Texas (-72,257), Michigan (-63,148), New York (-51,582), Ohio (-49,886), Illinois (-47,701), Pennsylvania (-44,173), Florida (-39,987), Indiana (-35,157), North Carolina (-34,150), and Georgia (-30,464) (see Table 1-2).
The 10 hardest-hit states, as a share of total state employment, are: Michigan (-63,148, or -1.4%), Indiana (-35,157, -1.2%), Mississippi (-11,630, -1.0%), Tennessee (-25,588, -0.9%), Ohio (-49,886, -0.9%), Rhode Island (-4,482, -0.9%), Wisconsin (-25,403, -0.9%), Arkansas (-10,321, -0.9%), North Carolina (-34,150, -0.9%), and New Hampshire (-5,502, -0.9%). Indiana falls into both categories – loss in numeric job numbers and loss as a share of total state employment.
Despite the decade-long failure of NAFTA, in 2005 Congress voted, albeit by a narrow margin (217-215), to extend NAFTA to five Central American countries and the Dominican Republic through the DR-Central American Free Trade Agreement (DR-CAFTA); the Bush administration signed the agreement into law. The Central America-Dominican Republic-United States Free Trade Agreement (DR-CAFTA) included seven participants: the United States, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. The export zone created was the United States’ second largest free trade zone in Latin America after Mexico. However, proponents of the agreement glossed over the fact that this agreement could and probably would have the same disastrous consequences that were attributed to NAFTA.
But, big business is not finished yet with free trade agreements. On January 19, 2006 the United States and the Middle Eastern country of Oman signed a free trade agreement. The U.S.-Oman Free Trade Agreement (OFTA) is part of the Bush administration’s strategy to expand NAFTA to the Middle East by creating a Middle East Free Trade Area (MEFTA). OFTA replicates the failed trade model embodied in NAFTA and the Central America Free Trade Agreement (CAFTA).
The Free Trade Area of the Americas (FTAA), currently being negotiated by 34 countries of the Americas, is intended to be the most far-reaching trade agreement in history. Although it is based on the model of the North American Free Trade Agreement (NAFTA), it goes far beyond NAFTA in its scope and power.The FTAA, as it now stands, would introduce into the Western Hemisphere all the disciplines of the proposed services agreement of the World Trade Organization (WTO) – the General Agreement on Trade in Services (GATS) – with the powers of the failed Multilateral Agreement on Investment (MAI), to create a new trade powerhouse with sweeping new authority over the Americas.
For years now, corporations and administrations have been foisting one free trade agreement after another on unsuspecting American citizens using euphemistic terms and words to describe the agreements. Free trade sounds so inviting – no taxes, no tariffs, no restrictions. But free for whom? Free trade agreements benefit corporations and big business with little benefit to the average worker. When was the last time you picked up an item in a store and saw “Made in the USA” ? The wolf isn’t even hiding in this one – just look at the labels.