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O P I N I O N
The World as Trade and Misrepresentation
Yevgeny Vilensky • The FTAA and the corporatist takeover of free trade • May 2001

The Corporate Claw, the Hegemon, Dr. W, and the NAFTA Baffler have joined their evil forces to take over the world. The only ones left to stop them are Fair Trade Frank, The Mobilizer, and Democracy Man. Sound like a new cartoon from PBS? No – it’s a list of costumes donned by members of the Student Alliance to Reform Corporations (STARC) in their recent protest against the Free Trade Area of the Americas.

The FTAA would expand the North American Free Trade Agreement to include the entire Western Hemisphere. The proponents claim that the FTAA will liberalize and open the economies of many of the nations of the Western Hemisphere, allowing for the free exchange of goods and services. So why are STARC and the rest of their rioting buddies from Seattle, D.C., and Quebec City, all up in arms about this? The main claims of the FTAA’s opponents claim that the FTAA will lead to loss of jobs due to factories moving to countries with cheaper labor; environmental degradation; privatization of many government functions like healthcare, energy, and education; and the increase in such pernicious trends like stronger intellectual property laws and the greater use of genetically modified crops. 

All of these claims are based on the usual slew of bad economic assumptions. But there is one criticism of IMF and WTO-style globalization that has merit. The FTAA will erode national sovereignty by using secretive corporatist government programs that masquerade as free trade. The FTAA will impose a system with no regard for laissez-faire on the rest of the world, with potentially disastrous consequences. This is not an inherent property of free trade, as the Left claims, but rather a major flaw in the way the FTAA will be implemented.

Most of the reasons that STARC gives against the FTAA rely on poor economic assumptions and disproved protectionist arguments. For example, STARC argues that free trade has led to plant closings and job loss in the United States. This is false. Since NAFTA was enacted in 1994, America saw an increase in the number of jobs. Until late 1999, unemployment was at unusually low levels. In part, this was due to the fact that corporations were able to move low-skilled jobs to other countries and raise their profits. This led to greater investment in research and development, spurring the creation of high-skilled jobs back home. Furthermore, the relocation of plants to countries with cheaper labor drastically decreases the price of consumer goods. This reduction in price then means that those same workers in America who previously paid more for these products can save money by buying these goods for less. This provides greater buying power and increases the standard of living.

STARC also claims that free trade will cause severe environmental degradation. As evidence, they cite the maquiladoras, American plants that have moved from the U.S. to Mexico, which have dumped so much toxic waste that the regions around the border have experienced higher incidence of birth defects. STARC fails to realize that it is the industrialized countries, the ones that have had to build their economies just as Mexico is building now, that have been able to sustain a high level of environmental protection and innovation. This is why poorer countries so often fight against international environmental agreements. 

It is a matter of time before Mexico will be able to decrease the level of pollution; this will surely come with an increase in capital, leading to the development of environmentally friendly technologies. Right now, pollution seems a better alternative than starvation. It is clear that birth defects as a result of pollutants in the water supply are tragic and we want to eliminate this if possible. However, only by increasing these countries’ access to capital, via investment and job creation, will it ever be possible to decrease the level of environmental degradation without harsh economic consequences for all citizens.
 Nonetheless, STARC is correct in its assessment that the FTAA will impose a non-libertarian structure on these countries regardless of whether the people want this or not. Central and South America are not exactly the havens for democracy. The ministers who purport to represent their citizens at the FTAA negotiations do not necessarily represent the wishes of their people. Many of the 800 million or so people potentially affected by the FTAA have not had their voices heard. What the FTAA negotiators have failed to realize is that effective free market reforms require the involvement of the people so that they can adapt to the policies enacted rather than have these policies thrust upon them.

Even if the trade negotiators were democratically elected, however, FTAA would still erode national sovereignty. As with the World Trade Organization, each country will attempt to impose those agreements that will benefit it the most, rather than seeking the overall liberalization of the markets in the hemisphere. This structure will then be imposed on all of the members without regard to the policy’s effects on each country’s market conditions. This becomes evident when one sees the U.S. government, with its subsidies to corporations, demand that the markets of the Third World be opened for its companies. These subsidized companies then compete on uneven footing with companies from other countries that play by the rules of the free market.

Another problem with the FTAA that makes it pernicious to free trade is its lack of transparency. The FTAA meetings have been conducted behind closed doors and the only things available on the official FTAA website have been the studies that it wants people to see. An important aspect of free trade is transparency on the part of the government. This allows for the proper application of the rule of law, which allows people to know beforehand the boundaries within which they can function. This is vital for the flourishing of free markets.

Finally, the FTAA will impose a corporatist structure on the citizens of the member nations. Many on the Right and Left fail to realize that “free market” does not mean corporatism. Where can this confusion be seen? The United States, for example, subsidizes its farmers and then forces countries in the Third World to loosen tariffs on grain. This allows the subsidized farmers to sell crops in the Third World far below the prices local producers can sustain. This forces the locals out of business and establishes U.S.-subsidized farmers as the monopoly in that country, allowing these farmers to raise prices as they wish. This happened in Haiti with rice in the late-1980’s. This could hardly be called a free-market situation. Yet, proponents of the FTAA, like President Bush, would trumpet this as a victory for freedom.

The problems with the FTAA, however, are not problems inherent in free trade, despite what the Left would like to believe. All kinds of trade zones suffer from the problem of a large bureaucratic regime controlling the way free trade is done. The best way to achieve free trade, however, is for countries to move towards a more open free-market economy by privatizing governmental functions like transportation, energy, and healthcare and lifting controls on private goods. STARC and other opponents of free trade charge that privatizing these would lead to mass starvation, energy crises, and sick babies left to die in the streets. But these claims are backed by little or no evidence. Some cite the California energy crisis as an example of the failure of deregulation. However, there, “deregulation” involved the implementation of price controls, which forced the energy companies into bankruptcy as a result of the higher oil prices OPEC was charging them.

When the riots are over and the McDonald’s and Starbuck’s storefronts have been rebuilt, we need to take a sober look at the FTAA and free trade policies in general. Free trade is the only thing that will allow Third World nations to escape poverty by providing the necessary infusion of U.S. capital and job creation. Chile is a prime example of a nation besieged by economic instability that was able to climb out and succeed by following a regiment of liberalization and opening of markets. 

However, it would be a grave mistake to dive into a poorly thought out plan like the FTAA. America should first liberalize its own markets and remove the subsidies that it gives corporations and farmers while pushing for the same changes elsewhere. Liberalization in the Third World cannot happen without a respect for national sovereignty and the liberalization of America’s own markets. Meanwhile, the “superheroes” of the Left should consider taking a long break. Maybe study some economics at the University of Chicago.

Yevgeny Vilensky is a sophomore in Trumbull College
 

 

   
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