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Lose-Lose: How Free Trade Hurts All Involved

Posted by Will Rice (will) on Nov 07 2011 at 12:46 PM
FALL 2011 >>

By Paul Crist

Since so-called free trade agreements cost jobs, threaten consumers and undermine democracy in this country, you might think that at least our partners in those deals would experience some compensating benefits.  But you’d be wrong.  Trade policy as currently pursued by the U.S. performs the difficult feat of harming all involved.  All, that is, except the driving force behind the deals: multinational corporations.

Take Colombia.  Earlier this fall, Congress approved and President Obama signed into law the Colombia Free Trade Agreement (FTA), which will devastate local industries in that country and abolish regulations meant to protect Colombian citizens.  Moreover, the Colombian FTA rewards a right-wing government that countenances the systematic murder of workplace leaders.  

Over 4,000 trade unionists have been murdered in Colombia in the past 20 years, mostly by right-wing paramilitaries with links to the government, making Colombia the most dangerous country in the world to support collective bargaining rights.  Purported successes in curbing this deadly campaign, much ballyhooed with the U.S. Congress in order to pass the deal, have been dismissed as illusory by Colombian labor leaders.

The pact is expected to boost some Colombian sectors (cut flowers, leather goods, seafood, textiles, certain services), but when compared to the losses in other sectors (rice, corn, poultry, communications technology) and the fiscal and other public costs ($635 million in foregone tariff revenue, a deregulated financial sector, abandoned public development programs), it’s clear the Colombian people are net losers.  A predicted 0.5% expansion of the nation’s economy as a result of the FTA—even if proved true—will benefit few average Colombians.  

So why do countries like Colombia sign such deals with the U.S.?  In some ways, they have no choice.  The U.S. is often their largest overseas market (in Colombia’s case, representing 42 percent of its exports); they can’t deny the demands of their biggest customer.  In the case of Colombia, half of its exports to the U.S. come into this country under special preferences, preferences that would have been threatened with cancellation if Colombia had balked in broader trade talks.

The rigid ideology of Colombia’s leaders also explains some of the willingness to sign up for trade deals that damage their own country.  As in many South American countries, Colombia’s political elite are the product of the economics departments of U.S. universities, which have inculcated in them an unquestioning belief in the virtues of free trade.  

But the main reason Colombia participates in destructive “free trade” is the same reason the United States does:  multinational corporations, while offering allegiance to no nation, wield disproportional influence over every national government.  These multinationals entities are the only ones who are actually freed by free trade: free to chase low wages by continually shifting production to ever more desperate communities; free to destroy indigenous crafts and industries with cookie-cutter globalization; and free to void any national laws that interfere with their ability to make a profit. Until the political structure of nations the world over is altered to reduce the influence of money on governing, more lose-lose trade deals are sure to be struck.

Paul Crist is an ADA Board member and economist.