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Home Publications Blogs Beat the Press The U.S. Has "Free Trade" Agreements, not Free Trade Agreements

The U.S. Has "Free Trade" Agreements, not Free Trade Agreements

Thursday, 19 May 2011 04:53

When the United States negotiates trade agreements with countries in Latin America, it likes to call them "free trade agreements." Apparently this makes them more salable than simply calling them "trade agreements."

These deals do not actually lead to free trade. They generally do almost nothing to remove the barriers that protect highly paid professionals, like doctors and lawyers, from foreign competition. More importantly they increase many protectionist barriers, like patent and copyright protection, which raises prices by several thousand percent above the free market price.

For this reason, in this article on relationships with Latin America, the NYT should either have simply called the agreements negotiated with Panama and Colombia "trade agreement" or used quotation marks in describing them as "free trade" agreements.

Comments (5)Add Comment
written by travc, May 19, 2011 5:16
Also important to note that free-trade does not require the free movement of capital between countries (aka. foreign investment). Even in the frictionless vacuum of a theoretical free-trade = good world, capital movements can be either a net benefit or a net harm depending on the particulars. Sadly, "free trade" agreements tend have provisions encouraging such capital flows without any sort of review or even acknowledgement that they might be a bad thing.

This point was made in a column in the Economist no less, though it was many years ago and I've no hope of finding a link again.
Free Trade and Free Choice are the Same Thing: Competition
written by izzatzo, May 19, 2011 5:39
They generally do almost nothing to remove the barriers that protect highly paid professionals, like doctors and lawyers, from foreign competition.

This is a common error by Baker and similar economists of his ilk. Professionals in the USA are already subject to competition through free choice.

No one is forced to use the services of these professionals. Choosing not to use them is competition in action as demonstrated by millions who engage daily in this vibrant form of free trade by relegating them to opportunity costs of the choices actually made.
written by Jay, May 19, 2011 7:49
We don't need foreign competition in the legal profession. Aside from the malpractice concerns, things are being automated, starting salaries at $30,000, people are being subjected to indefinite contract work, and some firms are even establishing a presence overseas or contracting work out to take advantage of cheap labor.

You already have a generation of lawyers that are leaving the profession in droves and others are going broke to practice. It's not about money for everyone. Although, naturally people don't expect to earn what their undergraduate degree could have done. Even worse is being blackballed out of the labor market for getting a professional degree.

It's more of a monopoly situation where a few big firms get almost all the corporate work. There are affordable legal services out there but corporate clients feel more comfortable paying top dollar for a firm with a prestigious legacy, exclusive image, and bunch of Ivy grads. And when said firm doesn't know what it's doing it just hires the talent to get the job done or just figures it out like anyone else.
Why does CEPR hate patents?
written by George Fleming, May 25, 2011 12:31
I suppose that the writers at CEPR receive money for their efforts. Would they hand it over to a mugger? They must, if they do not approve of "protectionist barriers."

I have noticed over the years that CEPR believes inventors should work for free. Obviously, those who direct this website have no idea of the sacrifice required to invent something useful.

Their attitude is not only offensive, it is illogical. If there were no patent right, there would be no incentive to create anything worth protecting. Removing this "protectionist barrier" - which is actually an incentive to improve the world - would put an end to the development of anything worth protecting.

However, copyright law is entirely out of control. There is no distinction between patent and copyright in the Constitution. They should have the same term of protection. For patents that term is currently about twenty years. The current copyright term is life of the author plus seventy years.

I believe this absurdity exists because lawyers write the laws (which is unconstitutional, but that is another subject), therefore they write the laws on copyright. Lawyers do not invent, they write. Therefore, they protect written creations far beyond any reasonable term because that is how they make their money. They disregard technical work because they cannot engage in it.

I see at the bottom of this web page that CEPR "reserves some rights." When will they square their talk with their action and give up this protectionist barrier?
and finally
written by George Fleming, May 25, 2011 12:36
I should have added, there is no "free market price" for something that does not exist.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.