It's Not About "Free Trade"
Knight-Ridder/Tribune Media Services, April 18, 2001
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public . . ." So wrote Adam Smith more than two centuries ago, and it is equally true today.
Quebec City is now host to numerous meetings of these "people of the same trade" -- the businesspeople who have access to the secret text of the "Free Trade Area of the Americas." The fact that the heads of major corporations such as Merck and IBM can read the draft of the agreement, while the press and the public are kept in the dark, speaks volumes about what is being negotiated.
With the enthusiastic support of the Bush administration, leaders of 34 nations are now gathering in Quebec to discuss the FTAA. The name of this treaty is misleading: it is not primarily about "free trade." In fact, this agreement will almost certainly strengthen some of the most expensive, economically wasteful, and (in the case of life-saving pharmaceuticals) deadly forms of protectionism. These are the patents, copyrights, and other monopolies commonly grouped under "intellectual property rights."
While tariffs rarely increase the price of a good by more than 20 or 25 percent, patent protected prices can be ten or twenty times the competitive price. One of the main purposes of these "free trade" agreements is to expand this lucrative form of protectionism across international borders.
Brazil has already run into trouble in the World Trade Organization for its laws dealing with the manufacture and import of generic AIDS drugs. These laws have formed an important part of Brazil's remarkably successful program for treating AIDS. Brazil has provided "triple-therapy" drugs -- the same ones that cost $12,000 a year to treat people here, but can be produced for as little as $500.
Generic AIDS drugs have enabled Brazil to provide treatment to almost all who need it, cutting the death rate from AIDS in half. But Washington is currently challenging Brazil at the WTO, contesting part of the Brazilian law that allows for the manufacture and import of these generic drugs.
Agreements like the FTAA also expand protections for foreign investors, giving them rights that they would not be able to win in their home countries. There was a little-noticed provision in NAFTA that allowed foreign investors to sue governments for regulations that infringed on their potential profits. This has turned out to be an environmental nightmare.
For example, the US- based Ethyl corporation (the one that brought us the lead in leaded gasoline) brought a complaint against the Canadian government in 1997. For public health reasons, Canada had prohibited the import of another potentially dangerous gasoline additive known as MMT.
This additive was effectively banned in the United States. But the fear of losing the NAFTA lawsuit was enough for Canada to repeal its law, and pay $13 million dollars in damages to Ethyl.
Now imagine extending these NAFTA provisions to 31 more countries and you can see why environmental organizations are adamantly opposed to the FTAA. They're not the only ones. Workers in the United States, Canada, and Mexico have now had seven years of experience with NAFTA -- the FTAA's pilot program -- and it hasn't exactly turned out to be the "win-win" deal that they were promised.
For the United States, the main problem has been the loss of relatively better paying manufacturing jobs, and the downward pressure on wages as companies move or threaten to move south. Canada has also lost a good part of its manufacturing sector, and income inequality has worsened significantly. Mexico has seen declining real wages for its workers, as well as falling income for the self-employed (a much larger part of the labor force than it is here).
For Latin America as a whole, the last two decades of "free trade" have been an economic train wreck. Income per person has grown about 7 percent over the last 20 years, as compared with 75 percent in the previous two decades.
In Quebec a "wall of shame" -- as press reports have described it -- was constructed to keep protesters away from the meeting. Three miles of chain link fence and concrete abutments were supposed to compensate for the meetings' lack of legitimacy among the populace.
The WTO and NAFTA are the product of a decades-long effort to rewrite the rules of international commerce in ways that ignore the needs of most of humanity, as well as our natural environment. But humanity is catching up, and has learned some lessons. The misnamed "Free Trade Area of the Americas" will not withstand public scrutiny.
Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of the forthcoming book Failed: What the "Experts" Got Wrong About the Global Economy (Oxford University Press, 2015).