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What's The Problem With "Free Trade"?

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Reprinted from Campaign For America's Future

What is NAFTA? The North American Free Trade Agreement
What is NAFTA? The North American Free Trade Agreement
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Our country's "free trade" agreements have followed a framework of trading away our democracy and middle-class prosperity in exchange for letting the biggest corporations dominate.

There are those who say any increase in trade is good. But if you close a factory here and lay off the workers, open the factory "there" to make the same things the factory here used to make, bring those things into the country to sell in the same outlets, you have just "increased trade" because now those goods cross a border. Supporters of free trade are having a harder and harder time convincing American workers this is good for them.

"Free Trade"

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Free trade is when goods and services are bought and sold between countries without tariffs, duties and quotas. The idea is that some countries "do things better" than other countries, which these days basically means they offer lower labor and environmental-protection costs. Allowing other countries to do things in ways that cost less "frees up resources" which can theoretically be used for investment at home.

Opponents of free trade ask for tariffs to "protect" local businesses, jobs, wages and the environment from being undermined by low-cost goods from countries where people and/or the environment are exploited.

Free trade is generally sold as offering lower prices to consumers. It is also sold with claims that it "opens up foreign markets" to U.S. exporters. But it also opens up U.S. markets to imports.

Does Trade Really "Open New Markets?"

"When more than 95 percent of our potential customers live outside our borders, we can't let countries like China write the rules of the global economy."
-- President Barack Obama

"[W]hen 95 percent of the people we want to sell something to live outside of the United States, we must open foreign markets to American goods and services so we can create jobs at home."
-- U.S. Chamber of Commerce

"Ninety-five percent of America's potential customers live overseas, so closing ourselves off to trade is not a solution."
-- Hillary Clinton

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It is a fact that only 5 percent of the world's population lives in the United States. The problem is that the line of argument that opening up trade "opens markets" brings with it certain misleading assumptions. It assumes first that non-U.S. markets are not already being served by local companies. Second, it ignores that free trade also opens our own markets to others. Third, it ignores that U.S. companies already can and do sell to most of the world's markets and vice versa. (For example, U.S. companies were already moving production to Mexico before NAFTA, the North American Free-Trade Agreement.) Suggesting that alternative approaches to trade would "close us off from trading" or "wall our economy off from the world" are ridiculous, misleading arguments.

If local companies are already meeting the needs in U.S. and non-U.S. markets, what does a trade deal really enable? Trade deals indeed "open up new markets" -- for giant, predatory multinational corporations. They enable large, predatory companies that have enormous economies of scale to come in and dominate those markets, putting smaller, local companies out of business. So trade deals mean the biggest multinational companies get bigger and more multinational -- at the expense of all the other companies. This includes enabling non-U.S. corporations to come to the U.S. and take over markets already served by smaller companies here.

The net result of allowing goods to cross borders without protecting local businesses is a "more efficient" manufacturing/distribution system powered by the biggest and best capitalized operations. The rest go away. Economists will tell you that these increased efficiencies allow an economy to best utilize its resources. But obviously one effect of this "increased efficiency" is fewer jobs, resulting in lowered wages on all sides of trade borders.

After NAFTA, for example, smaller, more local Mexican farms were wiped out by large, efficient American agricultural corporations that were able to sell corn and other crops into Mexico for low prices. The result was a mass migration northward as desperate people could no longer find work in Mexico.

Economists say even this is good because when costs are lower the economy can apply its resources more efficiently and increased investment can put the displaced people to work in better jobs. But we can all see that in our modern economy that's not what is going on. Investment in our economy is not increasing, partly because the resulting downward wage pressure has resulted in an economy with decreased demand. Fewer customers with money to spend is not a good environment for investment. Instead of these "freed up" resources (money) being used to provide better jobs with higher wages for everyone, they are instead being concentrated into fewer and fewer hands.

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Dave has more than 20 years of technology industry experience. His earlier career included technical positions, including video game design at Atari and Imagic. He was a pioneer in design and development of productivity and educational (more...)
 

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