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US Perspectives

This bi-weekly column presents contrasting perspectives from a progressive and a conservative point of view on current issues of public interest.  It is not a debate as such, but rather an effort to stimulate thoughtful discussion among Atencion readers.
You are encouraged to share your ideas with a letter to the Editor.

Free trade vs democracy

By Cliff DuRand

Cliff DuRand

Suppose a foreign corporation could impose a heavy fine whenever your laws protecting public health or the environment reduced their profits. Or suppose “Buy American” laws or GMO labeling requirements were invalidated because they discriminated against a foreign corporation. Well, you don’t have to imagine. Such things are actually happening under existing free trade agreements the US government has entered into – and now seeks to further strengthen under the proposed Trans-Pacific Partnership (TPP). Such laws are considered to be barriers to trade.

Regardless of what one might think of free trade as an idea, in fact, what are advertised as free trade treaties are not so much about trade as normally understood –movement of goods and services across borders – but protecting “investor rights” in foreign markets. And this includes the right to make a profit on their investment and be compensated when domestic laws or regulations reduce their expected profits. Such “regulatory takings,” as they are called, are considered as “tantamount to expropriation,” even when this is for the public good. In effect, corporate interests trump the public good under current “free trade” doctrine. In other words, capital trumps democracy.

A foreign corporation can sue a country when its expected profits are reduced by government actions no matter if it is in the public good and democratically decided. The suit is not decided in a domestic court but by an international adjudication panel of trade experts and lawyers who decide in secret and have the power to impose unlimited penalties to compensate for lost profits, present and future. There is no appeal. Since these investor-state suits were first established under NAFTA, almost all cases have been decided in favor of the corporations. The TPP will further strengthen the privileging of investor rights (i.e. the interests of transnational corporations) over the democratic rights of a nation.

Let me give you an example. In 2011 the Canadian province of Quebec placed a moratorium on the controversial practice of fracking in order to study the environmental risks involved. A corporation chartered in Delaware had mining permits in the Saint Lawrence valley that were suspended. Although the company, Lone Pine Resources, Inc., was headquartered in Calgary, it was a foreign corporation. Thus under NAFTA’s Chapter 11, it is suing the Canadian government US$250 million for lost profits. By latest count, some 450 investor-to-state cases have been filed against 89 governments by transnational corporations who have been awarded US$700 million to date.

TPP has been negotiated in extreme secrecy by the US and eleven other Pacific rim countries. Some 600 corporations have had a hand in framing it in their interests. But the public, consumer’s organizations, even members of Congress have been excluded. Now the Obama Administration has asked Congress to fast track this stealth treaty, sight unseen, agreeing to an up or down vote with no amendments and very little debate. Many in Congress are heeding the calls of citizens for an open public discussion of a treaty that would make an end run around democratic policy making and limit sovereignty. Many liberals and conservatives alike are opposed.

Who benefits from free trade? These agreements are usually sold to the public as promoting trade and jobs. Yet the record shows they often eliminate jobs that are off-shored to lower wage countries. And in the case of the recent free trade treaty with South Korea, it has increased US imports, but not exports, worsening our trade balance.

Historically free trade has benefited the most developed countries. In the 19th century Britain championed free trade while the US protected its industries behind high tariffs. That’s how we developed our domestic economy. Now the US is the global champion of free trade. But as “our” corporations have globalized, free trade no longer benefits US workers. But it has greatly benefited transnational corporations. They are its biggest advocates. Through so-called “free trade” treaties they seek to fix the rules and construct a global governance structure to suit their interests.

Cliff DuRand is a Research Associate at the Center for Global Justice and author and co-editor of Recreating Democracy in a Globalized State.

Free trade

By Matt Connolly


hen one hears the term “Free Trade”, the immediate connotation is one of mutually beneficial commerce between countries, with all the benefits being what you would expect. More employment, and exchange of culture, and overall greater productivity. That’s the purely capitalistic view of it, at least. Apparently, not everyone sees it that way. Here are some of the baselines and mitigating factors that cause certain groups to want to restrict trade:

First, there is a vast difference in wages around the world. Human beings can be taught to do just about anything, regardless of where they live. The big issue, however, is where they live. An American in a city has a certain level of existence and lifestyle. The basics of food, shelter, and clothing are taken for granted. Jobs mean more than that – homes, cars, vacations, college tuition, and the biggest one – retirement – are the ultimate ends. In many developing countries they are struggling for the basics and have few options or means to that end. Their needs are minimal, so the pay is minimal, yet both groups can produce similar products provided the factory hardware is the same.

This is the obvious reason why high wage countries don’t want free trade. They want protection from the cheap goods entering their market, yet they will eventually benefit from the gradual rise in purchasing power by the workers in developing countries. If all things were equal, the world would be a huge marketplace with similar buying power and an endless variety of products and purchasers. I’m pretty sure that’s where everyone wants to be. I say “wants” because of the benefits of a world market. The problem is the effect on the high wage country while the other countries rise up. No one likes to see a factory close and have the jobs go overseas. Unless you are an overseas worker and now see a way to have a stable lifestyle with room for growth!

So what have the high wage countries done? Imposed tariffs and all sorts of quotas and regulations, then threw on some “investor rights” laws for good measure to keep the lawyers happy. What should they do to really solve this? Utilize the simple economic incentives of the free market around the world and the natural desire for foreign goods by all countries to equalize things. In the US, the main reason for the outsourcing of factories and workers is the high corporate tax rate and the ever growing pile of regulations that US companies have to abide by. And to be clear, any tax a business is charged simply goes to the customer. It is overhead like anything else. The burden of compliance is just as onerous, yet it only increases. Businesses that outsource are simply navigating the path to viability. The saddest part is that it so easily correctible, except for the political ideology that refuses to allow it.

If you look at China thousands of years ago, it tells a similar tale but with a different agenda. They built a wall around their country in order to keep the technology in and keep it from the world. Little did they know that they were holding themselves back as the rest of world shared goods and information and rocketed past them. They are now seeing the light and are on the path to overtake the West if things continue as they are. They are also hungering for Western goods and even culture. Can we send them Justin Bieber and call it even? They are riding high on growth fueled by a cheap labor force and few regulations. They are also choking on pollution and are beginning to have societal problems created by an emerging middle and upper class. The point is that the free market is always right, but it’s rarely convenient. Patience, vision, and understanding of the laws of human nature and economics will ultimately prevail. Do we want to use that knowledge proactively or learn the painful lessons and play catch-up?

Matt has been a small businessman since age 10. A lifelong inventor and mechanic, he holds a US patent for an automotive tool. He’s been a professional auto racer since 1991 and has competed in the Mexican Grand Prix. He ran for PA state senate in 2010 and is running for US Congress in 2014.

This bi-weekly column presents contrasting perspectives from a progressive and a conservative point of view on current issues of public interest.  It is not a debate as such, but rather an effort to stimulate thoughtful discussion among Atencion readers.
You are encouraged to share your ideas with a letter to the Editor.


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