Criticism of Free Trade

I don't agree with much I read in The Nation. But this article on free trade is very very good.

Economist Jagdish Bhagwati of Columbia University has been one of the most visible and resolute intellectual advocates for free-market globalization, but lately he sounds a lot like Lori Wallach, the brainy lawyer who leads Global Trade Watch. "The process of trade liberalization is becoming a sham," Bhagwati wrote recently in the Financial Times, "the ultimate objective being the capture, reshaping and distortion of the WTO in the image of American lobbying interests."

Wallach and other leaders of worldwide popular dissent have been making the same argument about bait-and-switch diplomacy for a decade. "Oh, absolutely," Bhagwati exclaims. "People like Lori Wallach are right." The multinational corporate interests essentially hijacked the pure "free trade" principles Bhagwati espouses and turned "free-trade agreements" into their own agenda for a densely layered legal code–investment rules that impose a straitjacket of do's and don'ts on developing-country governments.

The rights of foreign capital and corporations are to be expanded; the rights of sovereign nations to decide their own development strategies steadily eliminated. A country must not require multinationals to form joint ventures with domestic enterprises. It must not limit foreign ownership of its natural resources. National health systems, water systems and other public services must be open to privatization by foreign companies. Underdeveloped countries must, meanwhile, enforce the patent-rights system from the advanced economies to protect drugs, music, software and other "intellectual property" assets owned by wealthy industrialists. Any poor nation that dares to resist the WTO rule will face severe "sanctions"–huge cash penalties–and possibly de facto expulsion from the trading club.

"The developing countries are scared out of their wits now," Bhagwati says, "because they don't understand what they're being forced to sign. The agreements are going way outside the trade issues and involve a helluva lot of things like your access to oil, your access to intellectual property and capital controls…. When I looked through the investment agreements, it was worse than reading my insurance policy for the fine print. I couldn't make anything out of it, and I'm a reasonably informed person, a pretty smart economist as they go."

Exactly. Obfuscation is power. The politics of trade resembles a maliciously lopsided power play in which the wealthiest industrial nations press the weak to accede to their terms or else get nothing back at the bargaining table, and very possibly lose their access to foreign capital or development aid. Trade ministers from poor countries naturally resist, but they don't have deep squads of corporate lawyers to argue the fine points and they don't want to be the troublemaker accused of blowing up the trading system.

I fully support free trade, and always will – if not on economic principles then on the moral principle that everyone should have the freedom to make their own economic decisions, and compete on a level playing field. But if free trade really does benefit everyone in the long run, then American corporations are actually harming themselves with their protectionist measures. That is bad business, and not in the best long-term interest of the shareholders. It's funny that capitalists, of all people, would be afraid of competition.