Global Policy Forum

Free Trade Agreements:


By Carlos Powell

November 27, 2002

Senior representatives from Corporate America had the occasion to pass through Managua to meet with their counterparts in this capital a few days ago, leaving a trail of illusions behind. Some members of big Creole capital were already cherishing the Agreement in their dreams like a promised but still untouchable fiancée. Still, more and more apologies for FTAs (Free Trade Agreement) are being openly circulated, but like a skilful textile retailer, they show the fabric where it is not torn. In the face of all the evidence of the disaster of neo-liberal policies over the last few decades, documented in reports by data specialists from the most respected institutions (UN, ECLA, CAM, WFP, WHO and others), these apologists are determined to sell a product that, if strict quality control were to be applied, would be pulled from the shelves.

I recently read a note in which its author, to justify the signing of a FTA between the United States and Nicaragua (or Central America as a block), was brandishing the argument of extraordinary merits that NAFTA would have had for Mexico, signed by Mexico, Canada and the United States in 1993, the only point of this radical praise in the "almost triplication of free trade" of the Mexicans with the United States. It is this argument in particular that motivates this article.

Based on concrete data and a simple rationalisation, I would like to reply to this and other arguments that are being circulated. I will not do it from the perspective of a hardened globalphobic or try to demonise FTAs. I see globalisation as a weapon with great potential. But like everything that has had great potential throughout the history of mankind, its use becomes so ambivalent and dangerous like the popular image of the double-edged knife. In other words, it is not the thing itself that is problematic, but the person who handles it, that person's intentions, the legal boundaries and to whom it is directed.

It is necessary to begin by remembering a basic concept: the calculation of a country's income per capita is the sum of its total GNP divided by the number of its inhabitants. Obviously the only exact thing about this calculation is its mathematical aspect, but it is light years away from representing the reality of the vast majority of the inhabitants. When the annual CPI of a Nicaraguan is rounded off to US$500, a good percentage of the population would like to live in this earthly paradise! And in the other extreme, taking a random example, it is difficult to imagine that Arnoldo Alemán has that annual income. We can, then, immediately dispense with the deceptive idea that the increase in a country's GNP will automatically result in benefits for the great majority, as a product of the increase in the volume of free trade. As far as history goes this never has been the case for countries that supply raw materials within the framework of the capitalistic division of roles.

The second point is that the expression "increase in trade", when referring to the exchange of goods between two countries (and especially between two countries with essentially different productive conditions, such as Mexico and the United States), hides realities which extraordinarily distort the analysis. The products which countries offer that have no industrial infrastructure and advanced technology lack added value, which is the main use of raw materials and agricultural products. That is the increase in volume of "trade": we trade products- and we continue to do so - that, since the inception of capitalism, have rendered little profit and are priced out of the reach of most people.

In addition to this pathetic and evident reality, we generally forget to mention that the non-manufactured products are the hardest hit by the blow of competency in the international market, for several reasons. To easily understand this, you would have to compare the situation of an unskilled worker who, when looking for employment, must compete with a large number of workers in the same position. Evidently, his skills lack "added value" and depreciate in the labour market, from blackmail by the massive number of unemployed, from the lack of legal protection, in short, from all the "opportunistic diseases", which free trade puts into circulation so that only the ones with the antidote survive. This is what happens to more than a billion workers worldwide. But this is not all.

The richest countries of the planet have designed the highly lauded philosophy of "free trade". They practise what they prohibit the rest of us from doing: food sovereignty. So as not to succumb to the use of one word, which has little liberal slants as "sovereignty", these countries use an euphemism: "mechanisms to avoid food blackmail". And they are right! Food, even though it is essential, is the basis of all that we would like to construct socially and in this order: health, human development, national development. This is why the rich countries of the planet invest the astronomical annual sum of $400 billion in protectionism and subsidises. Until this changes, whatever trade agreement is negotiated with one of these countries, it will be basically unfair. That is why - and by not being hysterical globalphobics or blindly portraying FTAs as demons -many are trying to clarify the public opinion of their fellow citizens.

This being said, there is no problem in accepting the argument that Mexico has "almost tripled its trade" since the signing of NAFTA in 1993. But if we are honest, we must also say that this increase has only benefited 20% of Mexico's wealthiest, who have given up a great deal of control of their stocks to multinationals which do not re-invest the assets in the country or generate a chain of local productivity, because they are supplied with a large quantity of goods imported from other markets - especially Asian - where the goods cost less.

We also have to say that simultaneously in Mexico hundreds of thousands of jobs have been lost, especially in the agricultural sector, and that these unskilled labourers, mortgaging and then losing their lands, have no other alternative but to work in the inferno of assembly plants, that famous job creation, where the "salary" is not more than $.025 per hour, ie, 2000% less than what an American would earn for the same job.

These assembly plants, as with all investment capital in the philosophy of "free" trade, disappears into thin air at the least local inconvenience or if it finds unprotected regions in the world where poverty is high and the labour force "more interesting". In short, it would have to be said that the average Mexican employee lost 16% of his purchasing power since the implementation of NAFTA. These are the facts, the realities, and not generalisations like saying "an increase in trade".

An article in the magazine Enví­o pointed out that some American athletes who, in addition to making millions of dollars in the leagues, earn millions more as estate farmers. In other words, they do not compete in the free market like they do in sports. This is how the prices of the only goods with which poor countries could alleviate their poverty and achieve a just economic system spiral downwards: because agricultural production in the rich countries practises artificial market pricing, or resorts to dumping and/or tariffs, buying tons of products from poor countries and saturating the market with under-valued prices. There are a host of examples, like regional cotton before the Chinese one, Caribbean sugar cane before European beet, our rice before the Japanese one, corn and kidney beans before the basic grains of the United States, etc. In Argentina there is the recent case of the production of honey: production volume increased until it began to flood the American market with competitive prices. When the American producers felt threatened, they demanded protective measures. The United States applied a tariff of 65% and the Argentinean production immediately crumbled, leaving thousands of producers who had accepted this "challenge of the free market" broke.

And what about Canada and NAFTA? You only have to recall the position of its own Canadian Catholic Bishops here (who are not "third world priests"), which appear in public documents against these agreements, by the humiliating and sadly famous chapter 11. This prevents governments from imposing their strategic vision of territorial occupation on multinational corporations and also authorises these multinationals to demand compensation from governments for losses which can occur when they are successful in proving (with a host of well paid lawyers) that this was due to bad state management. There the state intervenes, and in the last instance, the taxpayer. Multinational corporations have already won several million dollar lawsuits against the Canadian and Mexican governments. Given that these agreements are international in nature, they legally transcend governments.

And the Canadian bishops also offer these statistics: since the implementation of NAFTA the income of the country's 20% poorest went down from 3.8% to 3.1% while the income of the 20% wealthiest went up from 41.9% to 45.2%.

It is good thing that we view ourselves honestly before these realities. Let us read this quote from Colin Powell himself: "We want to sell American merchandise, technology and services without obstruction or restrictions". And this other one, from a senior executive from Corporate North America, Robert Zoellick, in which open blackmail and the arrogance of the survival of the fittest are evident, a quote that has nevertheless been published as an "argument" in favour of FTAs: "There are countries in the Asian-Pacific region, Africa and the Middle East which are also interested in agreements with the United States." What is Robert Zoellick saying here? One of two things: either accept the terms of the FTA, or multinational corporations will find workers for less than $0.25 per hour in Asia. The only thing that hides this show of bravado is that shipping costs will be less for American multinational corporations if production is done out of the assembly plants in Central America. This is where the talked-about Puebla-Panama Plan (PPP) comes in to play its fundamentally and unmistakably strategic role.

Another illusion that is used is the comparison between the - much needed - integration of Central America with that of the European Union. It is an impossible comparison, for evident reasons already mentioned, but also for other reasons. The European Union managed the integration of countries from a national perspective, proceeding with extreme caution with a previously established socio-economic level for candidates entering the Union so that they could compete with conditions similar to those of member countries. These long processes called for national referenda because they were anticipating participation by a large number of taxpayers. But in the perspective of FTAA, FTAs, which are spinning an enormous continental spider web, and sub-regional strategies such as NAFTA, the PPP (Plan Puebla Panama) and the future IIRSA (which is being negotiated and will be implemented in South America), the central axis is private capital or world banking investment controlled by the IMF. The philosophy is to have multinational corporations as the starting factor and the free market as the control factor!

In short, another substantial difference is that one of the central axes of the European negotiations was the free movement of labour, an aspect that was completely absent in the sub-regional agreements of the FTAA, where, on the contrary, there are customs mechanisms of control created to avoid (you just have to look at the situation at the Mexican border!) the movement of labour. Assembly plants for some, sources of employment for others. But let's not mix the two.

Translated by Ilich Nunez and Gillian Sloane-Seale.

More Information on International Trade and Development
More Information on Globalization of the Economy

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.


FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.