Global Policy Forum

Forget the FTA Fix, Just Say No

If the US Congress and the South Korean parliament approve the Free Trade Agreement (FTA), public power in both countries will be weakened and corporate power strengthened - at the expense of public needs and capacities. Free trade reinforces the very same trends that generated the economic crisis. US President Obama speaks of the FTA "creating new jobs and opportunities for people in both countries" but without mentioning the possibility of wage reductions, deregulation and negative environmental consequences.

By Christine Ahn and Martin Hart-Landsberg

October 1, 2010
Foreign Policy In Focus

The free trade push has begun again. Both U.S. President Barack Obama and South Korean President Lee Myung-bak are calling for ratification of the U.S.-Korea Free Trade Agreement, which was signed by the two countries' trade representatives in April 2007 but has yet to be approved by either the U.S. Congress or the South Korean parliament. Aware of how unpopular the agreement remains, President Obama wants the U.S. Congress to delay the approval vote until after the mid-term elections in early November but before the mid-November G-20 meeting in Seoul.

The Great Recession has left the U.S. economy in a mess. Slowly but surely people are coming to understand that we are in this mess because of a number of inter-related trends, all driven by increasingly unchecked corporate power: wage suppression, deregulation and globalization of production, and financialization.

It is therefore dismaying to hear President Obama announce that the U.S.-Korea Free Trade Agreement, which is designed to further enhance corporate power, will somehow "create new jobs and opportunity for people in both our countries."

There's Nothing Free about "Free" Trade

Not surprisingly-after all, it's called a "free trade agreement"--media and popular attention have focused on the agreement's potential impact on trade. If implemented, the agreement will eliminate most industrial and non-industrial tariffs and also encourage greater trade in services. In broad brush, this deal represents a trade in interests: Korean manufacturers want greater access to the U.S. market and they are willing to sacrifice their country's agricultural and (financial and health) service sectors to get it. U.S. agricultural and service sector businesses see it the same way and are content with the deal. No wonder the U.S. auto industry is largely alone in the corporate community (joined only by the beef industry) yelling for renegotiation.

This trade-off holds no promise for workers or small farmers in either the United States or South Korea, and this doesn't change even if the auto and beef industry succeeds in forcing a renegotiation of the agreement. Opening markets only means more intense competition and downward pressure on worker wages. The experience of past decades of trade liberalization should be proof enough. A case in point: both U.S. and Chinese workers have seen their working and living conditions deteriorate while dominant transnational corporations and their national allies in both countries have gained enormous profits.

The U.S. auto industry is fighting for whatever it can get. But regardless of the outcome of their struggle, the leading auto makers are not going to radically rethink their respective long-term growth strategies, which involve pushing down auto wages and moving production to new plants in other countries. GM, for example, already sells cars in Korea. Its joint venture with Daewoo produced some 900,000 cars in Korea and sold more than 100,000 of these cars to Korean customers in 2008.

The president claims that working people will benefit from the agreement. Beyond misguided confidence in the "magic of the market," the only justification for this statement is the analysis of the FTA by the U.S. International Trade Commission, which concluded that it would likely raise U.S. GDP by $10.1-$11.9 billion. This is basically a rounding error in an economy with a GDP of over $14 trillion. Moreover, believe it or not, this conclusion is based on modeling that assumes full employment and balance-of-payments equilibrium in both economies, and no shifts in foreign investment from one to the other. This kind of work is not serious social science-it is ideological cover for a corporate agenda.

More Than Trade At Stake

Although trade is getting all the attention, this agreement covers more than tariff levels. As in all U.S. free trade agreements, this one contains many chapters dealing with labor, government procurement, services, investment, intellectual property rights, and dispute settlement. These chapters detail a number of complex regulations and restrictions that have one clear aim: weakening public power and strengthening corporate power. Here are some examples:

The government procurement chapter would essentially limit the ability of any state entity to take into account "non-economic" factors in making spending or purchasing decisions. More specifically, governments would no longer be able to privilege companies that had exemplary labor or environmental records, or were locally owned or committed to using local labor.

The investment chapter would grant foreign investors important new rights. In particular, foreign corporations would be able to directly sue governments (local, state, or national) if they introduced new laws or regulations that, in their opinion, reduced their ability to profit from a pre-existing business opportunity. And they could choose to have the suit heard in a foreign tribunal by experts without regard to existing national laws.

A number of interwoven mandates from several chapters take dead aim at the public provision of health care. This is especially threatening to South Koreans who currently have such a system. These mandates would also make it much harder to create such a system in the United States. Among other things, the FTA provides for the establishment of special economic zones in South Korea where private U.S. insurance companies could set up operations under favorable conditions, thereby undermining the universal coverage and viability of the existing national public insurance system.

Even more deadly, several chapters appear to have the potential to bust South Korea's health cost-control system. Currently, South Korea has a positive drug list, which is a listing of generic, low-cost drugs that the government believes are medically effective and which its insurance will cover. The FTA provides U.S. pharmaceutical corporations with several avenues to demand that their higher priced drugs be placed on the list. Such an outcome would put a huge financial strain on the country's health care budget, potentially leading the government to abandon its public commitment.

The agreement would also restrict South Korea's existing laws limiting the import of GMO foods. It would also likely ban any attempt to require the appropriate labeling of such foods.

The agreement also contains financial deregulation provisions that would restrict South Korea as well as the United States from using capital controls to regulate "hot money" flows. While the U.S. government remains unwilling to consider such an option, the South Korean government currently employs such controls on the rapid movement of speculative capital. Do we really want to legally forbid their use, especially given our recent history of speculative excesses?

This is far from an exhaustive list of concerns. But even this brief list demonstrates that this agreement advances corporate power and profitability at the expense of public needs and capacities. It is far more than a commitment by two governments to reduce some tariffs.

Just Say No

Trade unions and other social groups in both South Korea and the United States have mounted a serious and sustained opposition to this agreement even before April 2007. That is one reason that its ratification has been delayed. Notably, the Korean Confederation of Trade Unions and the AFL-CIO have forged a common bond in opposition to this agreement.But the governments of both countries, representing the interests of their respective leading corporations, are determined to ensure its passage.

Unfortunately, movements in both South Korea and the United States have often allowed their opposition to be shaped by the media's presentation of this agreement. Thus, a lot of effort has been put into organizing around technical issues related to autos and beef. Instead what is needed is a strategy that helps working people see the true scope and aim of this and other free trade agreements and, even more importantly, how they are meant to reinforce the very trends that generated the current economic crisis.

Perhaps most disappointedly, many of the most active opponents of this agreement have settled on a strategy calling for its "review and renegotiation." Their sentiments are good, but the demand makes little sense even if we did have the power to review and renegotiate it. As we have tried to demonstrate here, this agreement is predicated on the principle that corporate interests should be privileged over all other things. There is no way to repair an agreement that is, by design, destructive of the public interest.

At this point, we need to build a movement in opposition to all free trade agreements. In the United States, that means opposing agreements with Korea, with Colombia and Panama (which President Obama also supports), and with any subsequent countries. And we should encourage our Korean allies to do the same, with this agreement and the one their government just negotiated with the European Union. Just say no.

Some argue that saying no is not enough, that we need to propose our own alternative trade program. We disagree.

Policies on foreign trade and investment need to flow out of a comprehensive understanding of both the roots of our crisis and the kinds of structural and social transformations necessary to solve it. If we want meaningful employment, community security and stability, well-financed and accountable social programs, environmentally responsive production, and solidaristic relations with other countries, we have no choice but to stop relying on market forces and the pursuit of private profit to direct economic activity.

Saying no to this and other free trade agreements will not bring an end to trade or hurtle the world economy into deeper recession, despite what political and business leaders say. These agreements are about power and privilege not economic efficiency or rationality. Rather, saying no to them is one way we can challenge the increasingly destructive domination of market imperatives over our lives and initiate the wider public debate required to put real economic change onto the public agenda.


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