"Free" Trade-- Another Way For Conservatives To Undermine Democracy

In the closing to his brilliant book, The Fifteen Biggest Lies About The Economy, Joshua Holland takes on the misleading notion of 'free trade' by pointing out that "Just because politicians say they believe in open markets and free trade between nations doesn’t make it true. In reality, they believe in 'free trade' until someone else gets a comparative advantage, and then their hypocrisy emerges and they become fierce protectionists."

Most people still believe that discussions of “free trade” are about ships full of bananas or ball bearings or whatever, crisscrossing the high seas. Understanding why that’s just a small part of the issue is key to grasping the difference between “free trade” and what these deals we’ve been signing for the last thirty years are really about: a corporate power grab.

Prior to World War II, trade wars were common, and they often led to shooting wars. In the mid-1940s, the General Agreement on Tariffs and Trade (GATT) was created to avoid those conflicts and foster world peace. Many of its authors were FDR liberals. They had high ideals.

Between 1944 and the mid-1990s, trade negotiations were conducted by dull, (mostly) white guys in business suits, and nobody really gave a damn. Poor countries griped about agricultural subsidies and the rich countries’ protectionism, but they were free to try various development strategies, including those that didn’t adhere to the dictates of “the market.”

During the first decades of the GATT, which governed trade between 1947 and 1995, the United States and “old” Europe had economies based heavily on manufacturing. Today, however, almost all advanced economies share a very similar distribution: about 1 to 2 percent in agriculture, maybe 20 or so percent in manufacturing, and around 80 percent in services.

For approximately the first forty years of the GATT’s existence, its members negotiated reductions in tariffs, quotas, and other traditional forms of market protectionism. They were the manufacturers, and those deals were for the most part negotiated on a level playing field between the world’s advanced economies-- what they call “North-North” negotiations in trade lingo.

People who brand opponents of today’s trade deals “protectionists” might ask themselves why nobody resisted the GATT during those years of slashing tariffs and quotas and the like. The reason is that reducing tariffs is what most people think of when they hear about “opening markets” and freeing up international trade. The controversy began only as “free trade” was gradually redefined to include all manner of domestic policies.

Beginning in the 1970s, two things happened-- or, I should say, two things aside from the oil shock of ’73. In 1979, during the Tokyo round of the GATT, negotiators began to look at “nontariff barriers.” These included onerous customs procedures, mountains of paperwork required to import goods, subsidies for domestic industry, and so on. That shift to “nontariff barriers” coincided with the emergence of the new conservative movement, with its think tanks and front-groups, and the elections of Reagan and Thatcher to head the Western world’s leading political and economic powers.

Now, once they started to look at nontariff barriers, it was inevitable that somewhere along the line, someone in those think tanks would say, “We can call all of those environmental laws and food-safety regulations nontariff barriers, too!”

With that mind-set, in 1994, after years of negotiations, the GATT culminated in the creation of the WTO, which had enforcement powers unlike any other multilateral organization. Its rules hadn’t been written by FDR liberals, but by the Reagan-Thatcher Big Business conservatives in the corporate jets circling Washington.

For too many of them, the new “free trade” framework provided a back door through which they could advance a broader agenda. They could push a set of treaties that pressured-- and, in many instances, legally compelled-- domestic legislatures to conform to the prevailing economic theories known as the “Washington Consensus” (whenever anyone calls something a “consensus,” it probably isn’t even close). And the definition of “nontariff barrier” continued to expand.

(In the meantime, since the early days of the GATT, dozens of countries, many of them newly liberated from the clutches of European colonialism, had been added-- and most were poor and had inadequate infrastructure and very different economic distributions. Many relied on agriculture not only for food, but also as a significant source of employment. Early on, the developed countries promised to start cutting agricultural subsidies and giving those developing countries a level playing field for agriculture, but so far they just haven’t gotten around to it yet.)

In addition, they began to look not only at the flow of goods across borders, but also at services. This brings us to a really key point: there’s a massive pile of cash just sitting out there in the functions that governments commonly perform: from education to sanitation and everything in between. According to Tony Clarke of the Polaris Institute, a Canadian NGO, the total estimated value of the world’s service sector, including public services, is between $15 trillion and $20 trillion. That’s a honeypot.

By the time we arrived at the “Singapore Round” in 1996, there was an aggressive push to (1) enact a broad set of “investor protections” that made a variety of laws-- some protecting the public interest-- subject to the WTO’s dispute-resolution process and (2) allow countries (or even private companies) to exert pressure on other governments to privatize their public services.

Organized labor, community activists, environmentalists, food security specialists, farmers, and many other groups started to see these rules as a significant threat to their work. They gathered to greet the ministers a few years later in Seattle-- the famous “teamsters and turtles” coalition-- which led to the infamous “Battle in Seattle” (actually a brutal police riot). Since that time, the fight has really been about how deep into the realm of domestic policy various trade agreements should reach.

Pressuring countries to adhere to the economic policies of the “Washington Consensus,” whether they’re popular or not, is job number one for the big multinationals, because a majority of governments on the planet today are, to varying degrees, democratic. And democracy is a huge challenge to many of the big multinationals’ interests. Workers’ movements, environmentalists, pesky public interest groups, and, above all, voters exert various degrees of influence on those elected representatives.

Trade treaties constrain legislatures to remain true to the prevailing orthodoxy. Most folks don’t know this, but when state lawmakers draw up new legislation, they often drop a line to the office of the U.S. Trade Representative to make sure their bills comply with our trade commitments.

Other countries acting on behalf of their biggest corporations can challenge laws that aren’t “WTO legal.” These aren’t about widgets being shipped from here to there; the range of what falls under the catchall “free trade” is astounding. A few of the more notorious decisions include:

• A Massachusetts law preventing state and local governments from doing business with the brutal dictatorship in Burma was overturned by domestic courts after a WTO challenge.

• An EU policy that gave preferential tariffs to small banana exporters in Europe’s former colonies was successfully challenged by the United States after lobbying by the Chiquita banana company.

• Venezuela, backed by Brazil, successfully challenged provisions of the United States’ Clean Air Act that kept fuels with higher levels of pollutants out of the market.

The WTO has an enforceable arbitration process, but it isn’t always necessary to lodge a formal grievance. Because the vast majority of challenges to various domestic laws have been upheld, merely the threat of bringing a case is usually enough to make governments rethink their legislation. This is common when it comes to health, environmental, and food safety laws. In the first ten years of WTO arbitration panels’ operation, all but two such challenges brought before them prevailed.

In NAFTA and in regional deals such as CAFTA and the proposed Free Trade Area of the Americas (FTAA), the business community managed to get what it had tried and failed to achieve in the WTO: the ability of multinationals to cut out the middle man and sue governments directly for the loss of profits resulting from a regulation or a law they consider too “burdensome.” Under those rules, “signatory governments are required to provide extensive rights and privileges to foreign investors,” who are then “empowered to privately enforce these new rights by demanding cash payment from governments” that don’t give them what they want, according to a report by Public Citizen.

The cases are decided behind closed doors in “private tribunals operating outside the nations’ domestic court system”:

The track record of cases demonstrate[s] an array of attacks on public policies and normal governmental activity at all levels of government-- federal, state and local. Even though these NAFTA cases implicate commonplace public policies, the investor-state system is a closed and unaccountable one. Citizens whose policies are being attacked have no avenue of meaningful participation and neither do the state and local officials they elected to represent them. [Domestic] court decisions can be challenged and jury decisions undermined, yet no judge or jury has standing to participate in the private NAFTA tribunals.

These rules shift significant amounts of risk from investors to governments. At the same time, they sharply limit what governments can ask for in return.

The common response to this critique is pretty straightforward: most of the parties to international trade deals such as the WTO are democratic states. Their legislators are elected by the people, and when they enter into a treaty, they’re doing it on behalf of those who put them in office. Hence, democracy is safe, even if democratic governments don’t always have the freedom-- the “policy space”-- to advance their constituents’ interests.

But we have to remember those private jets stacked up over Washington during the run-up to the vote on CAFTA. That trade deal faced stiff public resistance-- one poll taken in the weeks before Congress voted found that three out of four Americans opposed trade agreements that resulted in job losses at home, even if they resulted in cheaper goods and services. And cheaper goods were a central selling point for the deal.

As the vote neared, it looked as if George Bush might have become the first president to fail to get a trade agreement through Congress in forty years. But all of the lobbying might of various business groups came to bear on members of Congress. As the Washington Post reported, “A prominent business leader recently laid it on the line: Business groups are prepared to cut off campaign contributions to House members who oppose the pact. ‘If you [lawmakers] are going to vote against it, it’s going to cost you,’ Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, warned recently during a meeting on Capitol Hill.” Several years later, months before the 2008 presidential elections, Donahue would announce a $60 million war chest dedicated to punishing those whom the Los Angeles Times described as “candidates who target business interests with their rhetoric or policy proposals, including congressional and state-level candidates.” “We plan to build a grass-roots business organization so strong that when it bites you in the butt, you bleed,” Donohue said.

On the eve of the vote, the Bush administration started to cut deals with members of its own party who were resisting the pact. The Los Angeles Times reported, “For more than an hour, lawmakers milled about the House floor and gazed at the electronic scoreboard displaying the vote tally, which showed CAFTA several votes short of the mark.” Nancy Pelosi, then the House minority leader, told the Times, “Right there in front of us, for the world to see, they were twisting arms, making deals, changing votes.” Finally, when the count reached 217 to 215, the vote was gaveled to a close, and the deal had scraped through by a hair.

Yet if the pressure on lawmakers here in the United States was great, it paled in comparison with that brought to bear on leaders of smaller, poorer states such as Costa Rica. Lori Wallach, the director of Public Citizen, noted that “The U.S. ambassador to Costa Rica, Mark Langdale, was slammed with a rare formal denunciation before Costa Rica’s Supreme Electoral Tribunal in August after he waged a lengthy campaign to influence the vote on CAFTA. As part of that [campaign], Langdale employed misleading threats and suggested there would be economic reprisals if CAFTA were rejected.” The Bush administration repeatedly threatened to remove Costa Rica’s trade preferences-- which waived some duties on products it exports to the United States-- if the Costa Rican people rejected CAFTA in a referendum.

This kind of geopolitical arm-twisting is par for the course in venues like the WTO. In 2001, immediately after the attacks of 9/11, U.S. trade representative Robert Zoellick made the case that advancing the Anglo-U.S. model of corporate “free” trade was key to winning the “War on Terror.” At the time, author Naomi Klein wrote, “Zoellick explained that ‘by promoting the WTO’s agenda, these 142 nations can counter the revulsive destructionism of terrorism.’ Open markets, he said, are ‘an antidote’ to the terrorists’ ‘violent rejectionism.’”

The United States has become infamous among trade observers for using that kind of rhetorical “linkage” to advance its agenda, but it’s far from unique in that regard. These kinds of power plays are especially evident in negotiations between wealthy states and the developing world, so-called North-South negotiations.

As Aileen Kwa, who analyzed the back-room deals in which trade agreements are formed in great detail, wrote, “In comparison to the United States, the EU is usually more sophisticated in the rhetoric it adopts... it promotes its agenda at the WTO as being ‘in the interests of developing countries.’ This is ironic since developing countries’ assessment[s] of their own interests are the complete opposite.”

The highly developed states use economic blackmail-- threatening poorer countries’ trade preferences and foreign aid accounts-- and blatantly undemocratic methods to overcome the developing world’s concerns about these deals and get them to sign on the bottom line.

In their seminal book Behind the Scenes at the WTO, Kwa and coauthor Fatoumata Jawara cast a bright light on the murky world of international trade negotiations. “Any country whose political system operated as the WTO... [does]-- where... rules were routinely ignored, and people or interested groups routinely used bribery and blackmail to achieve their political ends-- would not only be rightly condemned by the international community as undemocratic and corrupt, it would also face a real and constant threat of revolution,” they wrote.

Crucial meetings are held behind closed doors, excluding participants with critical interests at stake, with no formal record of the discussion. When delegates are, in principle, entitled to attend meetings, they are not informed when or where they are to be held. Meetings are held without translation into the languages of many participants, to discuss documents which are only available in English, and which have been issued only hours before, or even at the meeting itself. Those most familiar with issues (Ambassadors) are sometimes discouraged or prevented from speaking in discussions about them at Ministerial meetings. “Consultations” with Members on key decisions are held one-to-one, in private, with no written record, and the interpretation left to an individual who has a stake in the outcome. Protestations that inconvenient views have been ignored in this process fall on deaf ears. Chairs of committees and facilitators are selected by a small clique, and often have an interest in the issues for which the committee is responsible. The established principle of decision-making by consensus is routinely overridden, and the views of decision-makers are “interpreted” rather than a formal vote being taken... Rules are ignored when they are inconvenient, and a blind eye is turned to blackmail and inducements. The list is endless.

A free-market transaction, remember, has to be free of coercion. All parties have to have access to the same information. By these standards alone, “free trade” is anything but.

There have been plenty of "Free Trade" votes since then, but let's go back and look at the aforemented 217-215 vote on CAFTA in 2005. 27 Republicans just couldn't bring themselves, even with all the concentrated pressure, to vote against the United States. Twenty-seven was enough to have killed the bill. It only passed because 15 Democrats, almost all of them notorious corporate whores, crossed the aisle in the other direction and gave Bush the votes he needed to pass the bill and further wreck the U.S. ecconomy. Almost all of those traitorous Democrats have since been defeated. But here's the list of the ones still serving in Congress:

• Jim Cooper (Blue Dog/New Dem-TN)
• Henry Cuellar (Blue Dog-TX)
• Rubén Hinojosa (D-TX)
• Jim Matheson (Blue Dog-UT)
• Gregory Meeks (New Dem-NY)
• Jim Moran (New Dem-VA)

State Senator Daylin Leach is the Blue America-endorsed candidate for the open congressional seat in northeast Philadelphia/Montgomery County. He's focused like a laser on economic growth and job creation as the only way to lift America out of the economic morass that the ideologically-based conservative Austerity agenda has driven the country into. Leach is a proponent of FAIR Trade, rather than the misnamed coprorate jihad called "Free" Trade. This morning he told us, "'Free' trade is often one of those phrases which is cleverly used to conceal the fact that the opposite of what is being said is what is actually the result. It's like calling a bill gutting environmental regulations the Healthy Skies Initiative, or calling a bill antithetical to what our founders intended when they wrote the Constitution The Patriot Act. Too often 'free trade' takes away our freedom to protect our workers, our environment, and our economic well-being."