John Buell

Compounding NAFTA’s Woes

In December, in especially untimely action, the US Senate ratified the US-Peru Free Trade Agreement. Just as its predecessor, the North American “Free” Trade Agreement, has been coming under increasing scrutiny and criticism even from some of its former advocates, Congress has now expanded the concepts of NAFTA to one more South American nation. Like NAFTA before it, this deal risks further damage to the economic interests of working class citizens not only in the US but in Latin America as well.

It is really a violation of truth in advertising to call NAFTA or the current deal “free trade.” Classic free-trade agreements of the sort celebrated in the economics courses of my generation, such as Paul Samuelson’s, talked about the efficiency and win-win gains to two nations when tariffs (taxes on imports) were removed.

NAFTA and the current agreement lower tariffs, but NAFTA went beyond classical free-trade agreements by extending to a larger international arena strong forms of economic protectionism for particular producers. Patent and copyright principles developed in the US market are now to be imposed on all signatories to future corporate trade agreements. Indeed, this is one of the major reasons US corporate lobbies push so hard to keep expanding the scope and reach of these treaties.

Signatories to these pacts are now obliged to accept monopoly control over the production and distribution of new technologies and drugs. This monopoly protection over certain industries, often justified with claims of “incentives for further research,” is a clear violation of the principles of market freedom so often touted by mainstream economists.

Here in the US, the vast profits generated by patent and copyright monopolies have done more to fund deceptive and demeaning ads than new wonder drugs and have proven to be major incentive to withholding valuable information from the public.

Regardless of how some US corporate interests may feel about intellectual property, there is no justification for using trade treaties to impose this model on other nations. Making drugs more expensive in developing nations may benefit a few US companies, but at great cost not only to foreign nations but to a larger world community, including US residents, who are put at further risk by the global spread of AIDS and other contagious diseases. Some of the most onerous implications these requirements impose on Peru are blunted in this agreement, but it nonetheless extends this pro-corporate principle more widely.

Just as basically, the Peru agreement continues the inequality at the heart of NAFTA. More than removing tariffs, NAFTA imposes a particular type of capitalism on Latin America. Investors are free to invest, thanks to the harsh international sanctions that are to follow from any attempt to expropriate their property, but labor’s ability to organize in behalf of its rights to speech, to strike, or even child labor protections is not similarly guaranteed.

Advocates of the new Peru agreement maintain that, unlike NAFTA, it does include the proviso that International Labor Organization standards, which defend basic labor rights, are a part of the new agreement. The kicker, however, is in the details. Unlike the case of many trade agreements among European nations, enforcement of any labor standards in this deal is not entrusted to an independent agency or court. Trade panels, with representatives chosen by this administration, will deem whether the Peruvian government has violated labor standards. American workers are being asked to entrust their faith in international negotiations to an administration with a consistent record of violation not only for domestic labor law but also for even more settled and respected traditions of civil and political liberties.

How those Democrats and so-called moderate Republicans who maintain they are independent voices can support this treaty is beyond me. Merely to claim that it is less awful than NAFTA is no defense. Because this agreement continues a pattern of disproportionate favoritism to corporate interests, most working class US and Peruvian citizens would be better off with no agreement.

NAFTA is not the sole cause of working-class woes in the last two decades. It has not sucked away millions of jobs as its most demagogic opponents claimed, but the unequal terms of trade it guarantees combined with a fierce domestic attack on unions, the minimum wage, and occupational regulation have placed major downward pressure on the working class. Even a number of the former supporters of NAFTA, including Brad DeLong at Berkeley, now admit that NAFTA has not worked out as well as planned.

More interestingly, Paul Samuelson is just one of the intellectual fathers of free trade to admit now that the gains in reduced consumer prices from free trade may not offset pressure on working class wages, especially when trade is between vastly unequal nations. Other trade supporters now acknowledge that too little has been done for the losers, a category that includes not merely those who directly lost a job but also workers who reduce wage demands in response to corporate threats to outsource their jobs. Those who wish to establish their independence from this administration should concentrate on assessing and correcting the damage that recent trade agreement have inflicted before risking further harm.

John Buell lives in Southwest Harbor, Maine, and writes regularly on labor and environmental issues. Email

From The Progressive Populist, February 1, 2008

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