Wednesday, February 19, 2014

NAFTA at 20: How ‘Free Trade’ Helps Banks Block Regulation

John Buell
The Bangor Daily News
Penny Pritzker, U.S. Secretary of Commerce, gestures during an interview with Reuters in Mexico City in this February 2014 file photo. The North American Free Trade Agreement, just turned 20, has been in the news lately. Its advocates hope to extend its reach and depth through a Trans Pacific Partnership trade agreement and similar deals with Europe. Trans Pacific Partnership’s possible threat to shoe-industry jobs in Maine has properly received much attention in the local press, but NAFTA has other lessons that deserve close scrutiny.

Perhaps NAFTA’s greatest achievement has been rhetorical. Agreements like a Trans Pacific Partnership are still called “free trade.” They are nothing of the sort. They employ coercive means at the domestic and international levels to enshrine monopoly privilege for key segments of the FIRE sector (Finance, Insurance, Real Estate) of U.S. capitalism. The instability and rapaciousness of deregulated finance on an international plane will likely cost even more jobs than NAFTA.

NAFTA was originally promoted with classic arguments of “comparative advantage.” If tariffs on goods are eliminated, each nation can specialize in those at which it is best. Trade between nations then increases the total size of the pie. The classic theory, however, postulates underlying assumptions, such as full employment, that have virtually never applied in reality.

Even if we accepted this questionable thinking, there would be even more compelling reasons to reject a Trans Pacific Partnership. Economist Dean Baker has frequently pointed out that these agreements require foreign governments to accept the terms of U.S. patent and copyright laws, in effect extending monopoly pricing power beyond U.S. boundaries. The Trans Pacific Partnership likely will add insult to injury by prohibiting Maine from importing cheaper drugs from Canada. So much for a Trans Pacific Partnership as a trade-promoting agreement.

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