Atelier 19, article 27


© Mark Weisbrot  :
(April 18, 2001)

                    It's Not About "Free Trade"
                                         By Mark Weisbrot (*)
 

"People of the same trade seldom meet together,
even for merriment and diversion, but the
conversation ends in a conspiracy against the
public . . ." So wrote Adam Smith more than two
centuries ago, and it is equally true today.

Quebec City is now host to numerous meetings of
these "people of the same trade" - - the
businesspeople who have access to the secret text
of the "Free Trade Area of the Americas." The fact
that the heads of major corporations such as Merck
and IBM can read the draft of the agreement, while
the press and the public are kept in the dark,
speaks volumes about what is being negotiated.

With the enthusiastic support of the Bush
administration, leaders of 34 nations are now
gathering in Quebec to discuss the FTAA. The name
of this treaty is misleading: it is not primarily
about "free trade." In fact, this agreement will
almost certainly strengthen some of the most
expensive, economically wasteful, and (in the case
of life-saving pharmaceuticals) deadly forms of
protectionism. These are the patents, copyrights,
and other monopolies commonly grouped under
"intellectual property rights."

While tariffs rarely increase the price of a good
by more than 20 or 25 percent, patent protected
prices can be ten or twenty times the competitive
price. One of the main purposes of these "free
trade" agreements is to expand this lucrative form
of protectionism across international borders.

Brazil has already run into trouble in the World
Trade Organization for its laws dealing with the
manufacture and import of generic AIDS drugs.
These laws have formed an important part of
Brazil's remarkably successful program for
treating AIDS. Brazil has provided
"triple-therapy" drugs -- the same ones that cost
$12,000 a year to treat people here, but can be
produced for as little as $500.

Generic AIDS drugs have enabled Brazil to provide
treatment to almost all who need it, cutting the
death rate from AIDS in half. But Washington is
currently challenging Brazil at the WTO,
contesting part of the Brazilian law that allows
for the manufacture and import of these generic
drugs.

Agreements like the FTAA also expand protections
for foreign investors, giving them rights that
they would not be able to win in their home
countries. There was a little-noticed provision in
NAFTA that allowed foreign investors to sue
governments for regulations that infringed on
their potential profits. This has turned out to be
an environmental nightmare.

For example, the US- based Ethyl corporation (the
one that brought us the lead in leaded gasoline)
brought a complaint against the Canadian
government in 1997. For public health reasons,
Canada had prohibited the import of another
potentially dangerous gasoline additive known as
MMT.

This additive was effectively banned in the United
States. But the fear of losing the NAFTA lawsuit
was enough for Canada to repeal its law, and pay
$13 million dollars in damages to Ethyl.

Now imagine extending these NAFTA provisions to 31
more countries and you can see why environmental
organizations are adamantly opposed to the FTAA.
They're not the only ones. Workers in the United
States, Canada, and Mexico have now had seven
years of experience with NAFTA -- the FTAA's pilot
program -- and it hasn't exactly turned out to be
the "win-win" deal that they were promised.

For the United States, the main problem has been
the loss of relatively better paying manufacturing
jobs, and the downward pressure on wages as
companies move or threaten to move south. Canada
has also lost a good part of its manufacturing
sector, and income inequality has worsened
significantly. Mexico has seen declining real
wages for its workers, as well as falling income
for the self-employed (a much larger part of the
labor force than it is here).

For Latin America as a whole, the last two decades
of "free trade" have been an economic train wreck.
Income per person has grown about 7 percent over
the last 20 years, as compared with 75 percent in
the previous two decades.

In Quebec a "wall of shame" -- as press reports
have described it -- was constructed to keep
protesters away from the meeting. Three miles of
chain link fence and concrete abutments were
supposed to compensate for the meetings' lack of
legitimacy among the populace.

The WTO and NAFTA are the product of a
decades-long effort to rewrite the rules of
international commerce in ways that ignore the
needs of most of humanity, as well as our natural
environment. But humanity is catching up, and has
learned some lessons. The misnamed "Free Trade
Area of the Americas" will not withstand public
scrutiny.

(*) Mark Weisbrot is co-director of the Center for Economic and Policy Research
     (www.cepr.net) inWashington, DC.

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