Democrats & Liberals Archives

Book Review: Myths of Free Trade

In The World is Flat, Friedman sings the glories of free trade. In this book by Representative Sherrod Brown, we get an alternate view of free trade, as serving the needs of business and very few of the needs of everbody else. Friedman raves about NAFTA; Brown abhors it. Friedman thinks our expanding business with China will being democracy there; Brown is pessimistic about this. This book is not as a good a read as Friedman’s, but its thesis is closer to what I believe.

Brown mentions the usual advantages given to us by proponents of free trade: free trade helps more people economically than it hurts, it helps in the fight against terrorism, and it can open up the society living under an authoritarian regime such as China. Then he quotes William Greider who says that the World Trade Organization (WTO) is:

"a private club for deal-making among the most powerful interests, portrayed as a public institution searching for international consensus. The WTO aspires, in effect, to create a bill of rights for capital, crafted one case at a time by the corporate lawyers filing their confidential pleadings in Geneva. It is not hyperbole when critics say the system defends property rights but dismisses human rights and common social concerns as irrelevant to trade."

In plain language, the WTO takes care of business. It does not give a figleaf about workers and their rights, and it does not pay any attention to health and safety conditions nor to environmental pollution and other hazards workers toil under.

Worse. According to the rules of WTO, any foreign business can sue our government if it feels that one of its laws impacts its business negatively. Here's one example: Methanex Corporation of Canada manufactures MTBE, a chemical placed in gas. California banned MTBE because its use leads to cancer. Methanex sued U.S. for $1 billion. The WTO, a collection of unelected businesspeople, is effectively a government overturning laws of our supposedly sovereign state!

Friedman and other free-traders throw export/import statistics at us showing that NAFTA is a huge success for both U.S. and Mexico. Brown destroys this myth by describing the maquiladoras story. Instead of manufacturing in the U.S., American multinational companies erect factories, called maquiladoras, in Mexico. Then they purchase capital equipment from American firms which send the equipment to the maquiladoras. Statistics mark these as a rise in American exports to Mexico. Then components are sent to the maquiladoras (more exports). After the components are assembled into cars or electronic goods, they are sold back to Americans (for the most part). Statistics mark these as imports from Mexico.

Under NAFTA, multinationals make out like bandits. Workers in U.S. lose jobs. Mexican wages are now 40% lower than they were 20 years ago, according to Brown.

Free traders make a case for doing more and more business with China. Free trade, they say, will open up Chinese society and eventually lead to democracy. I thought so too, but Brown has made me a little more skeptical.

Brown asks why do big corporations go to China? Because, he says, they benefit from cheaper workers and the lack of regulations about the environment or worker rights. A democratic country would establish minimum wages and environmental, health and other worker benefits - all of which would increase company expenses. This is why multinationals are NOT eager to bring democracy to China.

Brown offers many suggestions for making free trade fair trade. He thinks that the WTO must be reformed so that it is more democratic and represents other interests of society besides business: labor, health and the environment. American laws should not play second fiddle to the WTO. And trade treaties should be presented to Congress for approval BEFORE they are signed.

I agree. We need a democratic WTO that more broadly represents the societies of member countries. Balance your "flat-world" knowledge from Friedman with the "whole world" knowledge from Brown.

Posted by Paul Siegel at November 28, 2005 2:56 PM