Free Trade, Anyone? (Or, A Funny Thing Happened on the Way to the Business Forum)

From the April 2001 CEI UpDate

In Calvin Coolidge’s time, the business of America was business. In our time, the business of trade negotiators is business, or so it would seem. One thing’s for sure: The business of negotiators at Western Hemisphere trade summits is not necessarily free trade.

Another round of negotiations on the “Free Trade Area of the Americas” (FTAA) recently concluded in Buenos Aires, Argentina. The initiative in question, first envisioned by President George H.W. Bush, is intended to bring together the 34 countries of North and South America into a hemispheric free trade zone–one large enough to dwarf the European Union.

For the better part of a week at the beginning of April, dozens of mid-level trade negotiators met at the Argentine Ministry of Foreign Affairs to wheel and deal on the terms for reducing trade barriers. All this was to prepare the groundwork for a high-level meeting of Trade Ministers that took place on the meeting’s final day.

But much of the real negotiating took place a few blocks away in the Sheraton hotel, the site of a meeting of the Americas Business Forum (ABF). Corporate representatives from throughout the Americas have arranged for their own conferences to be held during each of the last few FTAA Ministerial Meetings to hash out recommendations that are then submitted to the trade ministers themselves.

The business negotiators discussed a variety of issues that are key to corporate interests–agriculture, intellectual property, competition policy, and subsidies, among others–with the goal of agreeing on basic principles about how the trade agreement should be drafted. By posing a united front, the reasoning went, they would be able to exert a greater level of influence on the official Ministerial negotiations. As one lawyer/lobbyist representative told us, “What happens over at the sub-minister’s meeting isn’t all that important. This is where the real action is.”

The ABF session had all the markings of preparing a sweetheart deal for business. Opponents of the FTAA can make a compelling case that because large corporate interests are directly represented in the formal trade negotiations, the FTAA is nothing more than another form of “corporate globalization.”

But for most of the FTAA’s organized opponents–the so-called Non-Governmental Organizations (NGOs)–this really isn’t the primary concern. They would oppose free trade anyway. Indeed, at many of the prior Ministerial Meetings, including the last one in Toronto in 1999, the NGOs too had their own meetings. (Of course, in Toronto, few complaints were heard about unelected special interests having too much input.)

The NGOs represent a broad array of special interest groups–environmentalists, consumer campaigners, indigenous peoples, human rights activists, and labor unions. And their arguments are familiar: Corporations, through free trade, will destroy the environment, cheat consumers, undermine worker rights, increase poverty and inequality, and destroy the souls of all those involved.

But a closer look at the ABF meetings shows the business community to be not nearly as unified as opponents would like to believe. In fact, it’s hard to justify calling it a “community” at all.

Many businesses only like trade when they can get it on their own terms. Honest-to-goodness “free” trade they can do without. These companies are the usual protectionist suspects in industries like steel, textiles, and agriculture. While they’d like to have the might of the US government behind them in knocking down import barriers in other countries, what is often more important is when that same power is used to keep exports from other countries out of our own markets.

Over the past thirty years or so, competition from abroad has forced many US industries–automobiles and electronics are prime examples–to increase efficiency and quality, and to vie for customers on an international playing field.

Those years were difficult for the companies and workers involved. But the lessons learned were beneficial. So it has become increasingly harder for the last bastion of old-line protectionists to demand special treatment for their own products. However, public opinion doesn’t stop them from pursuing their goals. Instead of doing so directly, though, one now finds strange coalitions of anti-trade interests at the intersection where the ideological and the protectionist opponents of trade meet.

So we see the Argentine and Brazilian generic pharmaceutical industries joining with consumer agitators and AIDS activists in contending that intellectual property rights “put lives at risk” for the majority of the world’s poor who can’t afford drugs produced by US drug companies. We also see French farmers arguing that imports of beef from the US and Canada actually pose a human health threat to European consumers. And we see billionaire textile magnate Roger Milliken funding Ralph Nader’s Global Trade Watch and Citizen’s Trade Campaign.

More curious still was the sight of labor union protesters in Buenos Aires, marching against the FTAA, blowing whistles, shooting off fireworks, and banging drums. There is a certain irony in Latin American textile unions opposing more open trade. It’s natural for blue-collar workers and their union leaders in the United States to oppose free trade; they clearly benefit from such protectionism–as does Roger Milliken. But the workers represented by Latin American labor unions (especially in the textile industry) could only stand to benefit from a real free trade agreement that would open US markets to their more competitively priced goods.

Trade negotiations and agreements are rarely about real “free” trade. In theory, they are intended to knock down trade barriers between nations and thus to level the playing field for all economic interests. In theory, international negotiators extol increased competition, tariff reduction, and the elimination of subsidies. But the negotiations are rarely theoretical, and it soon becomes clear that such simple steps towards freer trade are not very politically expedient.

In practice, each country’s negotiators come to the table to protect its own nation’s shortsighted business interests. And in the sordid world of interest-group politics, that means that some restrictions here are cut, others over there are maintained, all to give domestic industries a competitive advantage.

In the face of their current economic difficulties, the political leaders of Brazil, Venezuela, and Argentina already began backing away from the FTAA before the recent talks even began, much to the frustration of US negotiators. Their spin? That the United States already enjoys a large trade surplus with Latin America and thus has little to lose from even freer trade.

Venezuelan President Hugo Chavez condemned the FTAA for adhering to a neoliberal economic model, which he called “one of the roads of hell.” Leaders like Chavez fail to see past their terms in office, past the economic crises that have resulted largely from government interventions into the economies of Latin America, and past the domestic interests whose loud voices and drums in the streets demand attention. To embrace real free trade takes political courage, which few Latin American leaders so far have demonstrated.

At the end of the day, the ABF participants agreed on only a few modest points, and the recommendations forwarded to the Trade Ministers amounted to little more than broad generalizations. Those few businessmen attending who were interested in pursuing something that resembles genuine free trade can, at best, hope to keep their protectionist opponents from eroding the status quo. But one can only hope. Time will tell. The next one of these FTAA summits meets in Quebec City in late April.

Gregory Conko ([email protected]), director of food safety policy at the Competitive Enterprise Institute, and Kendra Okonski ([email protected]), a research assistant, covered the FTAA negotiations in Buenos Aires for National Review.