"Free Trade" Is Not about Trade

By Shniad, Sid | Canadian Dimension, May-June 2002 | Go to article overview

"Free Trade" Is Not about Trade


Shniad, Sid, Canadian Dimension


Fifteen years ago, this country was embroiled in the debate over the Mulroney government's Canada-U.S. Free Trade Agreement. Since that time, we have seen a proliferation of similar deals, each more comprehensive and regressive than the last.

The good news is that free trade and the corporate-driven globalization that drives it have generated an unprecedented reaction from civil society; demonstrations in opposition to free trade that began in Seattle in 1999 have spread around the world. But the bad news is that some of free trade's opponents insist on treating the subject as if it were primarily about trade.

The use of the slogan "Fair Trade, Not Free Trade" is symptomatic of the problem. Anyone seeing or hearing this slogan would reasonably conclude that the problem with free trade is the terms of trade contained in such deals. While it is undeniably true that the terms of trade between developed and underdeveloped areas of the world are a major problem, these are not directly influenced by mis-named free-trade deals.

The problem with free trade agreements is that they encompass much more than trade. In fact, some of the issues addressed in these deals have nothing at all to do with trade. For free trade to be properly understood, it must be seen as an integral part of the neoliberal policy framework that governments have, been putting in place for the past 25 years: curbing wages, rolling back social programs, privatizing government holdings and services, and deregulating corporate activity.

Neoliberalism originated in the early 1970s. By that time, the Keynesian economic policies that had been initiated after World War II. had produced an economic expansion that had lasted decades: Against the background of the full employment that characterized lengthy economic expansion, labour militancy generated strike levels not seen since the 1930s. This militancy, together with the relatively generous social spending that characterized Keynesian policies, combined to generate rising real wages, falling profits and a level of inflation that threatened financial returns. From capital's perspective, all this constituted a major crisis.

In 1975, the Trilateral Commission published a book called The Crisis of Democracy which captured capital's concerns. Writing against the background of the prevailing decline in profitability, its authors bemoaned the effects of increased government spending in the areas of education, welfare, social security, health and hospital care. Expressing a view widely shared by the rich and powerful, The Crisis of Democracy traced the crisis of profitability to "an excess of democracy." The neoliberal policies that the Trilateral Commission and other, similar groups have promoted ever since, through organizations like the World Bank and the International Monetary Fund, are designed to restore profitability and to ensure that it is not jeopardized in the future, first by restructuring the role of government and then by restricting the ability of the political process to generate progressive economic and social policy. This is where free trade comes in.

International Trade Agreements Reshape the World

In addition to their efforts in organizations like the IMF and the World Bank, the proponents of neoliberalism have extended the reach of their program into the realm of trade by promoting unprecedented changes to the role played by international trade agreements.

Established in 1948, the General Agreement on Tariffs and Trade -- the original international trade organization -- was mandated to reduce tariffs on internationally traded goods. In the following 20 years, the GATT achieved this goal. By the beginning of the Tokyo round of trade negotiations in the 1970s, tariffs on internationally traded goods had been largely eliminated. But by that time, the world's largest and most powerful capitalist countries envisioned a major change in the international trade negotiation process. …

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