The trade debate raging around the North American Free Trade
Agreement is mired in a fog of outdated economic ideas. Only a
trade specialist could take seriously such vacuous slogan-words as
"free trade" and "protectionism" when a third of our "foreign"
trade is American companies outsourcing work to off-shore
subsidiaries to reap the advantages of low paid labor. Most of the
current trade with Mexico represents intermediate products destined
for return to the United States or to other markets after they have
been enhanced in value by cheaper Mexican workers.
In recent years, the international flow of goods and services
has dramatically expanded, but the gap between the rich and the
poor has doubled and the assault on natural systems - marine
fisheries, tropical forests, top soil, rivers and the protective
ozone layer - has dangerously intensified. In this context, the
slogan "free trade" misses the point. Instead of wasteful
production and frenetic global exchange, we need a national
commitment to just social policies, vibrant communities and
reduction of our impact on the environment.
Listening to those who argue so dogmatically for free trade,
one would never guess that the concept was only invented in the
late 18th and early 19th centuries when conditions were totally
Perhaps the most famous exponent of free trade was David
Ricardo, a 19th-century political economist from England. Modern
world trade is based upon his theory of comparative advantage.
Rarely remembered is the parallel doctrine of Ricardo: the
so-called Iron Law of Wages. Under this infamous theory, the
"natural" price of labor was deemed to be just enough to allow a
worker bare subsistence, plus enough to produce a child to replace
him upon his death or disability.
Today, the modern ideologues of free trade don't say openly
that working people should live at bare subsistence levels.
Instead, they design algebraic models that "prove" the value of
deregulated markets and uncontrolled international trade. Absent
from their equations, however, are any moral ideas about social
justice or environmental stewardship.
Washington insiders talk as though "free trade" always raises
wages and generates good jobs. The facts indicate otherwise. Since
1973, American trade with other nations has doubled, but the value
of American weekly paychecks has fallen 18 percent. In the last
decade alone, the number of young men working full time who earn
only a poverty wage has increased 100 percent.
The U.S. economy expanded - national income per capita grew 28
percent - but the benefits were channeled to those with the highest