PCDForum Column #61,  Release Date September 30, 1993

by David Morris

Both supporters and opponents of free trade pacts agree on one thing: the world economic system is broken and needs fixing. The question is not whether we need new rules to govern the global flow of commerce and resources. Rather, the questions are, what should these rules be and what ends should they strive to achieve?

Unfortunately, the North American Free Trade Agreement (NAFTA) and the current round of negotiations under the General Agreement on Trade and Tariffs (GATT) are based on the simple premise that allowing ever greater quantities of material goods, services, and capital to move more freely among countries without governmental control will provide universal benefits. Critics challenge this assumption as simplistic, noting for example that during the 1980s trade soared between the United States, Canada, and Mexico, while living standards in all three countries declined.

Critics also note how carefully Europeans have crafted a comprehensive framework for their economic union. For example, their framework provides for political as well as economic integration, recognizing that a continental free trade zone without a continental government would greatly weaken democratic governance by leaving market forces unrestrained and unaccountable to the public interest. NAFTA and GATT both ignore the inherent inseparability of politics and economics.

The European framework further seeks to harmonize environmental, social, and labor standards upward, with richer countries working to boost productivity and income levels of their poorer neighbors. Poor countries have the responsibility to restructure their economies so that a large proportion of the benefits of higher productivity go to the workers. The related European provisions are not found in either GATT or NAFTA, including requirements that:

  • No country can become a member of the European union unless it is a working democracy.
  • No country can become a member if its per capita income levels are too far below the European average.
  • Richer member countries must provide financial assistance to poorer member countries.
  • Countries cannot gain a competitive advantage on the basis of low wages, poor working conditions and weak environmental standards.
  • As national authority over commerce diminishes as a consequence of integration, the authority of an elected European parliament increases.
  • When regulations enacted by state and national governments are challenged by corporations or other governments as unfair restraints of trade, the burden of proof is on the challenger.

While the European Union has been crafted out of active public debate, NAFTA and GATT have been drafted in secret. Since the major public input has come from representatives of transnational corporations it is not surprising that these agreements envision integrated economies dominated by mega-corporations freed from accountability to democratically elected governments, large-scale, absentee-owned production units, and long-distance distribution of goods and services. They further provide a framework for downward harmonization of environmental and social standards including wages.

Meanwhile citizen groups around the world are constructing a vision of a very different human future. They envision an environmentally sustainable economy characterized by shorter lines of distribution and locally owned and humanly scaled production units, where the authority and responsibility for decisions are shifted toward the people most affected by these decisions: local managers, workers, and communities. This citizen vision is best advanced by fair trade agreements based on the following principles:

  • The mechanisms for setting and modifying the rules of trade will be democratic and bring decision making down to the level of the people, even if their decisions inhibit flows of trade and capital.
  • Local value added activities will be encouraged, as will local economic self-reliance based on locally owned businesses, banks, and investments.
  • Communities will be allowed to place limits on foreign or external corporate ownership of local assets.
  • Minimum environmental, labor and political standards will set a floor for the whole, while giving scope and encouragement to individual nations and localities to impose higher standards on both imports and internally generated goods and services.
  • A transfer of resources from richer to poorer nations will occur with the objective of promoting full employment and environmentally benign development and the widest possible ownership of productive capacity.

Every one of these principles is violated by the NAFTA and GATT agreements now being proposed. Fortunately, the current debates about free trade offer an extraordinary opportunity to consider what we want from our economic and political future and to become active in crafting the rules governing our relationships accordingly.

David Morris is vice president of the Institute for Local Self-Reliance, 1313 5th St. SE, Suite 306 Minneapolis, Minn. 55414, U.S.A., Fax (612) 379-3920; e-mail: ilsr@igc.org. This column was prepared and distributed by the PCDForum based on his article "How About a Fair Trade Agreement," Utne Reader, July-August 1993.

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