By Donella Meadows
–August 27, 1992–
Wow! The world’s largest trading area, populated by 360 million people! A free market from the Yukon to the Yucatan! The latest dramatic chapter, says President Bush, in the new world Christopher Columbus discovered 500 years ago!
It’s enough to give you shivers down your back.
But have you ever stopped to wonder what, exactly, is to be gained by expanding the free-trade area of the United States from 250 to 360 million people? You’ve heard a thousand times that free trade is a great thing, but can you say why? Really now, why?
Because it’s an item of faith, that’s why. Free trade is a sacred cow, it’s motherhood and apple pie. Anyone who opposes it is a protectionist, and that’s a bad word — even if what you are trying to protect is not your own economic interest, but the welfare of your nation, and all nations.
Well, since there’s still hope that Congress will turn from faith to reason before approving the North American Free Trade Agreement (NAFTA), it’s time to be called a protectionist.
There are two reasons for a nation to control trade across its borders. One is to eliminate foreign competition for the benefit of particular industries that have bribed lawmakers. For example the U.S. has a sugar import restriction to protect Florida sugar growers. It keeps out sugar from tropical countries, where it can be grown more cheaply. It raises our sugar price. That’s classic protectionism. Our consumers and outside producers would be better off if sugar trade were free. The few owners of our large sugar farms wouldn’t be. Whether their workers would be is unclear, given how badly those workers are treated.
The other reason to control trade is to protect a larger community interest that would be violated by traders seeking their own advantage. For example, we will not allow the import of cars that don’t meet our safety standards. That deprives our consumers of cheap, unsafe cars, but we believe safety transcends economics. Similarly, we restrict the import of foods containing banned pesticides, and inefficient appliances, and tuna that has been caught by killing dolphins, and cocaine.
The new free trade agreement that President Bush is so happy about will not take down the barriers against cocaine, of course. No nation in its right mind would forfeit all control over its borders. NAFTA does not stipulate fully free trade, but it goes a long way in that direction, commodity by commodity, picture tube by auto part by banking service by soft drink by farm crop. That’s why NAFTA has taken so long to negotiate, why it is a very long document, and why only the negotiators understand its details.
This we can say for sure about the consequences of any free trade agreement. Trade is engaged in by people or corporations for their private economic advantage, not for the common good. No one is in business to improve American wages or the Mexican environment or Canadian pensions. In fact, since all these things cost money, corporations are rewarded, directly and clearly, for minimizing them. That’s not because they’re evil; it’s just how the game called competitive market economics works.
The larger the trading area, the larger and more footloose the corporation, the less it will be responsible to any community, and the more it will be able to seek out low wages here, lax environmental enforcement there, fewer health benefits here, weaker labor organization there. It will be more likely to pick up and leave its messes and more able to avoid the logic of Henry Ford — that he had to pay his workers enough so they could buy his cars. In a big market you can go on for a long time making cars with the cheap labor of the poor over here and selling them at a high price to the rich over there.
That is why corporations, and governments dominated by corporations, love free trade, and why workers and environmentalists don’t. All analysts agree that NAFTA will hurt low-income people and benefit upper-income ones — one more in a long line of policies by the Bush administration that lean in that direction. Our EPA head assures us that NAFTA contains strong environmental standards, but in fact environmental regulations will now have to be agreed upon and enforced by three governments instead of one. No matter how good present intentions are, Mexico’s environmental standards will rise slightly, and the U.S. and Canada will have the choice of lowering theirs or watching their jobs move south.
For exactly these reasons the Danes opted out of the European Common Market. Denmark has some of the world’s strongest laws about energy efficiency, toxic waste disposal, nuclear power, groundwater pollution, and the fair treatment of workers, and their market economy thrives as well as any in Europe. The Danes would lose these standards if they were ruled by the European Parliament. So they chose protectionism — protecting their quality of life.
Free trade enhances the power of business relative to the power of the society. It serves economic values and undermines other values — safety, fairness, democracy, environmental sustainability. Free trade encourages bigness for the sake of bigness, not because there are any more economies of scale with a market of 360 million than there were with a market of 250 million, but because there is more power and more wealth for traders.
Every community, state, and nation needs to recognize when what’s good for General Motors is good for the nation and when it’s not. It needs the power to protect values that are more essential than General Motors profits. Only the fine print of the NAFTA agreement will show whether the Bush administration has had the wisdom to do this. There’s a lot of fine print, little of which has been made public. When we get a look at it, when Congress debates it, we will see plenty of reason, I’m sure, to be protectionists.
Copyright Sustainability Institute 1992