{"id":232,"date":"2011-01-11T14:29:37","date_gmt":"2011-01-11T19:29:37","guid":{"rendered":"http:\/\/citizenstrade.org\/draft\/free-trade-economic-theory\/"},"modified":"2011-05-30T14:06:48","modified_gmt":"2011-05-30T18:06:48","slug":"free-trade-economic-theory","status":"publish","type":"page","link":"https:\/\/www.citizenstrade.org\/ctc\/trade-issues\/free-trade-economic-theory\/","title":{"rendered":"Free Trade & Economic Theory"},"content":{"rendered":"

See Related Reports<\/a><\/p>\n

Free trade agreements are often promoted as development tools, vital to eliminating poverty and increasing the standard of living in developing countries. International finance institutions and many political leaders argue that trade liberalization is a key stepping stone to development, and that new jobs, more foreign investment, and increased access to foreign markets will bridge the gap between the developed and developing world. Unfortunately, however, the proven impact of past free trade agreements has been increased impoverishment and underdevelopment for the global south.<\/p>\n

Southern countries are often disadvantaged even in the negotiating processes for trade policies. While \u00be of the World Trade Organization\u2019s (WTO) members are developing countries, most of these are economically dependent on the US, European Union, or Japan in terms of aid, imports, exports, or security. Dissent in the WTO could threaten their security and economic well being. Additionally, developing countries have fewer human and technical resources and enter negotiations less prepared since they cannot maintain a team of negotiators and translators comparable to those of developed countries. Furthermore, trade rules are generally negotiated to apply uniformly to all countries, regardless of economic and political variations. Hence, the rules applied to the wealthy, post-industrial economies of Europe and the US are the same for poorer, agricultural nations that have significantly different needs.<\/p>\n

The agricultural sector of southern countries is typically hard hit by free trade policies. Throughout the global south, a significant percentage of the population is involved in either subsistence or commercial agriculture. Without barriers against agricultural imports, foreign agribusiness imports are able to undercut local prices, putting farmers from southern countries out of business. In Mexico, under the North American Free Trade Agreement (NAFTA), this has resulted in massive increases in migration from rural areas to urban centers and to the US in search of employment. When employment is available for these immigrants, workers are subject to low wages and poor conditions. According to the Economic Policy Institute, underemployment has rapidly increase in Mexico since the implementation of NAFTA, while Mexican wages have dropped 27%, in part because of the destruction of domestic agriculture.<\/p>\n

Agriculture, along with public health, is also affected by the imposition of US-style patent and copyright protections through the WTO\u2019s agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and similar provisions in other free trade agreements. TRIPS mandates recognition of patent rights on a broad range of goods, including life forms such as plant and animal varieties traditionally cultivated by small farmers and indigenous groups. The patenting of seeds has required farmers to purchase new seeds every year, rather than practicing seed saving, thus significantly increasing the cost of production. Higher prices on patented and copyrighted medicines have had devastating effects on health systems in poor countries by prohibiting affordable access to vital medicines. These trade rules allow billions of dollars from developing countries to be transferred to developed countries in the form of royalties while ignoring the disastrous effects on public welfare.<\/p>\n

Social services are another major victim of free trade policies. Since many developing countries rely on tariff revenue for 10-20 percent of government proceeds, free trade agreements eliminate a major source of government income by eliminating tariffs. This inevitably results in decreased social spending on education, health care, and other vital social services. Moreover, the push for deregulation, liberalization, and privatization from the Free Trade Area of the Americas (FTAA) and WTO\u2019s General Agreement on Trade in Services (GATS) would lead to higher prices for water, electricity, health care, education, and other essential services, limiting the ability of the poor to access these essential services. Under GATS, developing countries are restricted from favoring domestic business over transnational corporations and from protecting natural resources such as fresh water or forests.<\/p>\n

The majority of free trade agreements fail to include enforceable provisions to protect workers\u2019 rights, human rights, and the environment. The lack of standards has led to a \u201crace to the bottom,\u201d where transnational corporations move from country to country in search of the cheapest labor and least imposing domestic regulations. This fluidity of investment creates instability and forces countries to compete for the lowest standards and the fewest protections in order to attract investors. Even if developing countries do impose strong labor and environmental standards, the investment provisions in NAFTA, and many trade agreements currently under negotiation, could allow corporations to challenge such laws as barriers to trade.<\/p>\n

Free trade agreements have failed to deliver the positive development effects claimed by their advocates. Instead, free trade agreements have led to increased poverty and unemployment, and decreased food security and access to social services.<\/p>\n

Related Reports<\/strong><\/a>
\nBill Clinton admits his Neoliberal Free Trade policies are wrong: ‘It was a mistake’<\/a> SWOPBlogger, March 22, 2010
\nWith cheap food imports, Haiti can’t feed itself<\/a> Associated Press, March 20, 2010
\nThe Failed Expectations of U.S Trade Policy<\/a> Foreign Policy in Focus, June 4, 2008
\nTrade, Jobs, and Wages: Are the Public\u2019s Worries about Globalization Justified?<\/a> EPI, May 6, 2008
\nU.S. Living Standards in an Era of Globalization<\/a> Carnegie Endowment for International Peace, July 2007
\nIs Deindustrialization Inevitable?<\/a> New Labor Forum, May 20, 2006
\nImpact of the Doha Round on Developing Countries<\/a> Carneige Endowment for Internationl Peace, March 15, 2006<\/p>\n

The Tyranny of Free Trade: Wasted Natural Wealth & Lost Livlihoods<\/a> Friends of the Earth, December 9, 2005
\nA Decade of Results Shows the WTO Model has Failed<\/a> Public Citizen, December 7, 2005
\nPoor Numbers: The Impact of Trade Liberalization on World Poverty<\/a> Center for Economic Policy Research, November 18, 2005
\nThe Shrinking Gains from Trade<\/a> Tufts University, October 2005
\nThe Doha Declaration on the TRIPS Agreement and Public Health and the Contradictory Trend in Bilateral and Regional Free Trade Agreements<\/a> Quaker United Nations Office, April 2004
\nFool’s Gold: Projections of the U.S. Import Market<\/a> Center for Economic and Policy Research, January 8, 2004
\nThe Relative Impact of Trade Liberalization on Developing Countries<\/a> Center for Economic and Policy Research, June 12, 2002
\nLabor Rights and Trade: Guidance for the United States in Trade Accord Negotiations<\/a> Human Rights Watch, October 2002<\/p>\n

Articles, Statements, & Releases<\/strong>
\nDo you want free trade – or fair trade that helps the poor?<\/a>The Independent (London), August 1, 2008
\nWave Goodbye to the Invisible Hand<\/a> Washington Post, August 1, 2008
\nChairmen Rangel and Levin Introduce Trade Enforcement Bill<\/a> Office of Congressman Sander Levin, July 17, 2008
\nCollege Grads, Incomes Stagnant, Turn Against Globalization<\/a> Wall Street Journal, July 17, 2008
\nA global lesson in market failure; From U.S. homeowners to the world’s poor, the pain is real<\/a> Globe and Mail (Canada), July 8, 2008
\nAs G-8 meets, free trade under fire<\/a> Christian Science Monitor, July 7, 2008
\nOrdinary People Pay Big Price for Free Trade<\/a> The Age (Australia), June 27, 2008
\nA Hint of Reality on Trade at the Washington Post?<\/a> Globalization Follies, June 26, 2008
\nThe Growing Power of the Fair Trade Uprising<\/a> Huffington Post, June 25, 2008
\nFree-Trade Era May Be Nearing End Amid Food, Growth Concerns<\/a> Bloomberg, June 13, 2008<\/p>\n

The Economists’ Dirty Little Secret<\/a> The Huffington Post, January 14, 2007
\nFree trade finding more resistance<\/a> Charlotte Observer, December 13, 2007
\nTrade pacts promise jobs, but do they deliver?<\/a> Miami Herald, December 10, 2007
\nFewer Americans Favor Free Trade, Study Finds<\/a> Wall Street Journal, December 5, 2007
\nThe gremlins of free trade<\/a> Boston Globe, November 19, 2007
\nIMF Fuels Critics of Globalization<\/a> Wall Street Journal, October 10, 2007
\nFrom Old World to Real World<\/a> Washington Post, April 25, 2007
\nIt is Time to Pause on Trade<\/a> The Hill, April 18, 2007
\nFree Trade With the U.S. Has Failed to Close the Income Gap or Create Quality Jobs<\/a> The Canadian, April 11, 2007
\nHow Free Trade Hurts<\/a> The Washington Post, December 23, 2006<\/p>\n

Why Fairer Trade Does Not Mean an End to Free Trade<\/a> Financial Times, November 29, 2006
\nThe False Dilemma of the Sweatshop<\/a> The Financial Times, July 25, 2006
\nWhere is the Development?<\/a> Africa Renewal, June 1, 2006
\nSupply-and-Demand Solutions<\/a> San Francisco Chronical, April 9, 2006
\nA Case for Tailoring- and Slowing- Free Trade in Poor Nations<\/a>New York Times, March 31, 2006
\nPoorest Nations Hit Hardest by WTO Agenda, Study Finds<\/a> Inter-Press Service, March 15, 2006
\nDollars Without Borders<\/a> New York Times, March 5, 2006
\nNew Economy Hurting People in the Middle Most<\/a> The Washington Post, March 8, 2006
\nIt Takes More Than Free Trade to End Poverty<\/a> The Independent, February 3, 2006
\nU.S. Latin America Trade Policy Under Scrutiny<\/a> Financial Times, November 7, 2005<\/p>\n

Economic Failure, Stagnation, Social Unrest<\/a> Miami Herold, October 15, 2005
\nThe Global Labor Threat<\/a> TomPaine.com, September 29, 2005
\nChinese Influence on the Rise of Latin America<\/a> Foreign Policy in Focus, June 23,2005
\nRecord Deficit Challenges Free Trade Assumptions<\/a> Inter Press Service, February 10, 2005
\nMaking Free Trade Fair<\/a> Barbados Nation, February 7, 2005
\nUS FTA Fever May Be Overrated<\/a> Asia Times, July 17, 2004
\nLatin America’s Stunted Growth<\/a> Center for Economic and Policy Research, June 15, 2004
\nCentral Americans Demonstrate Against CAFTA<\/a> Alliance for Responsible Trade, April 2004<\/p>\n

Rethinking the NAFTA Record<\/a> Institute for Policy Studies, August 2002
\nAFL-CIO President, John Sweeny speaks on trade deficit for 2004<\/a>
\nShaking Up Trade Theory<\/a> Business Week, December 6, 2004
\nRethinking Free Trade<\/a> Boston Globe, September 29, 2004<\/p>\n","protected":false},"excerpt":{"rendered":"

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