Free trade: economic principles and policy impacts

Global outcome of free trade really depends on which side of the fence one is on. The mention of free trade usually brings to mind topics such as the North American Free Trade Agreement, NAFTA, the Central American Free Trade Agreement, CAFTA, the Free Trade Area of the Americas, FTAA, the World Trade Organization, and the Fast Track Trade authority for the president of the Untied States (Eddlem pp). However, critics claim that free trade simply means an absence of any government intervention in business (Eddlem pp). Government intervention includes tariffs, taxes, trade sanctions, import quotas, regulations, or subsides, and each of these, including government subsidies, is equally anathema to a free trader because it detracts from the natural efficiency of the free market that produces wealth (Eddlem pp). Thus, all the international trade agreements, from the World Trade Organization to the FTAA, embrace some form of sanction mechanism to enforce the will of the deciding body, all endorse heavy government regulations on labor and the environment, and all protect forms of corporate welfare for favored domestic industries (Eddlem pp).

Critics of free trade policies claim that to corporate tycoons like Philip Condit, the former Boeing CEO who pushed Congress for the necessary trade agreements to sell taxpayer-subsidized goods abroad, "free trade ideology is not a set of principles ... But a tactical maneuver to be deployed, or withdrawn, as the circumstances require for the particular ends sought" (Eddlem pp). These agreements make American manufacturers dependent on foreign manufacturers through production sharing, and attempt to divest Congress of its constitutional responsibility to regulate trade, unconstitutionally surrendering that responsibility to an international body (Eddlem pp).

In the December 22, 2004 issue of American Review of Canadian Studies, Michael Hart states that "The successful conclusion of a trilateral North American Free Trade Agreement created expectations about the evolution of a North American community," however this has not happened, nor is it imminent (Hart pp). According to Hart, NAFTA is little more than a joint agreement to manage two distinct bilateral trade and economic relationships (Hart pp). The issues that Mexico has with the U.S. are not the same issues that Canada has, and trying to address either Canada-U.S. Or Mexico-U.S. issues on a trilateral basis is unnecessarily complicated and likely to prove counter productive (Hart pp).

In the March 22, 1998 issue of the Houston Journal of International Law, Lisa Anderson points out that the concept of free trade has taken on global proportions, and that the original bilateral trade agreements between neighboring countries have ballooned to encompass whole regions and countries are implementing new treaties to cross hemispheric boundaries (Anderson pp).

In February 2005, The International Development Committee challenged the European Union's plan to open up trade with African, Caribbean and Pacific countries, claiming that the free trade proposals between the EU and some of the world's poorest countries will force millions of people into poverty (Stevenson pp). The agreements are to begin in 2008 and will allow ACP countries free access to EU markets, but gives EU states reciprocal access (Stevenson pp).

Several on the committee, as well as many within the ACP countries protested the Economic Partnership Agreements, fearing that subsidized EU exports will flood the developing world, preventing countries from nourishing their own industries (Stevenson pp). Of particular concern are stipulations covering investment, competition and government procurement, the EU wants to force ACP countries not to discriminate against foreign companies when awarding contracts and not to penalize foreign investors, all leading to fears that competition with European multinational companies will destroy domestic development (Stevenson pp).

The free trade backlash seems to be gaining strength (Panchak pp). Supporters of the current trade policy claim that freer trade will lift millions of people in developing countries out of poverty which creating many more jobs in the United States, and that these new jobs will be the higher-paying, higher value-added jobs (Panchak pp). However, the "growing numbers of citizens willing to risk dying in the desert for a series of low-paying, back-breaking day jobs is a constant and visible reminder that free trade has hardly made a dent in Mexico's cycle of poverty" (Panchak pp). And in the U.S., the era of freer trade has "coincided with a period in which inflation-adjusted wages have fallen for U.S. workers, and those high-technology jobs, once the information-technology bubble burst, have been coming too slowly to quell dissent" (Panchak pp).