Tuesday, October 09, 2007

Typical Skin-deep Analysis of Free Trade from WSJ

"WASHINGTON -- By a nearly two-to-one margin, Republican voters believe free trade is bad for the U.S. economy, a shift in opinion that mirrors Democratic views and suggests trade deals could face high hurdles under a new president." (WSJ - 10/4/07)

Thus begins reporter John Harwood's analysis of the shift in opinion of Republican voters going into next years presidential election. The poll cited clearly shows that Republican voters are now largely in agreement with Democratic voters that free trade agreements are bad for the U.S. Of course, this puts most of the Republican presidential candidates in the uncomfortable situation of either changing or defending their positions - and past congressional votes - in light of of this change in the political landscape. Furthermore they will need to balance this stance with a contrary pro-business stance likely to be demanded by many Republican party 'benefactors'. To be fair, a few of the Democratic candidates have Clinton-era pro free trade agreement histories to defend, but overall Democratic rhetoric has been against these agreements for many years now.

The article goes on to explain that this change could be attributed to reasons of security, the recent spate of recalls of imported products and possibly even the steady loss of good paying manufacturing jobs over the last ten years. Nah, that couldn't be it.

So, typically, the article paints the argument against free trade agreements in a good or bad context, without questioning how the agreements are written. Both NAFTA and CAFTA are written from a business point of view. The only micro-economic sectors that they regulate are producers and consumers, buyers and sellers, importers-exporters. To look at these agreements you'd think that the other micro sectors of labor - human capital, physical capital - plants and the environment in which they operate and government regulation, don't even exist.

The reason these agreements are bad isn't because free trade is bad per se, it's because they aren't comprehensive. They allow U.S. firms to more easily produce in foreign (i.e.: non-EPA, non-OSHA, non-minimum wage) economies. Robert Reich, labor secretary under Clinton, has put forth the idea that these agreements should also specify 'living wage' guarantees. For example, that any nations party to the agreement must maintain a minimum wage equal to 25% of that nation's median income. Yes, labor would still be cheaper there than here, but at least not as cheap and there would be better distribution of income that would help create healthy middle classes everywhere which in turn would become more markets where the producers could sell more of their goods - everyone wins. Furthermore, why not also specify stipulations related to workplace safety, child labor and environmental protections like manufacturers in the U.S. must already obey.

To summarize, what the article fails to point out is that these agreements are crafted by corporations for the benefit of their own bottom lines thereby to boost the price of their stocks, largely by escaping almost all types of regulatory controls. NAFTA and CAFTA weren't written for the benefit of all in the signee nations. Indeed, in a net-net analysis, what they really do is lower overall average wages of the combined labor forces of the signee nations and worsen the distribution of income.

Yes, I know, what do I expect from the Wall Street Journal. The problem is this type of analysis is the norm from most of the main stream media, not just 'pro-business' press such as the WSJ.

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