NAFTA-Style Trade Deal Bad for Democracy

This weekend's Summit of the Americas aims to extend a NAFTA-style free trade area to
the entire Western Hemisphere. As Secretary of State Colin Powell recently put it, ''We
will be able to sell American goods, technology, and services without obstacles or
restrictions from the Arctic to Cape Horn.''

And foreign businesses will likewise be able to sell goods and services in the United States
''without obstacles or restrictions.'' But one person's restrictions are another person's vital social
safeguards.

Here is a short list of ''obstacles and restrictions'' that constrain American corporations - and
represent a century of struggle to make America a more decent society:

  • We allow workers to organize unions.
  • We limit the pollutants that corporations can dump into the environment.
  • We have regulations protecting employees from unsafe working conditions.
  • We assure consumers safe food, and drugs, and drinking water, and other products.
  • We require business to partly underwrite social insurance, such as Social Security, Medicare,
    and unemployment compensation.

Each of these protections was initially opposed by organized business in the United States.
And international business works hard to prevent such safeguards from being enacted in Third
World countries.

NAFTA has indeed opened commercial trade flows between Mexico, Canada, and the United
States. But it has also functioned as a convenient battering ram for business to resist social
regulation.

The Ethyl Corp. used NAFTA to pressure Canada to end a ban on a toxic gasoline additive,
MMT, which is not banned in the United States. Metalclad Corp., also based in the United
States, filed suit in a Mexican state court demanding to be permitted to open a toxic waste
dump. The suit held that even Mexico's still rudimentary environmental protections violated
property rights under NAFTA.

NAFTA pays lip service to labor and environmental protections, but the weak laws on
Mexican lawbooks are honored more in the breech. As a result, American companies that shift
production to Mexico outrun hard-won labor and environmental protections in the United
States.

Business, in other words, is keen to harmonize property rights, but not labor, environmental, or
consumer rights. And if NAFTA becomes a hemisphere-wide arrangement, the social balance
tilts even more dramatically to business, at the expense of both sovereignty and social
regulation.

Brazil, for example, takes a very different view of pharmaceutical patent protections than the
United States.

Brazil treats life-saving drugs as social goods. American pharmaceutical companies, not
surprisingly, treat Brazilian policy as patent infringement.

It is the defiance of the big global drug companies by Brazil (and by India) that has sharply
brought down the cost of AIDS drugs in the Third World. But if NAFTA is extended, Brazil
and its independent drug companies could be more easily sued by American rivals who have a
very different set of public health priorities.

Beneath the proposed Free Trade Area of the Americas and kindred arrangements lurks an
intriguing new ideology. This ideology holds that corporations are really agents of the spread of
democracy.

I recently participated in a debate at Columbia University sponsored by the Reuters
Foundation, on the health of democracy. One debater was Nancy Boswell, the managing
director of a worldwide organization called Transparency International.

This well-intentioned group, funded by businesses, banks, and foundations, has branches in
some 80 countries. It sees itself as fighting corruption in Third World countries and thereby
alleviating poverty, by pressing for US-style corporate accounting, enforceable strictures
against bribery, and the openness to investment characteristic of the United States.

In this view, nothing promotes democracy as much as the spread of free-market capitalism. It's
an audacious claim, and it may even be half-true. In Mexico, NAFTA probably hastened the
downfall of the single-party regime. But in South Korea, a reformist government had to abandon
half of its social program to reassure foreign investors.

Historically, democracy has been spread mostly by social movements, not by corporations.
The free-market ''transparency'' promoted by business actually promotes a narrow brand of
democracy that is a sanitized version of American capitalism, circa 1890 - full rights for
investors and for corporations, at the expense of laws that protect labor, the environment, and
consumers.

Today, some business leaders are cautious reformers and business is beginning, grudgingly, to
accept some minimal social standards as part of free trade agreements, but only because of
strenuous citizen and labor organizing. However, this social rebalancing works much more
effectively within one country, where voters and social movements can be direct
counterweights to corporations by recourse to democratic politics.

There are no citizens of the republic of NAFTA. That's why these trade deals threaten
democracy, even as they claim to spread it.

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