NAFTA sits in judgment under the Trump Administration, which scuttled the TPP agreement negotiated by the Obama Administration. In advance of a May Day filled with protests pushing for stronger Labor Rights and Immigration Rights around the world, where free trade continues to spread with initiatives like TPP and CEPA, President Donald Trump signed an Executive Order that seeks to determine whether free trade agreements have benefited the US. The simple answer will be “yes,” because the national, aggravate benefits of free trade policies are easier to calculate than the localized and long-term costs of failing to embrace alternative policies.
The more relevant question is, therefore, who has benefited from free trade agreements in what ways and who has been harmed. In reshaping US trade policy, the next question is how can the benefits of free trade policies be achieved without the costs of tariff-free trade. Although the Trump Administration faces steep opposition from immigration advocates due to his aggressive policies and rhetoric against immigrants, particularly illegal immigrants and migrants from Muslim countries, his anti-free trade views align with both the views of Labor Rights advocates and Immigration advocates who believe tariff-free trade disempowers the world’s population.
Trade offers many benefit to wealthy and poor nations alike, but free trade policies, especially tariff-free trade agreements, can deleverage the Peoples and governments of the world. NAFTA, for example, helped create the economic conditions that accelerated the need for illegal immigration from Mexico to the US while freeing US companies to exploit cheap labor in Mexico, thus undermining wages and business, opportunities in the US. Tariff-free trade may offer some added benefits to consumers when compared to trade expanded via the removal of technical barriers, but the biggest beneficiaries are transinternational corporations and their investors, who are either affluent or part of the small Global Middle Class.
It is the fear of this writer that policymakers and economic researchers cannot foresee an economy capable of supporting a decent Middle Class lifestyle for the bulk of the human population. In other words, they are settling for an economy that will enrich a handful of individuals in each country, thus engineering a sustainable economy for the few that will be composed of the superrich and a global Middle Class. While there are those who have little interest in the needs of the masses, there are many affluent who want to create a broader economy, but they lack the insight to see a means to ensure economic prosperity beyond free trade-fueled growth.
It is, therefore, pivotal for the middle and poor classes to take control of their economic destiny. This starts with a clearer understanding of how the economy needs to work. Tariff-free trade-accelerated globalization has undercut domestic production across the globe in favor of cheaper outsourcing. National economies must be built on industries that serve the local needs of a people with locally plentiful resources that are as local as possible with excess production being used to participate in the global economy. Globalization since the Clinton-era has, however, meant economies should be built to service global demand with each country offering a selection of specialized goods.
Because this model creates a fragile global market built on global pricing of overly relied upon goods, it creates a lowest-bidder competition that artificially suppresses prices to unsustainable levels. If a country has an established, efficient industry, which does not cater to vital national interests, that can deliver an equivalent and/or superior product and there is a weak or nonexistent domestic industry, tariff-free trade can be beneficial as it can be used to remove trade barriers to established industries in exchange for the same benefit. Absent this scenario, tariff-free trade is an industry killer, because it disadvantages the already mature, often more expensive.
With that in mind, economies are the engines of communities and they run most efficiently when their numerous parts are free of destructive interference. Only when the capitalist mechanisms of an economy are allowed to function properly and play their proper role can an economy provide for the various interests of the People it serves. When consumers are able to buy products and services, businesses are able to stay open and pay their employees. This is only possible, because wealth is able to circulate throughout the economy at a continuous and sufficient rate to maintain consumer spending.
Economic growth is one means of ensuring wealth circulates throughout the economy, yet economic growth does not necessarily guarantee enough wealth will circulate to all corners of the economy. Because the US economy is two-thirds consumer spending, payroll is the principle way in which wealth is distributed and circulated. Consequently, widespread employment, high worker productivity, and healthy wages create a strong, healthy national economy. As such, there is a need to empower workers and free the labor markets of destructive interference. Unfortunately, proponents of “free market” policies often speak of free enterprise then use government to undermine the collective bargaining rights of workers.
A lack of collective bargaining helps drive overall payroll costs down, which means lower pay, lower standards of living, smaller tax bases, and less consumer spending over time. In turn, less wealth is circulated. When employees can work together in some fashion to help ensure their interests as employees are met, they improve their outlook and the outlook of the economy. For executives and other individuals with highly coveted backgrounds, this issue is of little concern as they have enough leverage to negotiate as individuals. When it comes to those individuals with little leverage in their industry and workplace, collective bargaining puts them on a more equal footing with their employers, who can otherwise undermine worker demands by simply replacing them.
For businesses, the major downside to the waning influence of unions is a lack of competitiveness between employers over the best employees, which can result in lower workplace productivity and increased employee discontent. With or without unions, issues like this can only be addressed with better employer-employee relations. Relationships between employers and unions have often been quite hostile due, in part, to the fact this free enterprise solution to unhealthy, abusive business practices was born in an era of violent corporate reprisals. As such, the solution is not to undermine collective bargaining, but rather, to improve communication between managers and union workers for the betterment of business.
Unfortunately, today’s unions are businesses and their leaders are too often more concerned about their own paychecks and power than the interests of their members. Unions have also become far too involved in politics, i.e. selecting political leaders instead of ensuring worker rights. Unions have also failed to globalize alongside the globalizing economy. As the economies of the world merge into one giant global economy, effective representation is needed around the world, yet the unions of developed countries have turned inward. Too many have been willing to sacrifice the pay, benefits, and work conditions of nonunion members to further enrich their shrinking membership base, i.e. unions are helping to create the elitist Middle Class and deleverage nonunion workers inside and outside of their own nations.
Increased trade can open new opportunities for business to sell their goods and services. In turn, it can offers consumers greater access to those wares, including less expensive versions of domestically produced goods, which may or may not share the same quality and durability, i.e. the benefit of cheap is negated. For investors, it provides cheaper access to global investment opportunities. Above all, it provides businesses the opportunity to operate in whatever environment is most advantageous to their needs. On the flip side, the benefits of free trade are derived from circumventing costs associated with taxes, regulation, and payroll. When these costs are suppressed too much, the economies of the world can no longer function.
In other words, free trade helps neutralize the economic sovereignty (power) of nations and rewards economies offering the lowest cost environment instead of a sustainable, properly regulated business environment where the interests of workers/consumer are met. Certainly, there will be those who argue businesses and countries have a greater choice under free trade, but the economy is ruled by market forces driven by costs. Free trade spreads, because the immediate economic benefits are often more obvious than the broader, long-term costs. In the long run, this means labor of richer countries is becoming too expensive to compete in the global economy and the labor of poorer countries must remain cheap to be competitive, thus free trade impoverishes and disempowers the Peoples of the world.
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