Monday, August 31, 2015

The facade of free trade with a military super power

There has been a lot of discussion about free trade in the news including TPP, TTIP, TISA and about 40 other agreements waiting in the wings. Now that Trade Promotion Authority has been set for President Obama, Congress will have a chance to vote on them up or down once they are presented. All of those agreements are being presented as "free trade" agreements.

CNN has a nice little chart showing the world's largest economies, with the US at $18 trillion and China at a distant second with $11 trillion. According to Wikipedia, there are 14 current free trade agreements in effect with the US. Clearly, there are many benefits to free trade. But is it really free trade?

The assumption we are asked to believe is that the US has built up the world's largest economy with free trade, but nothing could be further from the truth. For example, in my previous post, "The facade of the free market in global labor", I detailed the false assumption that when we trade with other countries, we are competing on a level playing field in the world labor market. There is no way American workers can compete with foreign labor where the government of our trading partner steps in to keep wages low for businesses. Yet, when we buy clothes, we are being asked to assume that the workers that created the clothes negotiated their wages in a free market.

There is another aspect I'd like to bring to the debate on free trade: the implied use of military force. The United States has been involved in one war after another for 214 years of its 239 years. To put this in perspective, 90% of the existence of the US has been supported by war.

The US has a current military budget of $600 billion, roughly 3 times greater than the next big spender, China and more than the next 7 countries combined, including China. The US has been the biggest spender on military force and preparedness for much of its modern life.

So when the US approaches another country for a trade agreement, is there a balance of power? Most definitely not. Consider the prospect of a third world country with a valuable resource like oil or uranium. Deal or no deal? No deal? Say hello to our jets, ships, tanks and boots. Deal? Please do your best to suppress wages so that our strong dollar can support your regime. Get the picture?

The current balance of power suggests that there is no way for any country to negotiate a mutually beneficial agreement with the United States. There are several sticking points with the agreements currently in negotiations that put our negotiating power perspective. Pharmaceutical companies are seeking to leverage US military power to ensure that their patent monopolies are protected. Seed companies like Monsanto, DuPont and Bayer are seeking to use American military force to protect their patent monopolies, by inserting provisions that allow GMO foods to be sold without labeling. Big Content, including companies like NBC/Universal, 20th Century Fox and Viacom, are seeking to protect their copyright monopolies through trade agreements by leveraging the implied use of military force.

Note the use of the language in the previous paragraph. In every example I included "military force". But when we read the news about free trade agreements, the use of force is never expressed or implied. Major media would prefer that most of us assume that the agreements were negotiated with a balance of power when they were not.

To be fair, the chances of war with any of the G20 countries is slim to remote. But the chance of indirect war say, with a third world trading partner of any of the G20 countries, is real. Everyone knows that the threat is real. Whether or not the threat can be carried out without worldwide political repercussions depends on who we're dealing with.

With such an overwhelming imbalance of power, it is impossible to say that any trade agreement with the United States was negotiated fairly and freely. Clearly, the US is relying more on military force than American innovation to compete with the world, and that is unsustainable.
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