Franklin W. Knight

A few years ago the United States of America was energetically bullying the countries of the Americas into a hemispheric free trade agreement. In the 1980s they signed a fairly successful bilateral agreement with Canada. In 1994 the North American Free Trade Agreement linked Mexico, the United States and Canada in an optimistic commercial zone whose after-effects are still being widely and heatedly discussed. Free trade, an important dimension of globalisation, was the major topic of conversation throughout the hemisphere. Both free trade and globalisation have lost their lustre.

Hemispheric free trade was supposed to provide a major impetus to the continued economic superordinacy of the United States of America as well as the countries of Western Europe. In the last 10 years, however, the major economic growth engines have been in China and India. With large populations and a penchant for adapting new technology, both countries have positioned themselves to dominate world trade for a very long time. Free trade is simply ideal for them.

Not everyone, however, was rushing headlong into that nirvana of free trade with the unbridled enthusiasm of the United States. Brazil has always held serious reservations about the hegemony of the United States within any free trade area of the Americas. As a major player on the world economic stage, Brazil ranks among the top 11 world economies with pronounced strengths in industry, mining, banking, agriculture and services. It has been consistently critical of the built-in protections for some North American producers and the severe challenges to national sovereignty involved in some proposed free-market undertakings. Brazilians also feel that trade reciprocity should reflect national equality.

Other dissenting voices were also heard. Caribbean concerns for the sustainability of small economies helped sink the Cancun round of hemispheric talks in 2003.
Some cautious observers doubted that given the past history of capitalism, rising globalisation and free trade would bring unbridled benefits to workers as well as capitalists. Indeed, one phenomenon of international globalisation of production and trade is that while individual firms have rolled up increasingly greater profits, real wages and domestic spending have probably fallen in some of the largest economies such as Great Britain, Germany and Spain. As The Economist pointed out recently, "The health of companies and the wealth of economies no longer go together." In other words, there is no noticeable trickle-down effect of company wealth among the rank and file.

If the major selling point of free trade was that it would create rich companies whose profits would spread among their workers and shareholders this simply has not happened so far. Nor is it likely to happen in the foreseeable future. Big international firms like the major oil companies have simply de-linked themselves from national origins and subsumed their loyalties to flexibility and profitability rather than workers or localities.

Free trade in the Americas is unlikely to generate new wealth for two simple reasons. The first is corporate greed. The second is global reality.

In poor countries like Jamaica, or even some wealthier ones like Argentina, Brazil and Mexico, workers do not own shares in their companies. If not enough of the exploited or abandoned workers of nomadic companies are shareholders they are unlikely to benefit from the rising economic tide that should lift all boats. Even in prosperous countries such as the United States, companies are reducing their support of health care for their workers and plundering or abandoning their pension plans. Profitability and corporate greed almost always take precedence over concern for the workers.

One inescapable consequence of globalisation is that companies have great mobility. No longer do workers move to companies. Companies move to the workers, constantly seeking the cheapest source of labour. The volume of simple products now made in China represents serious implications for manual workers throughout the Americas. Workers have relatively little power negotiating with firms that can simply outsource their production rapidly with manifest benefit to the corporate bottom line.

Outsourcing, of course, makes a mockery of national origins. Most Italian textiles and footwear are made in Romania. Most Japanese, German, and Korean cars sold in the United States are manufactured in the United States from components built in the United States. The great American car makers, General Motors and Ford, make more profits from their international divisions than from their national divisions - although that still leaves them in financial jeopardy. What impact the impending entry of Chinese-made motor cars will have on production is anyone's guess.

Now that free trade has generated such newly discovered universal problems of equity and fairness for the big participants, there is new re-thinking going on in several major trading countries in Europe and North America.
France, Spain and Portugal have challenged foreign ownership of some basic industries thereby questioning the fundamental principles of free markets and free trade.

The same is true in the United States. Last year the Congress blocked the Chinese government's purchase of Unocal a very small California-based oil company. This year the Congress raised a furore over the purchase of several American terminals by Dubai Ports World, one of the leading operators of ports worldwide. The objections were expressed in terms of national security.

National security, however, seems to be the deus ex machina for all unsavoury political decisions in the United States of America, a major debtor society whose economy is increasingly dependent on foreign investors and foreign commerce. International trade accounts for more than 16 per cent of its Gross Domestic Product. Much of the electronic software that drives America's war machine is non-local in origin, and according to one report a single Chinese firm makes about 80 per cent of the magnets used in America's "smart bombs". With such vulnerabilities, the development and articulation of international foreign policy requires more sophistication and less sophistry from the leaders of the United States. Rethinking free trade cannot be a sometimes affair.

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