Business Week weighs in against globalization

Chris Kromm ckromm at
Fri May 4 20:26:35 PDT 2001

MAY 2, 2001 Business Week


Free Trade? Someone Always Has to Pay

>From Seattle's riots to the Quebec protests, not even the thickest cloud of
tear gas can obscure the truth that globalism hurts workers

To hear the punditry tell it, the protesters who turned out in Quebec a few weeks ago and, more recently, at the International Monetary Fund meeting in Washington on Apr. 28-29, are largely irrelevant to the debate over free trade. A serious force for change? Not this ragtag bunch. Among the experts, the protesters were seen as either unrealistic "flat earthers" (according to The New York Times's Thomas Friedman) or, at best, sadly misguided (those toward the left end of this narrow spectrum of opinion take the opportunity to trot out memories of their own ancient activism in the '60s).

And you can feel the contempt of most national leaders. "It's very easy to protest when you have a job, when you have food on the table, like those protesters have," said Mexican President Vicente Fox at the Quebec summit. Almost makes you wonder why the working poor in the maquiladoras didn't book a flight to Canada for the weekend.

TV reporters, meanwhile, now know what motivates the globophobic crowd -- they come to smash things and party. This, if true, really ought to set off alarm bells, because it means America has raised a generation of masochists who view getting beaten and tear-gassed as just what they need to spice up their revels.

WRONG ISSUES. Young people get a pretty rough deal from these aged experts. Not long ago, the same pundits were wringing their hands over the perceived apathy of a generation of slackers (cue, again, the '60s flashbacks). Now that a significant segment of modern youth is again demonstrating passionate concern about something -- well, the problem is they just keep picking the wrong issues. Protesting against human-rights abuses, job loss, environmental depredation, giving corporations the ability to rewrite laws? Those crazy kids will never learn.

Much has been made of the so-called "democracy clause" in the latest Hemispheric Free Trade Zone proposal circulated in Quebec. But you have to wonder: If the document is, in fact, the celebration of freedom and democracy that the signatories claim, why did they feel the need to take such stringent and undemocratic steps as building a giant fence to keep protestors away from the event? Yes, I remember the violence at the World Trade Organization meeting in Seattle. But what about keeping the trade document hidden from the public and most elected lawmakers (while making it available to 500 business leaders) until the very last minute?

It isn't democratic, but it is strategic. Truth is, once people find out what's in these trade pacts, they tend not to like them very much. Clinton tried to do the same thing with the global Multilateral Agreement on Investment (MAI), keeping it secret even from Congress. When a copy of that agreement leaked onto the Internet, Clinton, with the lovable roguishness that has endeared him to liberals across the country, pointed to the surreptitious posting as proof the document was available for public scrutiny.

BACKLASH. The MAI went down in flames, and the same fate may await the FTAA. There's a backlash that has been building ever since the passage of the North American Free Trade Agreement, because "free trade" can carry a high price for a lot of people. According to a report from economist Robert Scott of the labor-backed Economic Policy Institute, NAFTA has eliminated some 766,000 job opportunities in the U.S. -- primarily for manufacturing workers without college educations. Contrary to what the American promoters of NAFTA promised U.S. workers, the agreement didn't result in an increased trade surplus with Mexico. Quite the reverse.

"As manufacturing jobs disappeared, some workers were downscaled to lower-paying, less-secure services jobs," Scott writes. "Within manufacturing, the threat of employers to move production to Mexico proved a powerful weapon for undercutting workers' bargaining power." (

But that's just the bitter pill American workers will have to swallow to help Mexico's poor, right? (Amazing how open to socialist arguments industry leaders are, as long as it isn't their income being redistributed.) Well, according to the EPI study, Mexican wages have decreased 27% since NAFTA, while hourly income from labor is down 40%.

FUEL FOR THE FIRE. And it isn't only factory workers who feel the impact. Corporations now have the legal means to try to rewrite troublesome laws. To take just one example, under NAFTA's Chapter 11 rules, Ethyl Corp. sued Canada for its ban on toxic gasoline additive MMT, claiming the ban expropriated its business by denying the company the profits it expected to earn from sales in the country. Ethyl won, forcing Canada to pay the company $13 million and lift the environmental regulation. It's cases such as this that make people suspicious of free trade.

According to true believers, we should all eventually gain from the "creative destruction" inherent in free trade. Exporting production allows for cheaper manufacture of goods, while jobs are created in new labor markets. People in consuming countries get goods at lower prices because they are produced more efficiently. Wages in developing nations rise. Eventually, everybody wins. And, as the Clinton Administration assured us before the passage of NAFTA, free trade creates jobs in the U.S. -- 200,000 per year, they claimed. So there might be some temporary dislocations in the workforce, but, in the words of the old saw, you can't make an omelet without breaking eggs.

As George Orwell pointed out when confronted with this argument, you should immediately ask to see the omelet. The Mexican people don't seem to be getting much of a bite, since in addition to falling wages, the number of people living in "severe poverty" (surviving on less than $2 a day) has grown by 4 million since NAFTA began, according to a January, 2001, report by Sarah Anderson of the Institute for Policy Studies.

POINTLESS SURVEYS. In the U.S., we can at least see egg on the face of the U.S. Commerce Dept. Several years ago, it canceled its biannual surveys of American companies intended to document NAFTA-related job creation because the results were so piddling -- fewer than 1,500 jobs could be attributed to the treaty.

But for the signatories, the prospect of this hemisphere of liberty is just too grand to resist. According to Argentina President Fernando de la Rua, "The next summit...will not require walls to keep out those who come to protest. But there will be space for those who have come to applaud when we work for the benefit and progress of all people."

Perhaps they'll take a travel tip from the WTO, which is holding its next meeting in the emirate of Qatar, which, coincidentally, has no troublesome rules protecting freedom of assembly. They won't even have to build a big fence.

Kite is an editor at BusinessWeek Online Edited by Douglas Harbrecht

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