PCDForum Column #61,  Release Date September 30, 1993

by David Morris

Both supporters and opponents of free trade pacts agree on one thing: the
world economic system is broken and needs fixing. The question is not whether we
need new rules to govern the global flow of commerce and resources. Rather, the
questions are, what should these rules be and what ends should they strive to

Unfortunately, the North American Free Trade Agreement (NAFTA) and the
current round of negotiations under the General Agreement on Trade and Tariffs
(GATT) are based on the simple premise that allowing ever greater quantities of
material goods, services, and capital to move more freely among countries
without governmental control will provide universal benefits. Critics challenge
this assumption as simplistic, noting for example that during the 1980s trade
soared between the United States, Canada, and Mexico, while living standards in
all three countries declined.

Critics also note how carefully Europeans have crafted a comprehensive
framework for their economic union. For example, their framework provides for
political as well as economic integration, recognizing that a continental free
trade zone without a continental government would greatly weaken democratic
governance by leaving market forces unrestrained and unaccountable to the public
interest. NAFTA and GATT both ignore the inherent inseparability of politics and

The European framework further seeks to harmonize environmental, social, and
labor standards upward, with richer countries working to boost productivity and
income levels of their poorer neighbors. Poor countries have the responsibility
to restructure their economies so that a large proportion of the benefits of
higher productivity go to the workers. The related European provisions are not
found in either GATT or NAFTA, including requirements that:

  • No country can become a member of the European union unless it is a working
  • No country can become a member if its per capita income levels are too far
    below the European average.
  • Richer member countries must provide financial assistance to poorer member
  • Countries cannot gain a competitive advantage on the basis of low wages,
    poor working conditions and weak environmental standards.
  • As national authority over commerce diminishes as a consequence of
    integration, the authority of an elected European parliament increases.
  • When regulations enacted by state and national governments are challenged
    by corporations or other governments as unfair restraints of trade, the burden
    of proof is on the challenger.

While the European Union has been crafted out of active public debate, NAFTA
and GATT have been drafted in secret. Since the major public input has come from
representatives of transnational corporations it is not surprising that these
agreements envision integrated economies dominated by mega-corporations freed
from accountability to democratically elected governments, large-scale,
absentee-owned production units, and long-distance distribution of goods and
services. They further provide a framework for downward harmonization of
environmental and social standards including wages.

Meanwhile citizen groups around the world are constructing a vision of a
very different human future. They envision an environmentally sustainable
economy characterized by shorter lines of distribution and locally owned and
humanly scaled production units, where the authority and responsibility for
decisions are shifted toward the people most affected by these decisions: local
managers, workers, and communities. This citizen vision is best advanced by fair
trade agreements based on the following principles:

  • The mechanisms for setting and modifying the rules of trade will be
    democratic and bring decision making down to the level of the people, even if
    their decisions inhibit flows of trade and capital.
  • Local value added activities will be encouraged, as will local economic
    self-reliance based on locally owned businesses, banks, and investments.
  • Communities will be allowed to place limits on foreign or external
    corporate ownership of local assets.
  • Minimum environmental, labor and political standards will set a floor for
    the whole, while giving scope and encouragement to individual nations and
    localities to impose higher standards on both imports and internally generated
    goods and services.
  • A transfer of resources from richer to poorer nations will occur with the
    objective of promoting full employment and environmentally benign development
    and the widest possible ownership of productive capacity.

Every one of these principles is violated by the NAFTA and GATT agreements
now being proposed. Fortunately, the current debates about free trade offer an
extraordinary opportunity to consider what we want from our economic and
political future and to become active in crafting the rules governing our
relationships accordingly.

David Morris is vice president of the Institute for Local Self-Reliance,
1313 5th St. SE, Suite 306 Minneapolis, Minn. 55414, U.S.A., Fax (612) 379-3920;
e-mail: ilsr@igc.org. This column was prepared and distributed by the PCDForum
based on his article "How About a Fair Trade Agreement," Utne
July-August 1993.

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