Life After Nafta

Politicians, mediacrats, environmentalists, social engineers, big corporations, big banks, and global democrats – the entire establishment – won the Nafta fight. Yet they did so only over the objections of Old Liberals and a resurgent Old Right, not to mention an increasingly anti-government public.

Despite the inclusion of "free trade" in the agreement's name, Nafta had nothing to do with liberty. It was about malting North America safe for Greenpeace, Archer-Daniels-Midland, Citibank, and social democracy. As a result, the continent is now a more dangerous place for taxpayers, small business, and American particularism.

With the end of the Cold War, everyone wanted to know how the world's political alliances would reshape themselves. Nafta's passage has answered that question. The Cold War model of warring cartels of nation-states has been transferred to international trade. And while this may make sense for special interests, it does not bode well for the future of freedom and prosperity.

With Nafta, the world is being reorganized into four trading blocs: Asia, dominated by the Japanese; Europe, dominated by the Germans; North America, dominated by the U.S. establishment; and the former Soviet Union and advanced third world countries, dominated by the Russians. This was laid out by Jagdish Bhagwati, a trade expert at Columbia University, who noted how far the new arrangements are from the ideal of free trade.

For the classical liberals, that ideal began with freedom at home. It was the obligation of government to protect person and property, enforce contracts, defend the borders, and nothing else. That meant no restrictions on imports or exports. Businessmen and consumers could trade abroad as at home: without limits.

This is America's ideal as well. The Declaration of Independence charged George III with "cutting off our trade with all parts of the world." Thomas Jefferson believed in liberty at home and free trade abroad, as did his followers. As the aristocratic libertarian John Taylor of Caroline expressed it, "Give us a free and open competition in our market, and we fear not to encounter like competition in the general market of the world."

Compare this to Bill Clinton's "free trade": more taxes, more regulations, more mandates, and more controls at home, and a trade bloc abroad rammed through Congress using Tammany Hall vote-buying techniques. Nafta was "free trade" that Ted Kennedy and the Institute for Policy Studies could support – and did.

"Free trade" used to be included in the lexicon of liberty. Clinton having coopted the term, but not the reality, the idea of free trade is now linked with mixed economies, environmentalism, heavy-handed labor laws, and the increasingly nebulous idea of "democracy."

After Nafta, National Wildlife Federation president Jay Hair exulted that "all future international trade agreements" would have to "address environ- mental concerns."

This is the corruption, not the fulfillment, of the Old Liberal ideal. Instead of the world of free individuals and sovereign countries that many of us hoped would emerge after the Cold War, we have strutting politicians throwing taxpayer's money at foreign governments that do their bidding, and imposing sanctions on those that do not. We have special interests who put politics before profits in determining the rules of commerce. And we have social engineers demanding that all trade be conditioned on erasing sexual and racial income disparities.

The "embryonic Nafta government," as the Washington Post calls our new system, will help bring all this about. Its side deals, which expanded on the core of the treaty itself, not only do not fit with free trade, they may eventually devour it. Its rules of origin create a New World Order trade bloc. Only the over-taxed and over-regulated citizens of each country suffer.

The free-market arguments against Nafta were not lost on some in Washington. Senator Ted Stevens (R.-Ak.) pleaded with the Senate to separate the side accords from the agreement itself so that they could be voted on separately. He feared that the accords – entrenching costly environmental and labor regulations – would prevent Alaska from attracting investment. But his amendment was defeated.

Senator Bob Smith (R.- N.H.) spoke about the red tape faced by small businesses in New Hampshire. "When I think of free trade," he told the Senate, "I do not think of the 1,200 pages of complex rules, regulations, and specifications on who can trade what, when, how, and how much"- as embodied in Nafta. All this and the "invasion of the sovereignty of the United States make this Nafta a bureaucratic nightmare. This Nafta – and especially its side agreements"-- "impede free trade."

Not a week goes by, said Senator Smith, when he doesn't get a call from an entrepreneur being wrecked by environmental regulation, or going out of business thanks to the artificially increased cost of labor. "Now we have a trade agreement that says – in essence – things will only get worse. Efforts to roll back ... government regulation will be met head on by side agreements designed by advocates of big government."

Nafta "represents an attack on our national sovereignty that must be repelled. I cannot in good conscience lend my support to an agreement that violates the spirit of the Constitution" and "the United States' right to maintain our own standards."

Congressmen Terry Everett (R.-Ala.), John Doolittle (R.- Cal.) and others on the House side joined Senators Stevens and Smith in voting no, despite the hysterical opposition of every establishment mouthpiece in the country. But the free-market opponents of Nafta saw exactly where this new world of warring trade blocs is taking us, and it's not closer to peace and prosperity.

The present task of a true free trader, and an Old Liberal, is somehow to rescue the ideal of liberalized trade from its perverters. We need to reassert the freedom of people to trade regardless of residence, while opposing agreements like Nafta that restrict that freedom through rules of origin, red tape, and bureaucracy. Moreover, we need to regain an appreciation of trade apart from loan guarantees, subsidies, and the entire panoply of interventionism.

In the 1950s, free-trade economist Wilhelm Roepke did just that. A Misesian, he was the intellectual godfather of the German economic miracle. The European elite – academics, government officials, and large corporations – had embarked on the Common Market, Nafta's intellectual godfather. Roepke thought it would lead first to a trade bloc and then to supranational government, as indeed it has (see Tucker, p. 7). Roepke was a member of the Mt. Pelerin Society, a club of classical liberals, but he resigned in protest when the Society endorsed the Common Market.

Like the European Community, Nafta is good for international politicians, since it puts them more in charge. It is good for international development banks, always looking for new territories to conquer. And it is good for the big companies that will be privileged through Nafta, and for the big banks that will be bailed out of their Mexican debts. But Nafta is not good for small business and consumers, the very groups for whom free trade was once such a benefit. As the bad effects of Nafta become obvious in the years ahead, we must not forget those who opposed it, and those who supported it.