Some conservatives and libertarians have hailed the North American Free Trade Agreement (NAFTA). That’s what can happen when you believe the government.
Far from being what U.S. Trade Representative Carla Hills calls “another splendid achievement” of the President’s “market-opening trade policy,” the treaty is a triumph only for government-managed trade and the special interests that benefit from it. Maybe that’s why the treaty’s 2,400 pages are available for viewing by the public only for a few hours a week, by appointment, in a room staffed with sullen secretaries who resent mere citizens interrupting their $40,000 a year gossip sessions.
Written by a cabal of lawyers from government, big business, big labor, and big green, the treaty is almost unintelligible for the non-specialist, perhaps intentionally. It specifies such items as:
“A change to Canadian tariff item 8517.90.a2, U.S. tariff item 8517.90.h2, Mexico tariff item 8517.90.x2 from any other tariff item, provided that with respect to printed circuit assemblies (PCAs) of Canadian tariff item 85117.90.al or 8473.30al, U.S. tariff item 8517.96.04 or 8473.70.hl, Mexican tariff item 8517.90.xl or 8473.30.xl: a) except as provided in subparagraphs b), for each multiple of nine PCAs, or any portion thereof, that is contained in the good, only one PCA may be a non-originating PCA, and if the good contains less than the PCA, all of the PCA must be originating PCAs.”
This is free trade? Nine hundred pages of tariff schedules cover everything from “concrete pumps for liquids, not filled with a measuring device from 36 up to 60 m3/hr capacity” to “twill weave polyester staple fiber fabric U% synthetic staple fiber, with cotton, 170g/m2, printed.”
The few real benefits from the treaty take 15 years to go into effect, while the costs kick in immediately, such as protectionist rules of origin. High tariffs will be levied on all cars that are not at least 62.5% North American made. This provision is designed to bar the European and Asian cars we want while allowing us to buy what we don’t want, Mexican cars.
Under real free trade, a legal right to do business is not a privilege. Nothing in the treaty is more revealing than Hills’s admission that these and other “rules of origin ensure that only North American-made products obtain the benefits of free trade.”
It’s easy for the government to agree to do wonderful things, like lower tariffs, fifteen years that a trade agreement negotiated by Jimmy Carter would be taken seriously today? We can only guess at what kind of government the U.S., Canada, or Mexico will have in the year 2008.
The possible change in regimes is not the only factor. There is also the simple passage of time. Time means economic development, new technologies, tastes, and resources. The free market easily adjusts to these changes with the price system. In assuming that government officials can know the economic and technological future, the treaty is no less silly than the old Soviet five-year plans.
Here’s what’s real, and extremely beneficial, free trade means: companies can export and import without government hindrance, and consumers can buy the foreign made goods they want. Consumers under free trade would, for example, be able to drive to Mexico or Canada, fill their cars with goods, and cross the U.S. border with only a wave from the guards. Try that today, and you land in jail. Try it under NAFTA, and you still land in jail.
The American shopping malls on the U.S.-Canada border have piles of old clothes in their parking lots. Why? Because that’s the only way Canadians can drive back across the border with new American clothes without being arrested. NAFTA does not change that either.
All of NAFTA, in fact, does a North American hat dance on the graves of Adam Smith, David Ricardo, Henry George, and Ludwig von Mises – the great champions of free trade.
These economists argued that international trade should be no different from domestic trade; the same logic applies to everyone, whether across borders or across town; foreign competition is no more “dangerous” to America than domestic competition; and competition, whatever its source, is good for the consuming public.
Smith, Ricardo, George, and Mises also taught the Law of Comparative Advantage: a nation need not be the absolute best at making a product to come out ahead. We might be able to make all the cars we need, and yet benefit from having Japan and Germany make some.
Most important, free trade, like other aspects of the free market in general, requires no government management. There is no need for “free- trade” legislation between Amoco and my car. Texas and Arizona need no agreements for their businesses to trade. Consumers in Virginia can buy whatever they want from California, and supermarkets in Alabama can sell Nebraska beef.
Mrs. Hills also trumpets that NAFTA will impose our draconian environmental laws on Mexico. That goal, she says, has been “front and center.”
U.S. business must now sacrifice billions to the earth goddess Gaia. Why make the poor Mexicans do the same? Hills also says that the treaty is based on “sustainable development.” As our student Matthew Hoffman has shown in these pages, “sustainable development” means UN, designed lower standards of living for the West. (For more on the green aspects of the treaty, see Jim Sheehan’s article on p. 8.)
Let’s say Carla Hills is serious when she says that her vision of the future is of people moving “from the shadow of government control into the light of liberty.” She and our other leaders would forget about managed trade agreements and cut taxes, spending, and regulation. When they do that, they deserve to be taken seriously, unlike when they pro, claim global wheeler-dealing as free trade.
As part of the New World Order, NAFTA creates a supra, national bureaucracy to manage North American trade. That alone tells us it’s not free trade. In fact, given its real nature, I suggest that from now on we call the treaty SHAFTA.
