The NAFTA Myth

Editor’s Note: The North American Free Trade Agreement (NAFTA) was approved by Congress 20 years ago this month. Rothbard’s essay on NAFTA, reprinted below, is available in the collection Making Economic Sense.

For some people, it seems, all you have to do to convince them of the free enterprise nature of something is to label it “market,” and so we have the spawning of such grotesque creatures as “market socialists” or “market liberals.” The word “freedom,” of course, is also a grabber, and so another way to gain adherents in an age that exalts rhetoric over substance is simply to call yourself or your proposal “free market” or “free trade.” Labels are often enough to nab the suckers.

And so, among champions of free trade, the label “North American Free Trade Agreement” (Nafta) is supposed to command unquestioning assent. “But how can you be against free trade?” It’s very easy. The folks who have brought us Nafta and presume to call it “free trade” are the same people who call government spending “investment,” taxes “contributions,” and raising taxes “deficit reduction.” Let us not forget that the Communists, too, used to call their system “freedom.”

In the first place, genuine free trade doesn’t require a treaty (or its deformed cousin, a “trade agreement”; Nafta is called a trade agreement so it can avoid the constitutional requirement of approval by two-thirds of the Senate). If the establishment truly wants free trade, all it has to do is to repeal our numerous tariffs, import quotas, anti-“dumping” laws, and other American-imposed restrictions on trade. No foreign policy or foreign maneuvering is needed.

If authentic free trade ever looms on the policy horizon, there’ll be one sure way to tell. The government/media/big-business complex will oppose it tooth and nail. We’ll see a string of op-eds “warning" about the imminent return of the 19th century. Media pundits and academics will raise all the old canards against the free market, that it’s exploitative and anarchic without government “coordination.” The establishment would react to instituting true free trade about as enthusiastically as it would to repealing the income tax.

In truth, the bipartisan establishment’s trumpeting of “free trade” since World War II fosters the opposite of genuine freedom of exchange. The establishment’s goals and tactics have been consistently those of free trade’s traditional enemy, “mercantilism” — the system imposed by the nation-states of 16th to 18th century Europe. President Bush’s infamous trip to Japan was only one instance: trade policy as a continuing system of maneuverings to try to force other countries to purchase more American exports.

Whereas genuine free traders look at free markets and trade, domestic or international, from the point of view of the consumer (that is, all of us), the mercantilist, of the 16th century or today, looks at trade from the point of view of the power elite, big business in league with the government. Genuine free traders consider exports a means of paying for imports, in the same way that goods in general are produced in order to be sold to consumers. But the mercantilists want to privilege the government-business elite at the expense of all consumers, be they domestic or foreign.

In negotiations with Japan, for example, be they conducted by Reagan or Bush or Clinton, the point is to force Japan to buy more American products, for which the American government will graciously if reluctantly permit the Japanese to sell their products to American consumers. Imports are the price government pays to get other nations to accept our exports.

Another crucial feature of post-World War II establishment trade policy in the name of “free trade” is to push heavy subsidies of exports. A favorite method of subsidy has been the much beloved system of foreign aid, which, under the cover of “reconstructing Europe,” “stopping Communism,” or “spreading democracy,” is a racket by which the American taxpayers are forced to subsidize American export firms and industries as well as foreign governments who go along with this system. Nafta represents a continuation of this system by enlisting the U.S. government and American taxpayers in this cause.

Yet Nafta is more than just a big business trade deal. It is part of a very long campaign to integrate and cartelize government in order to entrench the interventionist mixed economy. In Europe, the campaign culminated in the Maastricht Treaty, the attempt to impose a single currency and central bank on Europe and force its relatively free economies to rachet up their regulatory and welfare states.

In the United States, this has taken the form of transferring legislative and judicial authority away from the states and localities to the executive branch of the federal government. Nafta negotiations have pushed the envelope by centralizing government power continent-wide, thus further diminishing the ability of taxpayers to hinder the actions of their rulers.

Thus the siren-song of Nafta is the same seductive tune by which the socialistic Eurocrats have tried to get Europeans to surrender to the super-statism of the European Community: wouldn’t it be wonderful to have North America be one vast and mighty “free trade unit” like Europe? The reality is very different: socialistic intervention and planning by a super-national Nafta Commission or Brussels bureaucrats accountable to no one.

And just as Brussels has forced low-tax European countries to raise their taxes to the Euro-average or to expand their welfare state in the name of “fairness,” a “level playing field,” and “upward harmonization,” so too Nafta Commissions are to be empowered to “upwardly harmonize,” to ride roughshod over labor and other laws of American state governments.

President Clinton’s trade representative Mickey Kantor has crowed that, under Nafta, “no country in the agreement can lower its environmental standards ever.” Under Nafta, we will not be able to roll back or repeal the environmental and labor provisions of the welfare state because the treaty will have locked us in — forever.

In the present world, as a rule of thumb, it is best to oppose all treaties, absent the great Bricker Amendment to the Constitution, which could have passed Congress in the 1950s but was shot down by the Eisenhower administration. Unfortunately, under the Constitution, every treaty is considered “the supreme law of the land,” and the Bricker Amendment would have prevented any treaty from overriding any preexisting Constitutional rights. But if we must be wary of any treaty, we must be particularly hostile to a treaty that builds supranational structures, as does Nafta.

Any agreement that gives non-citizens the right to develop what our policies will be, is off the table for me.

These are multi-national agreements, and their review process can morph the original terms.

Who doesn’t actually agree with Free Trade as long as it makes sense? If it’s contributing to the standard of living for our citizens, I’m pretty much for it. If it puts some folks out of work so someone who is still working can get a 25% discount on what they purchase, I think it’s a decaying process on the well-being of our nation.

We MUST HAVE EMPLOYED citizens to thrive. Employing the citizens of other nations while our populace puts up with 25% unemployment and another 25% of our citizens have to work for far less than they used to, doesn’t add up on the list of what healthy nations do.

I don’t like taxes, but we do have to have ‘some’ tax base. It’s silly to thing we don’t. As we build ever larger national debt, there are contributing factors. Those factors include the financial well-being of our citizens.

As for these agreements, there are always things included that have nothing to do with trade, but more a binding of our border status, across border security, and a myriad of employment practices.

My rule of thumb is this. If we could thrive as a nation without these multi-national agreeements thick enough so no sane person would read them, then why must we have them now?

Trade took place before. We obviously don’t need these agreements to conduct it now. Further, we don’t have to have 20 nations in an agreement to get an agreement.

These things get far afield. They shouldn’t.

Personal agreements nation by nation are a better way to go IMO. If there is a reason to alter the agreement, we can do so without offending the other 19 nations in the agreement.

We hobble ourselves, and make agreements that don’t benefit us all too often.

I just don’t agree with this drive to turn us into a multi-national co-op.

We obviously didn’t have to go this route. And when you look at where we were twenty-five years ago today, and where we are now, I defy anyone to say we’re better off economically today.

If it’s contributing to the standard of living for our citizens, I’m pretty much for it. If it puts some folks out of work so someone who is still working can get a 25% discount on what they purchase, I think it’s a decaying process on the well-being of our nation.

Free trade -- even the real kind based on actual freedom -- will always cause some to lose work. People in other countries with different economic situations will be able to produce some goods more cheaply and more efficiently.

Except one thing. When you have rogue states, you don't do business with them. You don't want them to become an economic powerhouse with evil intent. That's precisely what we have with China. You don't want to do that with a Hugo Chavez, a Fidel Castro, or the People's Republic of China. It's suicide to do it.

When you make this kind of assertion, you're pretty much sticking to the Holy Grail of Conservative thought. I'm not convinced that is a good thing.

My rule of thumb has been tied to something most people enjoy and can understand. Sex. Sex is great. Can we participate in it 24 hours a day every day? Most thinking people would recognize there are limits to even the best of things in life. We moderate on the issue of multiple partners, setting down ground rules that make families more strong and stable.

If this is true, and I believe it to be, then why should trade be any different? Is trade good? Yes, it is good, but being honest with ourselves, there are times when it can be bad too.

What would be an example of bad trade? I would say that it could be when it strengthens what would be an obvious adversary. I would also say it could be wrong if it were to pit our workers against other workers when our workers have absolutely no chance of competing. I'm not a union sympathizer by any means, but I do think we should be very careful about destroying jobs and industry in the United States. That's not to say that union shops haven't caused part of the problem with their demands. We recognize that. That was wrong too.

One has only to look at China, what has happened there, to realize there can be some VERY BAD downsides to trade. China benefited from the trade. We did not as a nation. China became wealthy, productive, and a world class nation. We languished, our people were put out on the street with no jobs, and China also became a threat along the way. There was nothing free about this trade. China manipulated it's money value so that our goods going into China had to hurdle a 30-40% exhange rate that made it next to impossible to sell our goods there.

The last thing that I want to mention, is that when our business sector sells it's soul on the world market, to get cheap labor, it spreads it's patent and industrial secrets far and wide. China won't allow anything to be made in it's nation until it has all proprietary supporting information and technology. Out little 20 year scamper into the world of senseless free trade gone absolutely mad, was to gift China with 200 years worth of tecnology. We gave them the secrets, gave them the tools, gave them the know how, and basically handed them the guts of our industrial machine, for free.

In what world does it make sense to undermine our ability in this manner, when the obvious damage can only result in what it was predicted to by people such as myself?

We can sit here and pat ourselves on the back for being free and doing what we want, but at the end of the day that was the main focus of the 1970s Hippies. It wasn't realistic then. It's isn't realistic now. You have to use common sense. Over the last twenty years, trade mavons used none. Well, here we are.

Obama has doubled down, and actually made things exponentially worse. That's not to say it was all the Democrats fault though. Bush had a Republcian Congress, and look what that ultimately resulted in.

Our economy is sick, no doubt. Financial practices were abysmal. Our overseas business aqumen was downright suicidal though.

I would also submit that yes, there are times when it's best to operate as a closed shop rather than do what we have done. What is the benefit of free trade if it facilitates our nation becoming a second or third tier nation? Right now were in the midst of a depression that has touched at least 50% of our work-force negatively. Is that just because we have a sick economy right now? Well, the economy didn't help, but we were sick long before the 2008 crash. It really hit the fan in about 2000.

In a four year term, we generally add about 9.0 million jobs. Over two terms in office, a president can expect to see jobs go up by at least 17 million jobs. This took place from 1960 to the year 2000. Do you know what the job growth under Bush was? For his first term, it was negative (around 800,000 jobs). This was the first time in over 40 years we had seen something like that. I submit that all other things being equal, the loss of jobs under Bush was the result of inexcusable trade policies.

We should take advantage of that and shift our capital into lines of production that are more capital-based and more profitable. In a well-functioning and free economy, that process would more than compensate for the losses.

Please tell me what restrictions were placed on business in the last 20 years. You'll have to excuse me, but business did whatever the sam hell it pleased. It there too much taxation and regulation? I believe so. It's pretty well accepted that we do. None the less, business moved off short. Every job it could send away, it did.

Our government messed with the lending industry to make it easier for people to get homes who couldn't pay for them. That did finally hit the fan around 2008. That was the double-whammy that sent our nation into a death spiral.

It is the gradual erosion of our economic freedom that causes the overall job losses -- not the freedom, itself.

I appreciate the argument, but the economic freedom flowed for twenty years. Business wasn't blocked from doing what it wanted to. As any Conservative I do believe the government screws things up, but in this instance the major problem was something being passed off as Free Trade that was anything but Free Trade. We paid one hell of a price.

We've pretty much moved production away from the U. S. Now R & D is taking place off our shores as well. We are turning into 20th Century Great Britain. Either we pull our heads out and put an end to this nonsense, or we will no longer drive global dynamics. I'm talking five to ten years before we're dictated to.

So much for our Free Trade dividend..

And while you think I'm crazy, the corporations and businesses that moved off shore will do just fine, as our populace implodes with no jobs in sight.

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