Free trade and the left: Replies

...Indeed, during the last two decades of accelerating U.S...

...THERE WAS plenty of room for debate on what happened in Mexico and why...

...Members of Congress learned at least two lessons from that experience...

...The literature and the debate make a clear distinction between fundamental human rights—such as the right to bargain collectively, which should apply to all—and standards, such as a minimum wage or hours of work, which should be scaled to the capacity of the economy to support them...

...For example, it has not been the left of the Democratic Party that has betrayed America's poor and near poor, it has been the center-right promoters of Wall Street's vision of global laissezfaire...

...But a major reason poor countries are poor is the way in which they have been ruled...

...As communication and transportation technology expands markets beyond national borders, sensible people are asking: what are the rules for the global economy...

...As I pointed out in my review of Dani Rodrik's book on globalization in the Fall 1997 issue of this magazine, economists have not been able to ascribe more than a small portion of postwar economic growth to trade liberalization...

...Mandle, citing Jagdish Bhagwati, misstates this position, saying that the left is asking that developing countries have standards "equal to or in excess of those adhered to by the developed countries...

...His argument is historically incorrect...

...It took a century of struggle in the United States to develop a set of rules that defended people and communities from the excesses of a continental capitalism...

...NAFTA was sold as a "free-trade" agreement, but it was not...

...In contrast, the protections for labor and the environment— core elements in any modern social contract—are for all practical purposes nonexistent, relegated to toothless language in unenforceable "side agreements...

...free traders" soap opera...

...He completely misses the way in which the emerging global marketplace is an economic battleground for class interests—between rich and poor, capital and labor, and despoilers and protectors of the environment—that spill over national borders...

...He then censures the liberal left for abandoning the domestic struggle against inequality...

...The second lesson of NAFTA was that the free-trade homilies of Economics 101—which provided the multinational business lobby with intellectual authority—did not describe the way the world actually worked...

...As Rodrik, himself a distinguished free-trade economist, ruefully admits, the notion that international trade has been a major contributor to growth rests on faith...

...82 n DISSENT / Spring 1998 Treasury...

...But the range of possibilities in the distribution of the benefits of productivity between capital and labor are much greater than Mandle asserts...

...Congress had voted for in 1993...

...The result should not have surprised anyone...

...Excuse me, but I rarely see Professor Bhagwati or other champions of unregulated trade on the intellectual or political barricades fighting for programs to provide the poor and near poor with "education, publicsector employment, and income transfers...

...Treasury and the International Monetary Fund (IMF) protected those who had invested in Mexican bonds...

...For a visual demonstration of this, Mandle need only observe the next meeting of the IMF and watch the finance and economic ministers of developing countries being wined, dined, and shuttled around in limousines provided by the world's largest banks and corporations...

...JAY MANDLE devotes most of his argument to setting up a straw man—the notion that those of us who have opposed Washington's corporate-driven global economic policies are "protectionists," ignorant of the textbook benefits of expanded trade, or else people with a monstrous agenda "to punish the underdeveloped world...

...Instead, it is one thousand pages of detailed rules, most of which are aimed at protecting the interests of U.S...

...The subsequent bailout of the Mexican economy by the U.S...

...Thus, over the last quarter century of the globalizing of the American economy, productivity has risen about 25 percent, while the median compensation of the American worker has fallen...

...He concedes that American liberals are right to emphasize that globalization creates important problems for the United States...

...If the leaders of the United States, Canada, and Mexico wanted simply to lower tariffs, the agreement could have been written on one page...

...Inevitably the bubble burst, throwing two million Mexicans out on the street, bankrupting twenty-eight thousand small businesses and decimating the middle class...

...Mexico, for example, was stripped by NAFTA of its ability to control the flow of capital in and out of the country...

...Since the United States takes 85 percent of Mexico's exports, a flood of imports followed, resulting DISSENT / Spring 1998 n 81 ARGUMENTS in a loss of American jobs and downward pressure on wages...

...First, they learned that the agreement weakened the bargaining position of labor in all three countries...

...But Professor Mandle chooses instead to drag out the old "protectionist" canard, which is a signal that he would rather stop the discussion than contribute to it...

...That question—not the stale and abstract squabble over theories of free trade and protectionism— is the heart of the real-world debate...

...standards for the protection of capitalists' assets, but not that they must treat their workers as human beings...

...To be sure, some opponents of the president's bill to renew his fasttrack authority were protectionists, just as some of its supporters were sweatshop operators...

...Intellectual property rights for corporations, repatriation of capital, and deregulation of foreign business are not only spelled out, specific punishments and penalties are described...

...In what sense is the resistence of the rulers of China, Guatemala, or Indonesia to labor standards in their countries morally superior to those who want to curb their regimes' ability to suppress wages and routinely beat, jail, and even kill workers who protest...

...And in the maquiladora factories along the U.S.Mexican border, where independent labor unions are suppressed, output per hour is often at or near U.S...

...As for the effect of free trade on growth, it continues to be vastly overstated in the economists' catechism...

...They also included institutions and policies to dampen the volatility of the business cycle...

...It also added to the country's already heavy foreign debt burden, forcing it to redouble its efforts to export its way out of austerity...

...Ironically, for all his professed internationalism, Mandle's argument is stuck in nation-state categories...

...As a matter of fact, I am more likely than not to meet the same opponents carrying the same corporate water, opposing the social contract here and abroad...

...Productivity obviously does set a constraint on wages...

...I cannot speak for the other "left nationalists," but as someone who has spent most of his life working for a progressive domestic agenda, I find Mandle's comments on this issue offensive...

...But the rejection of fast-track was not a rejection of the principle of comparative advantage...

...Markets do not exist in nature...

...They are defined by sets of rules...

...Mandle tops his case off with an unearned moral posturing against "intrusionism" into the affairs of poor nations...

...Mandle's failure to take his own professions of support for internationalism seriously leads him to a compartmentalized morality in ARGUMENTS which the concern for social justice must stop at the border...

...Second, the notion that such rules represent unacceptable "intrusion" on the sovereignty of third world countries is disingenuous...

...Within a year after NAFTA went into effect, the promises of accelerated Mexican growth, rising wages, the emergence of a prosperous middle class, and a reformed democratic government turned to ashes...

...Instead, Bill Clinton announced his intention to expand NAFTA to the rest of the Western Hemisphere and demanded a renewal of his fast-track authority to do it...

...These rules included protections for labor, the environment, and the public health...

...The overwhelming majority of Democrats who voted no, including the maligned Congressman Gephardt, were not against more trade with the rest of the Western Hemisphere...

...They wanted trade agreements redesigned to give labor and environmental rights parity with the protection of capital...

...These are complicated questions and there is room for honest argument...

...The defeat of fast-track last fall and the current Asia crisis are finally moving the policy debate—in the media, among policy elites, and even among some in the universities—slowly toward the question of the rules for the management of the global economy...

...levels while wages are onetenth or less...

...First, no serious advocate of international labor protections would apply first world labor standards to third world countries...

...Anyone opposed was, a la Professor Mandle, a mean-spirited "protectionist...

...Multinational corporate and financial networks are systems that tie together political and business elites from all over the world...

...JEFF FAUX is president of the Economic Policy Institute...

...Rather, it was a rejection of the specifics of the trade and investment strategy that the last three presidential administrations have been pursuing—a strategy that protects the interests of multinational investors and leaves working people in all countries to the mercies of unregulated capital...

...In this case, he swings at the effigy of protectionism by telling us that wages have nothing to do with unions or institutions but depend exclusively on productivity and growth, which he asserts is a result of increased trade...

...It is hard to imagine a more uninformed line of reasoning...

...His latest book is The Party's Not Over...

...Third, my criticism of the United States for not approving International Labor Organization principles reflects my view that the struggle for labor rights in other nations is not separate from the struggle for the rights of labor in our own country...

...For example, the defeat of fast-track, which Mandle laments but does not analyze, was primarily a reaction to the experience of the North American Free Trade Agreement (NAFTA), which the majority of the U.S...

...Fortunately, there are signs that the epithet is losing its sting...

...Serious people on both sides of the question have moved beyond Professor Mandle's "protectionists vs...

...The first charge is simplistic, the second is absurd...

...But, like Professor Mandle, the administration and its corporate allies were uninterested...

...Today, the rules of the global economy are set by those who represent capital in all countries in order to maximize their advantage over labor...

...Finally, when Mandle sets up a straw man, he should make sure that he knocks it down...

...Driven in large part by the hype of NAFTA, Mexico's economy had swelled with infusions of short-term speculative capital...

...The plot in his global economic drama is limited to rich countries and poor countries...

...Why is it acceptable for third world nations to be told that in exchange for access to American markets they must privatize, deregulate, and impose U.S...

...The mistake that Mandle and Bhagwati make is to assume that poor countries are run for the benefit of poor people...

...In the context of "free trade" agreements, the leaders of almost all third world countries have handed over much of their economic sovereignty to the interests of multinational capital as promoted by the policies of the major international institutions, such as the IMF, the World Bank, and the U.S...

...exports, America's economic growth has slowed down...

...He tells us the policy answer is to have the affluent beneficiaries of trade taxed to help the poor and near poor with education, public-sector employment, and income transfers...

...The bulk of those members of Congress who voted against the proposal understand that we buy and sell on a small, increasingly integrated planet...

...Social and political disorder followed, including drug-related corruption at the highest levels of government and the army...

...He then goes on to demonstrate this by citing my own criticism of the United States for not signing all of the International Labor Organization protocols...

...and Canadian investors seeking cheap Mexican labor...

...DISSENT / Spring 1998 n 83...