At the core of a free market is free trade―in the private sector, among the states, and between the U.S. and other nations. The late libertarian economist Dr. Murray Rothbard once observed that, “Free-market capitalism is a network of free and voluntary exchanges in which producers work, produce, and exchange their products for the products of others through prices voluntarily arrived at.”
However, the federal government has a number of sanctions that apply to domestic transactions, many enforced in the name of “consumer protection,” and that moniker is a hard shell to crack for the advocates of competitive free enterprise. Pundit P. J. O’Rourke sees the situation this way: “When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.”
Internationally, Washington has entered into several compacts with other nations under the attractive banner of “free trade.” The North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) are probably the best known arrangements. Chuck Baldwin, the 2008 presidential candidate of the Constitution Party says, “I believe these free-trade deals, as they are called … are tools of globalists to sacrifice American independence and sovereignty.” Michael Badnarik, the 2004 Libertarian Party nominee for President notes, “NAFTA and GATT have about as much to do with free trade as the Patriot Act has to do with liberty.”
Now comes Son of NAFTA and GATT: the Korea Free Trade Agreement (KFTA). The text of KFTA, which the Associated Press calls “the largest U.S. trade deal since the 1994 North American Free Trade Agreement,” is almost identical to NAFTA.
The Korea Free Trade Agreement is actually a heavily managed trade deal―just like NAFTA―and weighs in at over a thousand pages of fine print. Multi-national corporate elites get favors, exceptions, and precedence, while hard-pressed middle-to-small sized U.S. industries (such as manufacturers of cotton products and car parts) shoulder extra obligations and restrictions. The Economic Policy Institute estimates that KFTA would increase the U.S. trade deficit with Korea by $13.9 billion over the next seven years. Rising Korean imports would displace approximately 888,000 U.S. jobs over this time period, with the KFTA directly responsible for about 159,000 net job losses.
Higher trade deficit plus net job losses: that’s arithmetic free trade style. But wait, you’ll soon read how Professor/Senator John McCain explains the equation as a plus for America.
As with NAFTA and GATT, central to the KFTA debate is the issue of relinquishing America’s sovereign rights and its self interests in global trade policies to international authorities. Congressmen Ron Paul wrote a letter to his House colleagues stating “Free trade theorists such as Adam Smith and David Ricardo must be rolling in their graves to see pacts like President Obama’s Korea Agreement called ‘free trade.’ It includes endless pages of rules and regulations enforced by foreign tribunals. This act is a sneaky form of international preemption, undermining the critical checks and balances and freedoms established by the U.S. Constitution’s reservation of many rights to the people or state governments.”
KFTA would grant foreign firms operating in the United States with extraordinary “foreign investor” rights and the power to sidestep our court system to enforce these new entitlements. The KFTA’s “investor-state” compliance system empowers Korean corporations to directly challenge U.S. laws before foreign tribunals established at the U.N. and World Bank to demand our tax dollars for any domestic policy Seoul claims could undermine their special foreign investor KFTA privileges.
The non-partisan National Conference of State Legislatures issued a statement warning that unless the controversial investor-state language in the proposed Korea Free trade deal is removed “to protect state sovereignty and federalism, we fear that it may be more dangerous to include [the] flawed investor-state language in the U.S.-Korea FTA than to forego the provision all together.”
And here’s a real KFTA stick-in-the-eye: our tax dollars will actually flow into North Korea via its Kaesong Industrial Complex—a “free trade zone” haven for sweatshops where South Korean firms employ some 44,000 North Koreans for wages in the range of 25-38 cents an hour (in 2007, their autoworker counterparts in the South earned $23.30 an hour). North Korea-manufactured automobile parts would be built into South Korean cars sold in the U.S. The proposed trade deal allows up to 65% of the auto parts to be purchased from North Korea, then shipped here duty-free.
The Ludwig von Mises Institute’s Jeffrey Tucker states that “The Mises Institute has consistently favored free trade―the real thing―while criticizing ‘free-trade agreements’ as mercantilism in disguise. The position is a lonely one, except that looking back history we find that the Austrians were against trade agreements from the beginning, even battling as forms of Keynesian planning. So there is a tradition here that would lead modern Austrians to oppose efforts like the North American Free Trade Agreement and all the others that have followed.”
And here’s a bit of practicality to back-up Tucker’s sound philosophy: CAFTA, the Central American Free Trade Agreement, has cost about 20,000 jobs in that region since its implementation in 2005. Most loses affect contract manufacturers who make low-value garments for U.S. apparel makers. American importers from CAFTA countries must continually report to U.S. Customs bureaucrats about their CAFTA shipments―the agency then investigates working conditions and the legitimacy of the claims for trade preferences. Importers who buy from China however, can benefit from that country’s (artificially) low costs and high productivity without having to meet such requirements since they’re not applying for any trade-pact preferences. In 2009, overall U.S. imports of apparel dropped by 6% but imports of apparel from China increased by 11%.
More free trade mathematics at work.
Economic guru John McCain explained his enthusiasm for NAFTA because it represented “an important component of our international economic policy” but “it will likely be several more years before its full impact can be determined.” Huh?
You have to give Senator McCain some credit for consistency: he recently asserted: “We’ve got to have free trade agreements. I’m glad the president is supporting the South Korea free trade agreement.”
Although there is no scheduled vote yet, the Republican establishment is pushing for fast track provisions to pass KFTA, the same legislative ploy used to impose “ObamaCare” legislation. The White House is working with the ruling class elites―special interests who lust after profits but are no champions of free enterprise―such as the Chamber of Commerce, the Ford Motor Company, J. P. Morgan Chase, and the National Association of Manufacturers.
Meanwhile, most GOPers, as usual, are following any parade flying a flag emblazoned with a nifty “free trade” logo, even though the fine print says “made in Korea.”
Some good news in all this: an NBC-Wall Street Journal poll in September 2010 found 53% of Americans believing free trade agreements hurt the U.S. economy, with only 17% thinking such pacts are beneficial. Bad news: polls can sway as public perceptions are challenged by the media. Last November, Rick Newman of U.S.News & World Report wrote: “It’s easy to vilify government for [economic] woes, but at the core this isn’t a failure of government; it’s a failure of the free-market principles so many Americans blithely support.”
Representative Sander Levin (D-MI), ranking member of the House Ways and Means Committee, recently observed, “These FTAs have their own history so I think it’s a little hard to draw any specific lesson as to future legislation. But when it comes to trade … hope rings eternal.”
Dr. Rothbard addressed this kind of muddled thinking some years ago: “It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”
It’s time for libertarians and constitutionalists to take a leading role in the broad coalition forming against the Korea Free Trade deal. That association ranges from Ralph Nader to Ron Paul and from Donald Trump to the Sierra Club. Dr. Rothbard’s biographer, Lew Rockwell, convinces me that Rothbard’s name would be on that anti-KFTA list as well: “As a steadfast believer in free trade, Rothbard argued that peace between nations cannot rest on negotiations between state managers. Peace is kept by the network of exchange that develops between private parties. This is why he opposed false ‘free trade’ such as NAFTA and GATT which have more in common with neo-mercantilism, and he was the first to forecast the disaster NAFTA has become.”
Although libertarians don’t much like regimentation, signing-up for the fight against the Korea Free Trade Agreement is a good place to form a line. I believe Dr. Rothbard would have been standing right at the front.