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Free Trade Agreements – Not a Simple Idea

Trade Agreements3


Guest Editorial by Wayne Spencer — OHEA Member — Henderson, NC

(April 5, 2016)

I do not believe in free trade. Most academic economists do not believe in free trade either. But, most economists are not independent. Most economists are employees of banks and corporations and free trade is their employer’s policy. No employee is going to hold his job for very long opposing his employer’s policies in public. (not even on Facebook)

Free trade allows the importation of goods from slave holders in other countries. It eliminates the need for having to re-fight the civil war to restore slavery here in America. We have little regard for human life in the U.S. but we don’t like to view it or be told of human sacrifice on our behalf. In the worst case, it is perfectly acceptable to slaughter hundreds of thousands of humans in Africa and Asia in order for our military industrial complex to continue on. Free trade is more humane since we pay to house and feed the human slaves. A kind and gentle alternative.

So of course slavery helps the American consumer. Americans love free stuff. Look what it took to eliminate slave policy here? If every American had been thinking human rights, slavery here wouldn’t have lasted a day. Hardly anyone cared. It took a “passionate few” (Henry David Thoreau’s words) to end slavery here; it will take a passionate few to end slavery there as well. It may not happen in our lifetime but that should not be reason for complacency.

I support “fair trade” where free people bargain for the fair price of the goods that they produce. Notice I said that “they produce,” not that a slave master takes from them and sells. How do we know if the producers fairly bargain for the sale of the goods they produce? Here are a few questions to ask:
(1) Are they free people?
(2) Do they have the right to organize?
(3) Do they have collective bargaining rights?
(4) Are they being adequately compensated for their labor?
(5) Is their compensation adequate for them to purchase goods and services that would satisfy American standards? (We need to judge their compensation based upon our standards, not theirs. Or is it fair to trade trinkets for Manhattan?)

If the answer to any of the above questions is no, then that is not fair trade.

NAFTA, CAFTA and TPP are even much worse than free trade. Take a look at the provisions that violate the sovereign rights of countries and the human rights of their citizens; provisions that put corporate profits and corporate property rights ahead of people’s very right to live. These trade policies are a new world constitution which supersedes all the “law of the land” of every country that is party to its terms, especially including our own. (See Article 6 of the U.S. Constitution)

Not only do the provisions of these trade agreements codify slavery, they codify colonialism, where every person in every country that is a party to these agreements is subject to a group of self-proclaimed multinational corporations. Every nation becomes a colony to the master non-geographical corporations who hold the power under these agreements.

I am a strong believer in trade agreements; I believe they are essential to promote trade and to guarantee the human rights of all workers on all sides. They must provide, at a minimum; for uncoerced collective bargaining, safe working standards, internationally recognized environmental standards and international oversight by international commissions comprised of workers from other countries.

To work out a fair trade agreement will not be easy and will require an open discussion in open proceedings. It cannot be accomplished behind closed doors. Democracy and fairness are never negotiated secretly behind closed doors.

I submit; there are many forms of racism that are not overt, but are just as harmful. I think that the kind of overt racism that Trump has displayed is horrid and should be profoundly objected to. Isn’t it in fact being profoundly objected to? Isn’t the media objecting to his racism strongly? I think so. However, how about the racism that is not overt, but implied? The fact that 40% of all payroll in the U.S. is paid directly or indirectly in compensation for the making of military weapons that are deployed, nearly exclusively, for the murder of hundreds of thousands of poor Africans and Asians. Or consider the millions of people in our own country who keep imploring for us to “support our police.” Surely, in light of the hundreds of police shootings of unarmed black people, the term “support our police” can have only one meaning.

If we fail to see the racism around us, or the policies that support it, then we are all part of the problem.

My opinions on free trade and globalization go back to the 1990’s before NAFTA but during the tremendous lobbying effort on its behalf. I was working for an organization involved with the futures industry in DC at the time, so I was in the thick of the debate surrounded by insiders. But these insiders were more liberal than you might think. (Mostly Democrats)
The premise of free trade as promoted by the free-traders, is NOT for exploiting cheap (slave) labor. It has been sold to us for its economically and environmentally sound global network, based upon the manufacture of goods being near the source of raw materials and skilled labor.

(1) Countries having the necessary naturally-occurring raw materials and the necessary skilled workers, have a natural economic and environmental efficiency advantage over others that do not. Example, a country having large deposits of coal and iron ore have a natural advantage for steel-making over those that don’t. This advantage might also translate to an advantage in manufacturing some finished goods.
(2) It is natural for countries having an advantage described in (1) to sell and ship their goods to countries not having these advantages.
(3) Countries with only the advantage of having workers with special skills or knowledge also have a limited economic advantage in the manufacturing of specialty goods. Example, Swiss watch-makers.
(4) There are also hybrid examples of free trade producing inefficiencies. As one example, some countries may have an advantage in (1) and as a result produce various manufactured parts for automobiles. However, it might be more efficient to have the automobiles assembled in the countries where they will be sold and delivered due to shipping costs.

When calculating inefficiencies, the total economic and environmental cost of shipping, including the externalities, must be considered.

So where does the free trade model break down? The example above assumes that every country produces the goods that it is most efficient at producing. In reality, in the capitalist mercantile system, there are practices that skew the model such as currency exchange rate manipulation and government subsidies.

Until we have an internationally agreed upon system, that fairly calculates the actual efficiencies in order to determine trade agreements, I will be opposed to free trade. In the meantime, I think the long-recognized bilateral trade agreements, that are made to determine tariff levels for each classification of goods is the fairest we can have at the present time.
All trade agreements must be subject to these human rights considerations:
(1) Workers must be free people.
(2) Workers must have the right to organize.
(3) Workers must have uncoerced collective bargaining rights.
(4) Workers must be adequately compensated for their labor.
(5) Workers compensation must be adequate for them to purchase goods and services that would satisfy American standards. (Compensation based upon our standards, not theirs. Or is it fair to trade trinkets for Manhattan?)

The argument made that 70 cents per hour is adequate for someone in Vietnam because they may starve otherwise, is a racist argument that unintentionally leads to a race to the bottom where, in the end, both sides starve.

If this present system was working so well, the American worker would be happy with the cheap goods and the Vietnam children would be adequately fed. In effect, this system of exploitation harms both the exploiters and the exploited.

In the long run, only a fair trade policy can succeed in both feeding the Vietnamese and providing a stable economy in America. It must be based upon inefficiencies, not exploitation. The actual rise in the standard of living for both parties must be in the gain produced by efficiencies, otherwise it is a zero-sum game where one gains only to the extent that the other loses.

(Zero-sum is a situation in game theory or economics in which one person’s gain is equivalent to another’s loss, so the net change in wealth or benefit is zero. A zero-sum game may have as few as two players, or millions of participants. Zero-sum games are the opposite of win-win situations – such as a trade agreement that theoretically increases trade between two nations – or lose-lose situations, like war for instance.)

To say that it is not a zero-sum game contradicts the original advocates of free trade. If you take away the artificial labor cost differences and currency manipulation, you are left with efficiencies as the only cost saving. Without the benefit of efficiencies there is no difference in cost. No difference = zero difference or zero-sum.

I stated above: ” In the meantime, I think the long-recognized bilateral trade agreements, that are made to determine tariff levels for each classification of goods is the fairest we can have at the present time.” Notice, I did not say tariffs were good or bad. Tariffs should be negotiated as a part of a “bilateral” agreement between two countries with one country’s trade policy being the combined total of all of their bilateral trade agreements. In the past this method has produced a coherent trade policy with tariffs adjusted on a daily basis over the total range of commodities traded.

One of the byproducts of bilateral trade agreements is that they tend to produce a sustainable trade balance between countries.

In the early 1970’s world trade was increasing at a dramatic pace even though we were operating on the old bilateral trade agreements protocol. The reason for the increase in trade was primarily due to the reduced cost of shipping non-bulk manufactured goods as a result of the maturing adoption of inter-modal transportation methods. Trade was already on the rise well before the introduction of free trade policies. I submit that free trade policies did nothing to improve trade due to actual efficiencies, but rather, they introduced a movement of capital from modern industrialized countries to former colonial states where there was already a history of exploitation of labor. In my analysis of free trade, back in the 1990’s, I found that free trade was merely a subterfuge for the reinstatement of colonialism.

I suggest that you read The Pure Theory of International Trade by Miltides Chacholiades. His work is renowned in the area of international trade and this book is often used in advanced undergraduate and graduate economics students. Nowhere in his book does he include the exploitation of workers as a cost benefit in favor of free trade. Further on page 5, Chapter 1, Introduction he sets some judgmental rules regarding the ethics of tariffs, when they are ethical and when they are not. He again in Chapter 16, page 369, discusses the 1. Social Welfare Function of free trade and makes it clear that the savings resulting from free trade are from efficiencies gained.. nothing more, nothing less. The differences in wage levels alone is not a a legitimate advantage.

My own background in trade began when I was writing an analysis of the competitiveness of shipping manufactured goods from the states of Ohio, Western Pennsylvania and Western New York through an inter-modal facility at Buffalo, NY (BuffaCon) transshipped via the Erie-Lackawanna and Canadian National RR to the port of Halifax, NS. for loading on container ships destined for foreign ports. Both shipping costs and time were reduced compared with the conventional route through Port Elizabeth, NJ. After we were established, I then issued through rates for all commodities based upon our facility (Buffex) to and from Manchester, Rotterdam and Sydney. It was during my involvement in this activity that I discovered a hole in our FMC rules that actually nullified U.S. tariff provisions for the big players.

So why the free trade rules, since the tariffs didn’t actually mean anything? It could only be for the movement of capital; the export of capital. The free flow of goods has nothing to do with these free trade agreements. As far as I can tell, it is for (1) the free flow of capital, (2) the protection of the return on invested capital and (3) the dominance of those with the capital. Free flow of capital without the free flow of labor will result in the complete devastation of the world economic system.

Another argument for free trade is this: “One big thing that is omitted is infrastructure. Are there port facilities nearby? Has a huge factory already been built? Are you at the end of an oil pipeline? These things aren’t permanent, but certainly affect efficiency for decades or more.”

Good point, but most of these items are included in the word “resources.” Of course ports are a natural resource. Other resources such as infrastructure play a part, but are not as important. The movement of capital can overcome a lack of plant and equipment but it cannot overcome the lack of natural resources.

Case in point, NC already had the best plant and equipment for the textile industry, yet within a few years new plants and equipment were built in Mexico to get cheaper labor and now these same Mexican plants have been abandoned for new ones built in China and now these are being abandoned for new ones in Vietnam. We have allowed capital to move freely which is an unfair advantage compared with labor which cannot.

Example: steel mills will always be located near large deposits of coal since many more tons of coal are required to make steel than is iron ore. Hence, when the U.S. had steel mills, they were always located near an abundance of coal deposits rather than iron ore. Otherwise most of our steel mills would have been located in Minnesota rather than in Ohio and Pennsylvania.

Buffalo, NY was, in a way, an exception. It had the lake port facilities which were already being used for the transshipment of ore to Pittsburgh. It was also the nation’s second largest rail center with railroads extending into the coal fields of Pennsylvania, a short distance away. As a result, Buffalo had three major steel producing facilities: Bethlehem, Republic and Wickwire-Spencer.

One efficiency leads to another. The steel industry in Buffalo led to the building of five General Motors plants and two Ford plants in the area, all large users of steel. Generally, efficiencies dictate the geographic placement of industry.

The present trade agreements such as NAFTA, CAFTA and TPP do not respect these natural efficiencies, rather they substitute artificial barriers and artificial support of trade based upon corporate profit alone. I am going this “long route” in the way of explanation to attempt an understanding of the problem with these current trade agreements. As a result, maybe you will reconcile the principles of free trade with real devastation and political upheaval occurring here in the U.S.

posted 4/5/2016

Editor’s Note: See how Nobel Laurent’s  and other critical thinkers view the TransPacific Partnership!

Update: June 30, 2016:

While Secretary of State, Hillary Clinton supported the TransPacific Partnership (TPP) but during her 2016 Presidential Campaign she turned her position against it. Now, the Democratic Party, in a recent meeting of its 2016 Platform Committee, wrote up support for  the TPP! We wonder why they did that? Are they surrogates for Secretary Clinton? What would be Hillary’s advantage to changing her mind again? 

(back to top)

Liberals Equally to Blame in Many Areas of Slow Human Progress: Including Climate Change

 Editorial by Frank McKay, OHEA Vice President, Creedmoor, NC

(April 19, 2016)

“The difficulty lies, not in the new ideas, but in escaping from the old ones.”
John Maynard Keynes (1883–1946)

“A man with a conviction is a hard man to change. Tell him you disagree and he turns away,” Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point.”

Leon Festinger (1919-1989); Father of the Theory of Cognitive Dissonance


It has been said by someone that you can identify an educated person when discussing a problem to be solved; they ask the most insightful questions to get at solutions.

One also could make a good argument that an educated, thinking person can clearly see that the dichotomy of “Liberal Versus Conservative” is more of a hindrance than a useful classification of how people think; most of us are classic liberals in some human areas of endeavor and conservative in others. The alleged spectrum from one end to the other is non-existent I would guess in 90% of individuals. Terms like Progressive Liberal don’t really add much clarification; I suspect the definitions for “progressive” would be plentiful and varied. We heard Bernie and Hillary attacking each other in this sense.

Because this website stresses critical thinking and attempts to describe what that means, we feel comfortable saying that a far superior method for classifying people in the sense of human progress  would be “critical thinkers,” and “non-critical thinkers.” We are talking here about solving serious world problems, not discussing your religious beliefs, your favorite color or when life  begins. I note this because Humanists always distinguish between “beliefs” and statements of fact or logic.  People often state what they believe but cannot always justify it, nor present evidence for it and often don’t need to do that. Most of the time we can simply say we disagree on a certain kind of belief, shake hands and be tolerant.

However, we need to rip all the emotional baggage out of many discussions if we are to get at some problem solving steps. Progressive steps? Humanists use scientific thought and try to avoid errors in logic when discussing serious problems. 

So let’s see what we can do with these ideas in terms of the title of this Editorial. These thoughts on the failure of so called liberals  was triggered by an article today in the New  York Times entitled: “Liberal Biases, Too, May Block Progress on Climate Change,” by APRIL 19, 2016. Mr. Porter has a degree in physics which is useful to know.

So let’s critique Mr. Porter’s thoughts and add some more. Humanists tend toward the “liberal” side of arguments but we will correct errors in thought of so-called liberals when necessary. I like that old saying, “Be open minded but not so open your brains fall out.” Do you know who was the author of that statement?

Mr. Porter agrees with many critically thinking persons and this web site that climate change solutions should not include natural gas (methane), COsequestration nor the bizarre wood burning notion found and promoted in current congressional legislation. Methane is apparently leaking from the entire production/use cycle and it is a more potent greenhouse gas than is CO2. Removing CO2 from the atmosphere is far, far from a proven technology on both the removal and storage aspect and burning wood and wood by- products is simply absurd. One needs a non-fossil, non CO2 producing fuel that has already been tested. Obviously solar and wind are the on-going rational approach. But another fuel is needed and that is nuclear.  Current problems with using renewables without nuclear have been discussed elsewhere on this website.

The safety of nuclear has been compared more favorably with the negative health and climate change effects of dirty fossil fuel and a casual Google search for that will give you all the info you need. The problem is the association of nuclear with WWII deaths and the “mysterious” concept of radiation. The number of deaths from nuclear power plants is minuscule compared with the death and dangers of fossil fuels. Storage of nuclear waste is becoming more an more unnecessary with breeder reactors. Many further developments have occurred in reactor design — with containment, moderators, cooling systems and fuel construction all aimed at safer operation and refueling more efficiently and effectively.

Here is one fine summary of the comparison of nuclear energy safety compared with fossil fuels: 

In the aftermath of the March 2011 accident at Japan’s Fukushima Daiichi nuclear power plant, the future contribution of nuclear power to the global energy supply has become somewhat uncertain. Because nuclear power is an abundant, low-carbon source of base-load power, it could make a large contribution to mitigation of global climate change and air pollution. Using historical production data, we calculate that global nuclear power has prevented an average of 1.84 million air pollution-related deaths and 64 gigatonnes of CO2-equivalent (GtCO2-eq) greenhouse gas (GHG) emissions that would have resulted from fossil fuel burning. On the basis of global projection data that take into account the effects of the Fukushima accident, we find that nuclear power could additionally prevent an average of 420 000–7.04 million deaths and 80–240 GtCO2-eq emissions due to fossil fuels by midcentury, depending on which fuel it replaces. By contrast, we assess that large-scale expansion of unconstrained natural gas use would not mitigate the climate problem and would cause far more deaths than expansion of nuclear power.

Above quote from: Environ. Sci. Technol., 2013, 47 (9), pp 4889–4895

Small modular nuclear reactor by Nuscale. Click image to go to detail.

Small modular nuclear reactor by Nuscale. Click image to go to detail.

The development of small module reactors is underway; these are reactors capable of generating about 300 megawatts of power or less, which is enough to run 45,000 US homes. From the previous link: “The Department of Energy is offering US$452 million in matching grants to develop SMRs and private investors like the Bill Gates Foundation and the company of Babcock and Wilcox are putting up money for their own modular reactor projects.”

Other new innovative, advanced types of nuclear plants are being designed and bipartisan Congressional hearings are ongoing where Federal officials, advocates, and scientists testifiy at hearings on legislation dealing with advanced nuclear reactors and modernization of nuclear energy infrastructure.

France of course produces 75% of its electricity from nuclear and now claims a substantial level of energy independence and almost the lowest cost electricity in Europe. It also has an extremely low level of CO2 emissions per capita from electricity generation, since over 90% of its electricity is nuclear or hydro. Hence their deaths from electric production are near zero and they do not affect the planet with high CO2 emissions. 

The United States and the world will need nuclear plants until solar, wind and other renewables are advanced, electric automobiles are common, the grid for delivering those has been built, and  energy conservation and battery storage technologies have also made serious advances. Education is needed on this issue. It is an emotional issue and nothing else. Whether we can convince the general public on this point is certainly going to be a challenge. Engineers with training, skill and good mathematics and data, cannot show us “real plans and policy”, as to how the entire United States can function on “renewables only” within the coming decades without nuclear power in the mix. It can’t be done and if we don’t start removing all fossil fuels from the mix within that time frame, we are in big, big trouble.

And where else are the brains of liberals falling out?

 (to be continued)