I’ve made my career developing international trade-management systems for multinational companies in the USA, Canada, Europe, Asia, the Middle East, and Latin America. I understand the pros and cons of free trade, and therefore wanted to review this book on the basis of how I understand the issues. I’m reviewing the book in June 2017, five and a half years after it was published. Have author Ian Fletcher’s opinions been validated or refuted during the past five+ years of free trade? I believe they have been validated.
Free trade treaties are sold to the American public and our Congress on the basis of highly dubious promises that did not pan out. We were told that “Free trade will create millions of high-paying jobs for America’s workers. Why, of course, they will! Our workers are the most productive in the world. Free trade will open other countries’ markets to our products and put our people to work building products to export. It will raise our economic growth from 3.5% to 5% or better! It will prosper the entire world! Rah! Rah! Cis-boom-bah for Free trade!”
The free trade treaties are signed, and we come back a few years to find that:
1. No noticeable amount of jobs have been created in the USA by free trade. In fact, jobs have disappeared. Companies that used to employ Americans fired their American employees who already had well-paying jobs, moved their work to Mexico or China, and now import the product back into the USA. The factory towns of the USA, which were supposed to prosper with free trade, have become a blighted wasteland.
2. The USA exports LESS after free trade agreements are signed, because American companies close their USA factories and therefore produce nothing in the USA to export. This book was written in 2011. We export less to most countries today, in 2017, than we did five years ago.
3. The economy shrivels when free trade agreements are signed. We already had 3.5% economic growth BEFORE free trade with many countries was signed. Today our economic growth averages 1.8%. It has been cut in half AFTER free trade treaties were signed.
4. The propaganda about free trade benefiting American workers is reversed after free trade is signed. When Free Trade Mavens are hawking their their free agreements they portray American workers “as the most productive workers in the world. They DESERVE the right to make products to sell to the rest of the world.” Then when the American workers lose their jobs BECAUSE of free trade, the Free Trade Mavens blame the workers: “American workers are too lazy, stupid, and mal-educated to compete with the rest of the world. That’s why we had to fire those miserable slackers. Don’t blame us when our free trade promises turn out to be a pack of lies. Blame American workers. It’s THEIR fault!”
5. Free trade agreements are signed on the promise that “We are going to export high-value computers, electronics, and appliances.” After we sign free trade agreements we start IMPORTING those products, and the American factories that used to make them shut down and lay off their workers. Then the Free Trade Maven propaganda changes to: “We are going export corn, wheat, and tree nuts” --- low-tech commodity products that have so little value that we must subsidize their production with imported labor and tax subsidies. So instead of exporting high-value products built by American labor, we export turnips that have to be grown by importing Mexican and Guatemalan labor!
6. Nor do these exports of ag products ever amount to much. Most countries protect their domestic farmers. Even our Canadian neighbors do not permit American farm products to glut their market. They wrote a clause into the NAFTA treaty allowing them to restrict imports of many American ag products to 3% of their domestic market. Even supposedly beef-hungry China never bought a single ounce of American meat.
7. The only time American businesses ever oppose free trade is when the imported products would prevent them from robbing American consumers. Big Pharma spends billions of dollars lobbying Congress not to allow the importation of foreign-made medicines. Why would they want to let an American buy a pill made in Mexico, Canada, or Germany for 89 cents, when they can monopolize the market in the USA and sell it for $89,000 dollars?
8. The world economy is less stable than it has been at any time since WWII. Global wealth has declined with the replacement of millions of American jobs at $25 / hour with the $2 / hour labor pool of Mexico and China. Not only has the USA become blighted by poverty, but Mexicans are poorer than they were before NAFTA, because the jobs they had before NAFTA have been replaced by $2 / hour jobs in American-owned and Chinese-owned sweatshop. What little growth there is in the world economy is propped up by trillions of dollars of public debt issued by world governments who have no intention of ever repaying it.
Fletcher explains why free trade is still supported even though on a common-sense basis it is indefensible.
Big Business promotes free trade because it allows them to fire their higher-paid workers in the USA; replace them with peons in Mexico and China; use Mexico and China as bases to import products into the USA --- thereby inflating corporation profits by arbitraging a First World price list with Third World labor; and avoiding paying taxes on the profits earned in the USA by laundering the money through overseas tax havens like Ireland where the effective tax rate on corporate profits is zero. Big Business promotes the creation of unelected supra-national organizations like the WTO, GATT, NAFTA, International Monetary Fund, and TPP to shield them from compliance with the laws of any nation. Since Big Business controls the supranational organizations, they become accomplices to multinational corporation piracy.
Liberals also support free trade because it promotes the creation of supra-national, unelected governing bodies that use each nation’s tax dollars to impose liberal values that don’t represent the people’s interests. As CNN reports today: “[French President] Emmanuel Macron is getting in Donald Trump's face….he's already seized a role as a bastion of liberal global values, staring down both US President Donald Trump and Russian President Vladimir Putin, two of the biggest threats to the political consensus that has dominated Western politics for decades”
Liberals see Globalism as a sort of supra-national welfare state that transfers wealth out of the USA and into the pockets of Third World peoples whom Liberals believe have been oppressed by years of oppression from the USA and Europe. In their view globalism, is a means of transferring wealth from the American middle class to the Third World poor. And of course, Liberals staff these supra-national governments with bureaucrats who are paid a lot of money funded with tax dollars.
Conservatives have an ideological bent in seeing free trade as a way to destroy national governments. They think that free trade will enable big business and wealthy to relocate out of high-tax countries and into tax havens and therefore force their home countries to lower taxes. Conservatives also despise labor unions and therefore imagine that by relocating businesses overseas they are helping to exterminate the left-leaning working class. Many Liberals also despise the supposedly ignorant (and largely Conservative-voting) working class Whites and seek to wipe them out by destroying their livelihoods with imports.
Thus do Liberals and Conservatives support free trade for all the wrong reasons.
Ian Fletcher also makes it clear that the world’s economists are paid by big government and big business interests, so they conform to the free trade agendas of their employers in order to keep their meal tickets coming.
Fletcher points out that economists are ignorant of the free trade icons they revere. For example, Adam Smith never believed in free trade as a means of beating higher-paid workers in developed countries out of their jobs by shipping work to low-wage countries. David Ricardo, the father of “comparative advantage by free trade” advised the Portuguese and British governments to embrace free trade. He thereby launched both countries on a journey to economic oblivion.
Nor do any other countries other than the USA, Britain, Canada, and Australia practice free trade. Every other country protects its markets from imports of USA-made products. We run $347 billion trade deficits with China; $155 billion with the European Union; $65 billion with Japan; $63 billion with Mexico; $28 billion with South Korea, and so on down the line. Our exports to all of these countries is lower today than they were in 2011 when this book was written. We even sell less to Canada today than then. Few countries want to buy American-made products, while we have allowed our American companies to take their production overseas and dump it back into the USA.
Furthermore, once an industry leaves the USA, it never comes back. The knowledge and traditions of that industry (known as “intellectual capital”) are sold by our CEO’s to foreign businesses and their government partners for a pittance. The USA no longer innovates much of anything in electronics because we no longer have an electronics industry here to innovate. Likewise, the rapid loss of our motor vehicle, aviation, and computing industries, is destined to make us a larger version of Portugal, which only knows how to export olives, wine, and goat cheese. So far, have propped our economy up with $20 trillion of government debt. Once that is defaulted on, it will be finis for the USA as a world power. This is exactly what China wants, and the reason why it protects its economy from USA-made products, while we allow the Chinese to sabotage our economy with predatory imports and cyber warfare.
Ian Fletcher sums it up this way:
=====
All over America, other industries are quietly falling apart in similar ways. Losing positions in key technologies means that whatever brilliant innovations Americans may dream up in small start-up companies in future, large-scale commercialization of those innovations will increasingly take place abroad. A similar fate befell Great Britain, which invented such staples of the postwar era as radar, the jet passenger plane, and the CAT scanner, only to see huge industries based on each end up in the U.S.
ARROGANCE AND INCOHERENCE
The media sometimes tell us that America’s labor force is so much more skilled than other nations that free trade will cause us to cream off the best jobs in the global economy. The next minute, they tell us that our poor math skills and work ethic are the root of our economic problems and that we should only blame ourselves. These obviously can’t both be true.
Sometimes, we are told to stop being arrogant and face up to the fact that the world isn’t our oyster anymore and that Americans aren’t entitled to be richer than foreigners. Fair enough: we’re not entitled to any particular living standard. But we certainly are entitled to a government that seeks to defend our prosperity, if that’s what we elected it to do.
Signs that America’s trade policies are dangerously wrong are often reinterpreted as evidence that our economy is so strong that it can survive even these problems. For example, because we have survived a trade deficit which would have produced a currency collapse in any other nation, trade deficits must not matter. But that is like saying that because the strong constitution of a patient has enabled her to survive cancer, cancer isn’t a disease. If free trade is a cancer slowly eating at our economy, we need to know now—especially if it is a problem whose solutions have long lead times.
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My skepticism of free trade is confirmed. If the USA does not reverse destructive “free trade” policies --- which in practice means allowing other countries to wreck our economy with imports, while keeping our products out of their countries --- then the USA isn’t going to remain a major economy. We will revert to a sort of North American Russia that has atomic weapons, a bit of oil and corn, and not much else.
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