An Attack on Free Trade
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
President Chavez of Venezuela roused a riotous crowd protesting against free trade over the weekend at the Summit of the Americas in Argentina with the following words: “Every one of us has brought a shovel, because Mar del Plata is going to be the tomb of FTAA.”
One might listen to Mr. Chavez and believe that all Latin America is opposed to free trade. Of the 34 nations attending the summit, however, nearly all supported further negotiations for the Free Trade Area of the Americas. President Fox of Mexico observed that the free trade pact can move forward without participation from the skeptical nations. Far from being buried, free trade in the Americas will develop without Venezuela.
It may seem ironic that America is promoting reliance on an international organization, in this case an agency adjudicating disputes under free trade treaties. But, unlike the United Nations and the European Union, the World Trade Organization, the North America Free Trade Agreement, and other free trade arrangements do not make laws or limit property rights. Instead, they adjudicate disputes between member governments over the rules covered by the treaty.
These treaty organizations provide businesses and consumers with greater certainty about arcane trade rules. Without these organizations, many businesses would be less likely to invest in countries where trade rules can change unpredictably and there are shifting political winds. Even as unaccountable international bureaucracies, treaty organizations provide a rule of law where none would be otherwise.
Quotas, tariffs, duties, anti-dumping laws, export subsidies, and other trade-related activities are measures that practically every government, including ours, uses to benefit their own businesses and interfere with trade. These mechanisms typically have more political than economic benefits.
International treaty organizations such as the WTO and Nafta discourage such anti-trade mechanisms but come with the cost of resolving disputes using international bureaucracies. America, as much as any other country, loses part of its sovereignty in these international forums, where it is as likely to lose as to win.
Last week, for example, the World Trade Organization ruled in favor of America in a trade dispute with Mexico over “Anti-dumping Measures on Oil Country Tubular Goods From Mexico,” but sided primarily with Europe over America in a separate dispute over calculations of dumping margins. Earlier in October, Nafta favored Canada in a trade dispute with America over softwood lumber.
A free trade treaty organization is perhaps the only venue where Mr. Chavez and Venezuela would be able to defeat America on legal issues. America would willingly bind itself to such a treaty; Venezuela would not. America sees greater value in the expansion of the rule of law than in the expansion of its national sovereignty; Venezuela does not.
Mr. Chavez’s ostensible opposition to free trade is based on the misguided notion that the poor in Venezuela are harmed by international trade. The opposite is the case. Trade opens up American markets to products from workers around the world, providing these workers with jobs, higher incomes, and, eventually, education.
America currently imports far less than it exports. Venezuela, and other countries in the Americas, have much to gain from greater access to U.S. markets; America has far less to gain. Among Latin American countries, only Mexico, which already has a free trade treaty, is one of America’s largest trading partners (ranked second behind Canada).
Venezuela’s economy is chaotic, with high unemployment. It would be in shambles without oil revenue. Business is precarious. Just last week, the government temporarily shut down the country’s largest telephone company, CANTV, allegedly for tax reasons.
Mr. Chavez fights free trade not so much to advance Venezuela as to advance his personal agenda. In contrast, the leaders of most Latin American governments rightly see their future as brighter with the expansion of the rule of law and the predictable behavior of governments, which are the foundations of international trade.
A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com.