Free Trade as an Extremist Ideology: the Case of Nafta

• Publication year: 1994
• Citation: Vol. 17 No. 03

UNIVERSITY OF PUGET SOUND LAW REVIEWVolume 17, No. 3SPRING 1994

Free Trade As an Extremist Ideology: The Case of NAFTA

Robert W. Benson(fn*)

I. Introduction

I want to speak for moderation and conservatism, and against the ideological extremism that is pushing an agenda of radical risk taking in the form of the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT).

Now, if by ideology we simply mean a coherent framework of ideas by which we guide our personal and public decisions, then ideologies are useful. All of us walk the world with ideologies in our heads. They are inevitable if we are to keep our actions consistent with our analysis of reality and with our values. But extremist ideologies are ideologies gone bad, like a runaway train oblivious to signals that it is hurtling down the wrong track and endangering not just its occupants but all in its path. Ideological extremists turn a deaf ear to the cognitive dissonance of signals that contradict their analysis of reality. Their unquestioned faith that the ideology is leading in the right direction induces them to take risks dangerous to themselves and others. It is my view that free tradism has become such a classic extremist ideology, just as, until recently, Marxism-Leninism was.

I owe you evidence to support that last statement. After all, belief in free trade is part of the mainstream wisdom of our time, as sensible as the flu vaccine and as good as the ice cream cone. To loosen your grip on that pollyannaish view of free trade, or perhaps to loosen its grip on you, I need to show you that free tradism is fairly described as fitting the two criteria that characterize extremist ideologies: (1) their adherents are oblivious to cognitive dissonance contradicting their analyses, and (2) their adherents are willing to plunge themselves and others into great risks in the name of the ideology. I intend to adduce evidence in these two categories. I will use NAFTA as my example (though a similar exercise could attend the GATT), and I will be specific, analyzing concrete issues of trade theory, jobs, the environment, human rights, and democracy in that order. You then be the jury to decide whether or not I have made out a sufficient case.

II. Free Trade: The Case of NAFTA

A. Ideologues' Deafness to Cognitive Dissonance

1. Evidence That the Economic Theory Underlying NAFTA Is Wrong

a. The Simplistic Claim That a Rising Tide of Free Trade Will Lift All Boats

It is an article of faith for free trade ideologues that trade brings the greatest good to the greatest number of people in all the trading nations. That faith is rooted in old bibles: Adam Smith's 1776 work, Wealth of Nations, in which Smith noted that specialization of labor increases wealth, and David Ricardo's 1817 work, Principles of Political Economy and Taxation, where Ricardo laid down his doctrine of comparative advantage.(fn1)

Probably every economist today acknowledges that the classical Smith-Ricardo theory had fundamental errors, among them the assumptions that capital is immobile across borders(fn2) and that comparative advantage is static. Contemporary neoliberal economists have reformulated the theory into a much more nuanced model.(fn3) Even that model is now crumbling. In a recent survey of the field, political economist Robert Gilpin, who is sympathetic to free trade, concluded that[c]omparative advantage is now . . . considered to be arbitrary and a product of corporate and state policies. As the concept of comparative advantage has lost status, the argument for free trade has necessarily lost some of its efficacy and has become less relevant. . . .

The evolution of liberal trade theory suggests that liberal economists have begun to give more credence to the basic nationalist contention regarding the arbitrary nature of comparative advantage. They have had to come to terms with a world in which comparative advantage, international competitiveness, and the international division of labor result in large measure from corporate trade strategies and national policies. . . . In a world where who produces what is a crucial concern of states and powerful groups, few are willing to leave the determination of trading patterns solely up to the market.(fn4)

In short, Gilpin's survey of the literature revealed that the predominant body of theoretical writing on the topic today suggests that free trade and its doctrine of comparative advantage are not, and could not be, magic invisible hands guaranteeing the greatest prosperity for the greatest number. There are winners and losers in international trade, depending especially on corporate and government policies. But this is not what we hear in public debate over NAFTA. Even economists who know better cheer while the ideologues in charge of selling NAFTA to the public invoke the simplistic rhetoric of Adam Smith and David Ricardo.(fn5)

b. The Mismeasurement of Trade Benefits by Gross National Product or Other Market Data

The Office of the U.S. Trade Representative boasts that NAFTA will create "the largest and richest market in the world, with 360 million consumers and $6 trillion in annual output."(fn6) Economic growth theory generally measures progress, success, or welfare by Gross National Product (GNP), Gross Domestic Product, or related statistical accounts. No statistician or accountant who works with these measures would claim that they tell us directly whether we are better off or not; they are merely surrogates for progress and welfare. Yet these figures are touted as if they were direct measures of happiness. There is an old saying that some people know the price of everything and the value of nothing. This seems to be true of economists as a class.

There is now a ripe body of critical literature pointing out how deceptive and dangerous it is to rely on GNP or similar data to gauge social progress or welfare.(fn7) Such figures fail to measure enormous portions of economic and social activity, including much of women's work that is outside the formal marketplace.(fn8) Such figures fail to account for depletion of natural resources(fn9) and fail to measure, or they mismeasure, environmental, health, social, and cultural costs and benefits, including distribution of wealth.

The free trade ideologues supporting NAFTA have not only ignored these critical shortcomings in their benefit measurements, but they have been bitterly hostile to the one attempt to force them to measure the environmental impacts of NAFTA. When a conservative, Republican federal district judge in Washington, D.C. held that U.S. law requires an environmental impact statement to be prepared for NAFTA,(fn10) free trade media commentators denounced the decision as, among other things, "loony,"(fn11) and the Clinton Administration appealed and succeeded in having the decision reversed on a jurisdictional technicality.(fn12)

c. The Impossibility of Infinite Global Economic Growth

Free trade theory in its current form assumes that it is possible for traditional economic growth, that is economic growth that consumes nonrenewable natural resources and emits continuous wastes, to expand infinitely.(fn13) The assumption appears to be a grievous error because the global ecosystem has finite resources and finite waste sinks. World Bank economist Herman Daly calls the assumption an impossibility theorem. Together with numerous others, Daly has been waging intellectual combat against the assumption for twenty years.(fn14) In 1987, the United Nations' Brundtland Commission Report lent prestigious international opinion to the notion that traditional economic growth cannot be sustained indefinitely,(fn15) and raised alarm about the frightening negative feedback that the global ecosystem is already manifesting.(fn16) In 1992, political leaders from most countries in the United Nations, including Vice President Albert Gore, met at the Earth Summit in Rio de Janeiro and proclaimed consensus that the global environmental crisis requires us to take the pathway of sustainable development, that is, development that is sustainable into future generations. Those leaders rejected the traditional pathway of economic growth that leads present generations to consume all the resources and fill all the waste sinks to the point of the collapse of the planet's life-support systems.(fn17)

What has been the response of free trade and economic growth theorists to all this? A postscript in the new edition of Herman Daly's and Kenneth Townsend's anthology notes that growth advocates have largely ignored the questions raised by themselves and their colleagues.(fn18) However, economist Julian Simon has responded.(fn19) His prescription is, essentially, not to worry because when natural resources have run out in the past we have always found or invented new ones.(fn20) It is a good bet, says Simon, that we will be able to do so in the future, at least if we encourage unlimited population growth so that we have many more inventive human minds around to work on the problems.(fn21)

As for response to the Brundtland Commission and the Earth Summit, the business community in general and NAFTA negotiators in particular proceeded in complete disregard of the concept of sustainable development until late in the drafting process when the phrase "sustainable development" was...