Free Trade Isn't Fair

Free trade doesn't make things better for the average person. It makes things worse.

Dolan calls the phenomenon "downward harmonization," which is a riff on "harmonization," the term used to describe efforts by industries to create national product standards and regulatory policies that make it easier to move production anywhere in the world and to create jobs in developing countries. But those jobs, Dolan says, often go to countries with the weakest laws governing labor, health and safety, and the environment -- countries where corporations can pay substandard wages and can employ workers in sweatshop conditions. More often than not, the result is that a lowest-common-denominator logic prevails, he says, especially if big companies are able to influence the rule-making procedures.

Dolan's group has documented how the movement of jobs across borders compromises living standards for workers in industrialized countries, and how pressure from international regulators and from big companies has hurt efforts to regulate dangerous technologies or hazardous products in developing countries. Even human-rights issues suffer -- getting pushed off the agenda in favor of business-driven rights like copyright protection. "It's a lowering of consumer protection globally that we're documenting here at Global Trade Watch," Dolan says emphatically. "Each of these sectors feels the costs of globalization."

Free trade is bad for democracy, not pro-democracy. Forget places like Indonesia or China, and the complex interplay between market forces, cronyism, and democratic advances and retreats. International free-trade organizations like the WTO are themselves undemocratic institutions that are driven by corporate agendas, rather than by popular needs, Dolan argues. The WTO is made up of one delegate each from its 135 member countries. Those delegates, who are often drawn from trade ministries and who have close ties to corporations, are involved in the negotiations over free-trade rules. Conflicts are heard by a three-person panel behind closed doors -- and its decisions are binding.

In the name of free trade, then, the WTO essentially overrides national sovereignty. Over the past two years, as a de facto international court for trade disputes, it has regularly overruled national safety and environmental regulations that have been judged to be a barrier to trade -- and it has levied stiff fines on nations that have refused to alter their domestic standards. For example, the WTO ruled that the European Union had no right to ban imports of hormone-treated beef from the United States, and then it hit the EU with $116 million in tariffs on its goods. In another case, it overruled a U.S. trade ban that had prohibited the sale of shrimp caught in nets that aren't designed to let sea turtles escape. India had protested the rules to the WTO, which subsequently sided with India over the United States. The list goes on and on, says Dolan, but it all adds up to the same thing: The WTO is an institution that flies in the face of democratic decision making.

What Dolan and his fellow activists envision is an entirely different global entity, one that is based on a broader set of concerns than the WTO agenda. "We want to create multilateral agreements and supranational institutions that reflect our interests and not the narrow interests of transnational corporations," he says. "We want trade agreements that make human rights and labor rights as important as copyrights. We want environmental and consumer standards to be enforceable by trade sanctions, the same way that corporate rights are protected by trade sanctions. Values other than the bottom line should be incorporated into commercial agreements. That's what we want."

Free trade is an example of old-style economic thinking, not of some new intellectual paradigm. Champions of free borders and open markets love to portray their opponents as being hopelessly out of step with cutting-edge business practices. Nonsense, says Dolan. Free-trade policies are themselves old-fashioned -- modeled on an outdated Cold War paradigm that has little relevance in today's business world.

The theoretical underpinnings of free trade, loosely referred to as the "Washington consensus," developed in the aftermath of World War II. Free trade, the reasoning goes, promotes economic growth, which in turn promotes an environment that is conducive to nurturing democracy and human rights -- and, ultimately, to fighting communism.

But critics of globalization argue that things didn't work out quite so neatly. Developing countries that were supposed to benefit most from free trade have often been most hurt by it. And any financial gains that have been made have often been limited to an elite segment of a population -- creating greater social instability. Struggling economies that open their doors to free trade, critics say, do not necessarily become stronger; they become more vulnerable to outside forces and more likely to be victims of projects that consume valuable natural resources, rather than create sustainable growth.