FacebookTwitterGoogle+RedditEmail

Trade Pacts: How Super Rich Get Richer

by DEAN BAKER

Free trade is like apple pie, everyone is supposed to like it. Economists have written thousands of books and articles showing how everyone can gain from reducing trade barriers. While there is much merit to this argument, little of it applies to the trade pacts that are sold as “free-trade” agreements.

These deals are about structuring trade to redistribute income upward. In addition these agreements also provide a mechanism for over-riding the democratic process in the countries that are parties to the deals. They are a tool whereby corporate interests can block health, safety, and environmental regulations that might otherwise be implemented by democratically elected officials. This is the story with both the Trans-Pacific Partnership (TPP) now being negotiated by General Electric, Merck and other major corporations who have been invited to the table, as well as the EU-US trade agreement.

But trade agreements don’t have to be designed to make the rich richer. It is possible to envision trade deals that actually would liberalize trade. Nafta and it successors were designed to push down the wages of manufacturing workers by making it as easy as possible to set up operations overseas. This put US steelworkers and autoworkers in direct competition with the low-wage workers in the developing world, pushing down wages of manufacturing workers in the United States, and by reducing the number of manufacturing jobs, the wages of less educated workers more generally.

This is all very simple and straightforward. But suppose that instead of designing trade deals to give us cheaper manufacturing workers we designed trade deals to give us cheaper doctors. In the United States we pay our doctors almost twice as much as the average in other wealthy countries, and almost three times as much as in countries like Sweden or Norway. Suppose we structured a trade deal to get our doctors’ pay in line with pay in other wealthy countries.

If we could save an average of $100,000 per doctor, this would translate to savings of roughly $85bn a year, which would come to more than $1tn over the next decade. Throw in dentists and a few other highly paid professions and we would be talking real money. Just the savings on doctors’ pay would come to more than $12,000 for an average family of four over ten years. This dwarfs the potential gains that are projected even by supporters of the trade agreements now being negotiated.

But we can be sure that freer trade in physicians’ services will not be on the agenda in these trade deals. While the United States brings in Stem workers, nurses, and even teachers from other countries in order to keep their wages down in the United States, no one in a policy position will talk about doing the same with doctors.

The reason is very simple: doctors have lots of money and power. Roughly a third of them can be found in the top 1%, and nearly all would be in the top 3% of the income distribution.

Of course, trade can be used to bring down prices in other areas as well. The United States pays close to twice as much for its prescription drugs as people in other wealthy countries. This is the deliberate result of a patent policy that gives unchecked monopolies to drug companies for decades. In contrast, every other wealthy country couples patent monopolies with price controls, negotiated prices or some other policy that limits the extent to which drug companies can exploit their monopoly.

The United States could simply change its patent policy, but with that route being politically blocked, it could in principle use free trade to bring about the same result. With the country spending over $300bn a year on drugs at present, the potential gains here also could be well over $1tn over the course of a decade.

The industry will claim that lower drug prices will hurt the incentive to develop new drugs, but we can switch to more modern and efficient methods for financing research. By raising prices by tens or even hundreds of times above their free market price, drug patents create the same sort of distortions and waste that we would expect from tariffs of several thousand percent. It’s not hard to envision a system that leads to less waste and corruption.

There are many other areas where trade could, in principle, be used to bring about gains for large segments of the US population as well as its trading partners. Unfortunately, we are not likely to see trade agreements that will produce such broad gains. This has nothing to do with trade per se, it has due to with the fact that these trade deals are developed and negotiated by corporate interests for corporate interests.

With the drug companies sitting at the negotiating table at the TPP, does anyone think the deal will actually lower drug prices? Do we expect good rules regulating fracking when the oil and gas industries are writing them? And will the big banks working on the financial section produce good rules for regulating finance?

Yes, free trade can benefit the country as a whole. But the trade deals we will see in the next year have nothing to do with free trade, they are just one more item on the agenda for redistributing wealth upward.

Mark Weisbrot is an economist and co-director of the Center for Economic and Policy Research. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.

This essay originally ran in the Guardian.

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of  Failed: What the “Experts” Got Wrong About the Global Economy (Oxford University Press, 2015).

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
December 02, 2016
Friday - Sunday
John Pilger
The Coming War on China
Jeffrey St. Clair
Roaming Charges: The CIA’s Plots to Kill Castro
Paul Street
The Iron Heel at Home: Force Matters
Pam Martens - Russ Martens
Timberg’s Tale: Washington Post Reporter Spreads Blacklist of Independent Journalist Sites
Andrew Levine
Must We Now Rethink the Hillary Question? Absolutely, Not
Joshua Frank
CounterPunch as Russian Propagandists: the Washington Post’s Shallow Smear
David Rosen
The Return of HUAC?
Rob Urie
Race and Class in Trump’s America
Patrick Cockburn
Why Everything You’ve Read About Syria and Iraq Could be Wrong
Caroline Hurley
Anatomy of a Nationalist
Michael Hudson – Steve Keen
Rebel Economists on the Historical Path to a Global Recovery
Ayesha Khan
A Muslim Woman’s Reflections on Trump’s Misogyny
Russell Mokhiber
Sanders Single Payer and Death by Democrat
Roger Harris
The Triumph of Trump and the Specter of Fascism
Steve Horn
Donald Trump’s Swamp: Meet Ten Potential Energy and Climate Cabinet Picks and the Pickers
Louis Proyect
Deepening Contradictions: Identity Politics and Steelworkers
Ralph Nader
Trump and His Betraying Makeover
Stephen Kimber
The Media’s Abysmal Coverage of Castro’s Death
Dan Bacher
WSPA: The West’s Most Powerful Corporate Lobbying Group
Nile Bowie
Will Trump backpedal on the Trans-Pacific Partnership?
Ron Ridenour
Fidel’s Death Brings Forth Great and Sad Memories
Missy Comley Beattie
By Invitation Only
Fred Gardner
Sword of Damocles: Pot Partisans Fear Trump’s DOJ
Renee Parsons
Obama and Propornot
Dean Baker
Cash and Carrier: Trump and Pence Put on a Show
Jack Rasmus
Taming Trump: From Faux Left to Faux Right Populism
Ron Jacobs
Selling Racism—A Lesson From Pretoria
Julian Vigo
The Hijos of Buenos Aires:  When Identity is Political
Subcomandante Insurgente Galeano
By Way of Prologue: On How We Arrived at the Watchtower and What We Saw from There
Dave Lindorff
Is Trump’s Idea To Fix the ‘Rigged System’ by Appointing Crooks Who’ve Played It?
Aidan O'Brien
Fidel and Spain: A Tale of Right and Wrong
Carol Dansereau
Stop Groveling! How to Thwart Trump and Save the World
Kim Nicolini
Moonlight, The Movie
Evan Jones
Behind GE’s Takeover of Alstom Energy
James A Haught
White Evangelicals are Fading, Powerful, Baffling
Barbara Moroncini
Protests and Their Others
Joseph Natoli
The Winds at Their Backs
Cesar Chelala
Poverty is Not Only an Ignored Word
David Swanson
75 Years of Pearl Harbor Lies
Alex Jensen
The Great Deceleration
Nyla Ali Khan
When Faith is the Legacy of One’s Upbringing
Gilbert Mercier
Trump Win: Paradigm Shift or Status Quo?
Stephen Martin
From ‘Too Big to Fail’ to ‘Too Big to Lie’: the End Game of Corporatist Globalization.
Charles R. Larson
Review: Emma Jane Kirby’s “The Optician of Lampedusa”
David Yearsley
Haydn Seek With Hsu
FacebookTwitterGoogle+RedditEmail