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
February 24, 2017
Friday - Sunday
Jeffrey St. Clair
Roaming Charges: Exxon’s End Game Theory
Pierre M. Sprey - Franklin “Chuck” Spinney
Sleepwalking Into a Nuclear Arms Race with Russia
Paul Street
Liberal Hypocrisy, “Late-Shaming,” and Russia-Blaming in the Age of Trump
Ajamu Baraka
Malcolm X and Human Rights in the Time of Trumpism: Transcending the Master’s Tools
John Laforge
Did Obama Pave the Way for More Torture?
Mike Whitney
McMaster Takes Charge: Trump Relinquishes Control of Foreign Policy 
Patrick Cockburn
The Coming Decline of US and UK Power
Louisa Willcox
The Endangered Species Act: a Critical Safety Net Now Threatened by Congress and Trump
Vijay Prashad
A Foreign Policy of Cruel Populism
John Chuckman
Israel’s Terrible Problem: Two States or One?
Matthew Stevenson
The Parallax View of Donald Trump
Norman Pollack
Drumbeat of Fascism: Find, Arrest, Deport
Stan Cox
Can the Climate Survive Electoral Democracy? Maybe. Can It Survive Capitalism? No.
Ramzy Baroud
The Trump-Netanyahu Circus: Now, No One Can Save Israel from Itself
Edward Hunt
The United States of Permanent War
David Morgan
Trump and the Left: a Case of Mass Hysteria?
Pete Dolack
The Bait and Switch of Public-Private Partnerships
Mike Miller
What Kind of Movement Moment Are We In? 
Elliot Sperber
Why Resistance is Insufficient
Brian Cloughley
What are You Going to Do About Afghanistan, President Trump?
Binoy Kampmark
Warring in the Oncology Ward
Yves Engler
Remembering the Coup in Ghana
Jeremy Brecher
“Climate Kids” v. Trump: Trial of the Century Pits Trump Climate Denialism Against Right to a Climate System Capable of Sustaining Human Life”
Jonathan Taylor
Hate Trump? You Should Have Voted for Ron Paul
Franklin Lamb
Another Small Step for Syrian Refugee Children in Beirut’s “Aleppo Park”
Ron Jacobs
The Realist: Irreverence Was Their Only Sacred Cow
Andre Vltchek
Lock up England in Jail or an Insane Asylum!
Rev. William Alberts
Grandiose Marketing of Spirituality
Paul DeRienzo
Three Years Since the Kitty Litter Disaster at Waste Isolation Pilot Plant
Eric Sommer
Organize Workers Immigrant Defense Committees!
Steve Cooper
A Progressive Agenda
David Swanson
100 Years of Using War to Try to End All War
Andrew Stewart
The 4CHAN Presidency: A Media Critique of the Alt-Right
Edward Leer
Tripping USA: The Chair
Randy Shields
Tom Regan: The Life of the Animal Rights Party
Nyla Ali Khan
One Certain Effect of Instability in Kashmir is the Erosion of Freedom of Expression and Regional Integration
Rob Hager
The Only Fake News That Probably Threw the Election to Trump was not Russian 
Mike Garrity
Why Should We Pay Billionaires to Destroy Our Public Lands? 
Mark Dickman
The Prophet: Deutscher’s Trotsky
Christopher Brauchli
The Politics of the Toilet Police
Ezra Kronfeld
Joe Manchin: a Senate Republicrat to Dispute and Challenge
Clancy Sigal
The Nazis Called It a “Rafle”
Louis Proyect
Socialism Betrayed? Inside the Ukrainian Holodomor
Charles R. Larson
Review: Timothy B. Tyson’s “The Blood of Emmett Till”
David Yearsley
Founding Father of American Song
FacebookTwitterGoogle+RedditEmail