"It's going to be easier to sell your product to 44 million new customers," proclaimed President Bush at a recent event staged to create support for passing the Central American "Free Trade" Agreement (CAFTA) before Congress adjourns for summer.

If his aides hadn't screened the crowd to minimize any chance of a hard question, someone might have asked just which imported goods Nicaraguans, who earn an average of about $2,300 annually, are planning to purchase.

Or a skeptic might have questioned how Central America, with a combined economic output less than many U.S. cities, is going to buy enough goods to help reduce a trade deficit that has surged from $38 billion to $617 billion under the trade policies of Presidents Bill Clinton and George W. Bush.

As with the North American Free Trade Agreement (NAFTA), the leading U.S. export will be jobs. According to the U.S. Department of Commerce, each $1 billion increase in trade deficit eliminates about 13,000 domestic jobs.

And for anyone inclined to sacrifice American prosperity to aid our poorer neighbors to the south, it's a false hope. During NAFTA's 12 year influence, Mexicans' real wages have fallen and poverty is rising.

CAFTA would benefit primarily transnational corporations, but not just by reducing tariffs. In fact, pacts like CAFTA are about preventing genuine competition as often as enabling it, due to politically-powerful corporations lobbying to expand the most costly forms of protectionism -- patents, copyrights and other monopolies grouped under "intellectual property rights."

Such rights often are essential to ensure writers, researchers, musicians and others receive compensation for their work. Often, however, what's patented is taxpayer-funded research, given away or sold for a pittance to corporations that reap huge profits, thanks to government-created monopolies.

In 2003 publicly-financed pharmaceutical research totaled $27 billion -- nearly equaling domestic drug research by all businesses combined. Public investment is even greater when you disregard "lifestyle drugs" like Viagra. According to a Massachusetts Institute of Technology study, 11 of the 14 most medically-significant drugs developed in the U.S. between 1970 and 1995 originated with government-funded research.

Yet most of this public investment is then privatized via exclusive licenses to drug companies. For example, the best-selling cancer drug Taxol was developed with $500 million in taxpayer research and testing, beginning in the 1960s--decades before its commercial debut.

Yet despite our public investment, we got nothing in return. Actually, less than nothing.

First, the National Institutes of Health granted exclusive production rights to Bristol-Myers Squibb Inc. for a pitiful 0.5% royalty. Then we paid Squibb almost $700 million in just the first five years of Taxol's production for government health care programs, at markups that would make street drug dealers blush -- up to 2000 percent over production costs.

Such profit margins would be impossible without government-created and enforced monopolies. Think "corporate socialism," not free market.

And while import tariffs rarely increase product prices more than 25 percent, patent-protected monopolies can gouge us for 20 times the cost we'd see in a competitive market.

Protecting these obscene profit margins abroad through trade pacts that poor countries often have little choice but to sign effectively mandates suffering and death in many instances. Poor countries that have violated trade agreements to provide generic AIDS drugs and save thousands of lives have been sued under trade treaty provisions to halt the practice.

The retail side of the drug trade demonstrates another angle of how corporate power has distorted market competition. Consumers Reports magazine issued a detailed report in 2003 showing that independent pharmacies beat chain stores on price, service and overall satisfaction. So why have more than 10,000 independent pharmacies disappeared since 1990?

Not only does massive advertising power mislead people that chain stores provide better value, government discrimination also harms independents. The U.S. Supreme Court ruled in 1992 that states could not collect sales tax on catalog or internet sales to in-state residents unless authorized by Congress. The Court's bizarre reasoning essentially said that mail-order businesses should be protected from having to collect the same taxes as community-based businesses because they built their operations on the expectation of such favoritism. So in 45 states, a community-serving business must compete hobbled by a penalty that averages nearly 8 percent of a product's cost.

Some state governments also hinder free market competition by forcing state employees to fill their health plan prescriptions at chain stores or online vendors. The state government may save a few dollars on the internet sales, but employees lose important personal service and communities lose vital businesses. CAFTA and other proposed "free trade" agreements make no attempt to stop this government discrimination against small businesses.

Where are those "pro-business" politicians and "free market" think tanks when it's entrepreneurs, not their corporate funders who are undermined by government policies? Apparently they don't like to confront the fact that political power determines which markets will or will not be free. But distinguishing theoretical free markets from the disturbing realities of corporate capitalism is essential for evaluating trade treaties.

The fact that NAFTA's legacy undermines the credibility of almost every argument for CAFTA will not dissuade its boosters -- they're pushing for a vote by the end of July. While the economic impact of CAFTA on the U.S. will be miniscule compared to NAFTA, corporate lobbyists are spending big out of fear that failure to pass CAFTA will derail momentum for global corporatization.

Enabling true market competition remains an important tool for building economic opportunity, but don't believe the "free trade" hype. These trade pacts are designed to consolidate power and profit for the giant corporations that create them, at great cost to average citizens and business people.

© 2005 ReclaimDemocracy.org

 

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