“Free trade” and its partner, “globalization,” are the happy thoughts of the day, with few in either party of any ideological persuasion expressing disagreement. But there are reasons to disagree with the direction in which the words point. Last week an article in the New York Times reminded us of some of them.
So dependent on exports to the United States have both Mexico and Canada become, the Times reports, that our recession means they slump too. Each country now sends the United States more than 85 percent of its exports, but when we have a recession, which we now do, Americans stop buying. That means Mexico and Canada suffer. But, because both nations are now linked with the American economy through the North American Free Trade Agreement (NAFTA), there’s nothing anyone can do about it.
“This is the price both countries are paying for their close integration with the United States,” Riordan Roett, an international economist at Johns Hopkins University, told the Times. “They benefit greatly when the United States grows, but when there is a downturn they feel the social and economic consequences immediately.”
In the case of Canada, the slump means that its manufacturers are stuck with a large inventory of goods they can’t sell—expected to carry over until 2002. That means Canadian companies halt production, since they can’t sell any more goods, and start laying off workers. Unemployment in Canada is now 4.7 percent and may rise to more than 6 percent this year.
In the case of Mexico, as the governor of the country’s central bank, Guillermo Ortiz, told the Times, “The weakened economy in the United States will mean decreased Mexican exports, less direct foreign investment and delays in the start of important new manufacturing projects.”
Eventually, both countries will no doubt recover, but even so, there are some lessons to be learned.
Lesson One is that trade means dependence. The more a nation trades with another, the more dependent its economy becomes with those of other nations. That’s the main reason Free Trade Utopians always gabble on about how free trade means world peace. Unfortunately, it has never meant peace, and it’s not uncommon for major trading partners to go to war with each other.
The more one nation trades with another, the more dependent they become on each other, and the more vulnerable each is to the weaknesses in the economy—and government and society and culture of the other. If the consumers of Nation A no longer want to sip Wonder Cola during their siestas, then Nation B, which exports Wonder Cola, takes a dive—and so do all the workers and investors who depend on the nasty beverage in Nation B. But if Nation A has a revolution or a religious awakening or a civil war, it may start restructuring its economy to avoid any connection with Nation B at all. Then Nation B may take a dive and not come to the surface again.
But, if Lesson One of Free Trade is dependence on economies, states and cultures over which we have no control or influence, Lesson Two is that Lesson One may mean political integration as well. Free trade drives transnational government and the erosion of national sovereignty—precisely so one (or each) country can have control of what goes on in the other one. Indeed, that’s exactly what the U.S. ambassador to Canada, Paul Cellucci, suggested last summer.
Bubbling with glee at the immense success he thinks NAFTA represents, Mr. Cellucci told Canada’s National Post that he believes the borders between the three North American states should be dismantled. “Mr. Cellucci,” the Post reported, “the former governor of Massachusetts and a close friend of George W. Bush … suggested the borders between Canada, the United States and Mexico be dismantled with the aim of achieving a more fully integrated economy.” A Canadian transnationalist, Maurizio Bevilacqua, chairman of the Canadian House of Commons finance committee, made similar noises. “With NAFTA, the economies of Canada, the U.S. and Mexico are becoming increasingly integrated…. we have to take the logical steps in maximizing the benefits of such an agreement.”
Just so. The next logical step after free trade breeds economic interdependence is the political and cultural interdependence that dismantling the borders would mean. If tax policies, regulations, labor laws and other politically driven forces in Nation A affect its economy, then those dependent on Nation A’s economy in Nation B will have to have a say in determining what they are.
Most Americans bought into the premises of free trade and globalization without thinking through their implications for national sovereignty, national independence and the survival of the American identity as a civilization and a nation. But the implications are clear enough, and maybe we should start thinking about them now.