The North American Free Trade Agreement (NAFTA) is the quintessential managed-trade vehicle sold under the rubric of
free trade. The first tip-off should be its size.
While we earlier saw how 54 words in the U.S.
Constitution established free trade among the
states of the Union, NAFTA weighs in at over
2,000 pages, 900 of which are tariff rates. (Under true free trade, there is one tariff
rate — 0 percent). The agreement does have
trade-liberalizing features, to be sure. Consisting of a 10 percent reduction in tariffs to be
phased in over 15 years, however, they are all
but buried under the profusion of controls
NAFTA also establishes.
In the first place, the benefit from those
tariff reductions are jeopardized by the agreement's “snap-back provisions.” Those permit
pre-NAFTA tariff levels to be restored against
imported items which “cause or threaten
serious injury to domestic industry.” In other
words, NAFTA supports free trade as long as
it does not promote international competition which is too hot for favored domestic
firms to handle. In addition, NAFTA's rules
of origin are designed to divert trade from
the world's most efficient suppliers to North
America's most efficient suppliers. This hobbles the international division of labor instead
of expanding it, as true free trade does.
The importance of NAFTA clauses that
keep out foreign goods came to light as U.S.
clothing manufacturers railed against the import of wool suits from our NAFTA partner
Canada. The suits in question were made
from third-country wool not covered by
NAFTA rules of origin. Since Canadian tariffs
on foreign wool were lower than U.S. tariffs
(10 percent vs. 34 percent), Canadian suits
sold for less and soon claimed a large share of
the U.S. market. The fact that the entire
discussion of this issue centered on closing
this "loophole" in NAFTA rather than on
lowering the injurious U.S. tariff on wool
should prove how devoted NAFTA's supporters are to free trade.
Free trade does not depend on international bureaucracies, yet NAFTA creates several of them. Its Commission for Environmental Cooperation was set up to enforce the
environmental aim of sustainable growth.
One tactic it uses is to prevent countries from
trying to create a friendlier environment for
investors by relaxing any extant environmental regulations. Such rules are to be enforced
by trade sanctions and fines, with the latter to
go into a slush fund for “environmental law enforcement.”
—Robert Batemarco, “Why Managed Trade Is Not Free Trade,” The Freeman: Ideas of Liberty 47, no. 8 (August 1997): 489.
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