The myth of free trade

The myth of free trade

by Reinhard Koradi, Dietlikon/Switzerland

Trade agreements between two or more states are not bad in general, in particular, if the principle of equivalence is respected and all contractors benefit from the contracts to the same extent. In other words, free trade agreements reach their limits where they infringe the liberties of the partners. The bad habit of negotiating the agreement behind closed doors, however, had led to some critical questions.

How much freedom does free trade bring?

The term free trade raises expectations for more freedom. Focusing on the question of how much additional freedom is really created by free trade, will soon evoke disillusionment. The processes alone that lead to free trade agreements relentlessly uncover the loss of freedom for the weaker negotiating partners.
Settling free trade agreements is often motivated by the need or the obligation to conquer new markets. The supersaturated home markets in the “mature” industrialized countries can no longer absorb the over-production driven by the growth hysteria. A vent must be found, which absorbs the excess amounts, otherwise a collapse of prices with its drastic loss of profits will follow. The escape route for the growth spiral fueled by the current monetary policy is the geographic market expansion. Free trade agreements or the formation of economic unions are then common strategies to implement the unhindered growth policy and the associated economic dictatorship beyond the country’s borders. Full access to new markets also opens up promising prospects for speculation and is a welcome refuge for the rising billion euro and dollar flood caused by the dubious debt economy. The risky casino economy is given additional impetus by the state guarantee in the euro area, dictated from above.
New markets for large investors can also be opened up via free trade agreements. We can currently observe the opening of agricultural land markets to large-scale foreign investors and rich industrial countries in Eastern Europe, but also in Africa and other regions of the world. The financially powerful investors edge out small farmers from their fields. In addition to attractive returns the landowners also benefit from public funding in many cases. Hunger versus speculative profits, a phenomenon of our times that enforces a grotesque abuse of valuable agricultural land in particular driven by the EU support for bioenergy.

 States lose the freedom to adjust their economies to the needs of the population

Harmonisation, deregulation and liberalisation are promoted everywhere despite the often very different geographical, climatic, cultural, social and economic conditions, true to the principle that power is in the hands of the strongest. Behind this campaign for a neoliberal economic order there is a successful lobby of stakeholders from the headquarters of financial capitals and transnational corporation centres.
The formation of the various economic areas such as the European Economic Community (EEC – which was extended to the political union EU later) or the North American free trade zone established as North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico are appropriate examples. The core of the free trade agreements is unhindered market access. This means respectively that tariffs must be reduced or even abolished, and all diverse production, quality and safety regulations (non-tariff barriers) must either be abolished, or are mutually aligned or accepted. Both tariffs as well as non-tariff barriers to trade are certainly justified from a national perspective. Customs duties may usefully balance the differences in production costs due to different production and quality standards or any price-relevant competitive differences (dumping by means of export subsidies).1 Non-tariff regulations designed to protect the national, regional and local economy and especially the young economies (less developed and emerging countries) are of vital importance. In industrialised countries (mostly smaller economies) there are good reasons to introduce protection measures at the national borders for national, economic, supply, employment, social and security considerations. These administrative barriers are often directly related to the product safety, consumer protection, health policy and the protection of animals and plants in one’s own country. They are part of a comprehensive prevention framework.
With the current free trade agreements the contracting countries lose their freedom to implement necessary protective measures identified in the national interest. It is in the nature of free trade agreements to violate the freedom of the contractors concerned. The benefits of a free trade agreement for an independent country therefore, depend less on the material value of the free exchange of goods, but rather on the involved loss of sovereignty and the associated consequences (tangible and intangible) for the political system and the population. In the context of free trade agreements a gradual transfer of nation state sovereignty onto powerful financial and economic oligarchs on the market can be observed.
A review of the Multilateral Agreement on Investment (MAI) discussed 15 years ago, clearly revealed this intention. Even then the big corporations strived to solidify their power secretly and quietly at monstrous proportions. Only due to the hefty resistance by the public and by the parliaments this project, which had intended to give the companies the same legal status as the nation states, failed at the time. In case it had been implemented the big corporations could have sued, inter alia, the United States for loss of profits.

Are we heading for an “economic NATO”?

Again there are new transatlantic free trade agreements on the table. A Transatlantic Free Trade Area (TAFTA) and a Transatlantic Trade and Investment Partnership (TTIP) are being negotiated between the US and the EU. “The entire TTIP-TAFTA project resembles the monster in a horror movie that goes on and on forever. After all, the benefits that such an ‘economic NATO’ would offer the companies, would be binding, durable and virtually irreversible, because each point might only be amended with the consent of all signatory states”.2
Since the globally operating US corporations seek to settle a similar agreement in the Pacific (Trans-Pacific Partnership), the world is heading towards a system that would install the domination of the most powerful capital groups over large areas on our planet and also legally hedge them. Other states that are not party to the agreement would have to bend to the rules whenever they traded with the US or EU.
The current negotiations on TiSA (Trade in Services Agreement) also mean an explosive for the sovereignty of independent states. This agreement is about the liberalisation of services. Switzerland has been actively taking part in the negotiations since their beginning. TiSA negotiations are conducted under strict secrecy. Around fifty countries are involved. The State Secretariat for Economic Affairs (SECO) negotiated on behalf of the Federal Council – without a mandate of Parliament! The agreement aims at concluding a comprehensive agreement on trade in services. The work is based on GATS (General Agreement on Trade in Services). The participants initially agreed in 2013, inter alia, on the recognition of a “hybrid” commitment list, in which the obligations (MFN, market access, national treatment) are mixed positively and negatively. In addition, the parties agreed on a provision on a ratchet clause and a standstill clause. Similarly to the “accompanying measures” in bilateral agreements with the EU, both the standstill clause and the ratchet clause are probably meant to silence legitimate criticism of the draft agreements.

Who shuns the limelight must have something to hide

In case TiSA was to be successfully completed and implemented, we will face its enormous impact on our everyday lives. It is about liberalisation – especially in the area of public duties. The privatisation of (public) services intends to commercialise the basic needs of the population (transport, administration, school, health, safety, energy and water supply, etc.). This means that the government will hand its duties over to private companies – and, as a result of market opening, it will do so especially to transnational big corporations. The states could set up a negative list and a restrictive clause at the beginning of the negotiations and thus exclude specific areas from deregulation. However, the main focus of the agreement remains rather problematic. What once has been privatised can no longer be nationalised, and what has not been regulated until the agreement will be implemented, cannot be regulated in retrospect. If a country decides to return the public service into the hands of the state, the affected corporations can sue the state for compensations. The secrecy of the strategy may be evidence enough that behind TiSA there are hardly any good intentions for the benefit of the common good. The concern is legitimate that TiSA will bring a corporate dictatorship and open the door to a new colonialism – in western as well as in northern industrial countries.

And what is Switzerland’s position?

Given various initiatives in the National Council, we must assume that Switzerland is once again ready to put its sovereignty on the negotiating table in exchange for alleged benefits of free trade. In addition to a motion by the Greens “The public service is non-negotiable”, which the Federal Council rejected, there is also the Interpellation Trede of 12 December 2014.
The Interpellation Trede (14.4295) requires the disclosure and representation of the substantive differences between GATS offer and TiSA offer.

The text of the interpellation of 12 December 2014:

“The Federal Council is asked to explain what substantive differences between the GATS offer and the TiSA offer exist, particularly with regard to the impact on the alteration of negotiation rules for the opening up of public service areas.


TiSA is a free trade agreement that is not negotiated under the auspices of the WTO, but in secret within a group of ‘really good friends’ in the Australian Embassy in Geneva, although the Federal Council does not have a sufficient mandate.”

Answer of the Federal Council

“Switzerland conducts the TiSA negotiations based on the Doha Mandate. The TiSA negotiations have emerged from the Doha negotiations and seek to return the outcome of the negotiations to the WTO. Since the TiSA negotiations have the same subject and the same negotiating objective as the service part of the Doha negotiations, the Doha mandate of the Federal Council represents an adequate and targeted basis for participation of Switzerland in the TiSA negotiations. [...] The rules of the TiSA process do not differ fundamentally from those of GATS. Both negotiation approaches provide that the coverage area and the extent of the parties’ obligations are established in their national lists with respect to market access and national treatment. The parties thus determine for themselves which obligations they are ready to fulfill. Just like GATS, TiSA also contains the necessary flexibility. [...].
Just like in the GATS agreement, the individual parties thus determine in their commitment list in which sectors and to what extent they grant market access and national treatment, even with respect to standstill and ratchet clauses for the national reservations which are also possible in TiSA. [...] For example, Switzerland has limited its TiSA-offer to obligations which correspond to those of the Doha offer or previously settled free trade agreements. This means that the legal situation concerning public service in the Swiss TiSA-offer is restricted to the same area as in the Doha offer or in the free trade agreement. These include areas such as public education and health care, energy supply (including electricity), public transport and the post office. There is hence no material difference to the GATS/Doha offer or already existing free trade agreements.”3

The Federal Council‘s position on the motion of the Greens and the Interpellation Trede reveals our executive’s very generous dealing with FTAs. This might entail some dangers. Just think of the many open files. In addition to the negotiations on a possible framework agreement with the EU and the above-mentioned transnational agreements, various domestic issues are on the table in the Federal capital Berne and they are very closely related to free trade. Let us mention the agricultural policy with a focus on “food sovereignty” or the educational, health, electricity market and security policy. Based on previous experience we cannot exclude that the Federal Administration and the Federal Council will develop solutions that rely less on personal responsibility and personal power in the country, but are primarily based on the free access to the deregulated international markets.

Free trade instead of own contributions

This can be illustrated by the example of the Federal Council’s counter-proposal to the popular initiative on “Food Security” of the Swiss Farmers’ Union.
The popular initiative submitted on 8 July 2014 with 147,812 valid signatures demands the supply of the population with food from diverse and sustainable local production. Among other things, the cultivated land should be preserved and the administrative burden on farmers be reduced. The farmers are to be guaranteed a comprehensive investment security. The initiators clearly aim at improving food security for the population by means of a secure domestic production and thus at conditions that give all producing farmers in Switzerland a real future perspective and facilitate ensuring food security.
However, the counter-proposal of the Federal Council relies on “free trade”. It aims at achieving food security via the access to international agricultural markets and by a competitive agriculture and food industry. The counter-proposal makes a U-turn out of the initiative. According to the Federal Council’s will, food security in Switzerland should not be ensured by the domestic production of local farmers, but through the free trade, respectively by access to the international agricultural markets. They speak of competitive enterprises in Switzerland. Competitiveness means that agricultural businesses must secure their economic success through personal contributions. Is this already a signal of the Federal Council and the Administration to exchange the diversity of indigenous agriculture by globally marketable agricultural industrial colosses?

A fair-weather policy with considerable danger potential

The willfully promoted decline in farming through AP 2014-2017 (Agricultural Policy) does obviously not lead to reconsidering at the federal level from the perspective of the country‘s supply and food security. The intention to ensure food security through access to international agricultural markets can only be understood if we assume that our authorities assess the current situation through rose-coloured glasses. The idea to delegate the country’s food supply to other countries, can only arise from the lack of confidence in our capability to meet the challenges of our times independently, and the fallacy that Switzerland is surrounded only by “really good friends”. Is it really true – are we not in the middle of an “economic war”? Whatever the answer to this questions may be: We have to protect our own interests and the independence of our country and defend them if necessary.
A short review of the late 19th century might open your eyes. Already then, Swiss agriculture had focused on the needs of the global market. There was a strong orientation of agricultural production towards dairy products and export-oriented cheese production. As a result, Switzerland became increasingly dependent on feed and grain imports from abroad. The “yellow” agricultural land turned into a “green” Switzerland at the end of the 19th century.
However, the international trading system was disrupted by the First World War. There was the problem of the supply of bread grain and flour for Switzerland. Since the turn of the century Australia, Argentina, Russia, Canada and the United States had become the main exporters of grain. For Switzerland the United States had been the main supplier of wheat before the war; during the First World War even up to 99 percent of the wheat supply came from the United States. The global crop failures in 1916 and 1917 led to a shortage and sharply rising grain prices. Therefore, on 1 October 1917 bread and flour had to be rationed.4
Poverty and hunger then tormented the people in Switzerland and led to outbreaks of violence by people in need. – Who can guarantee that this will not happen again?

Direct democracy as a chance

There are always times when the voters in our country have to make use of their direct democratic rights and obligations and take our country’s destiny into their own hands. Now unmistakable signals are required that the Swiss citizens want to maintain their independence. That they are not willing to delegate the provision of food but also all other areas of basic services to foreign countries or transnational corporations by engaging in transnational agreements or organisations. What happened 15 years ago with the MAI agreement can happen again today. The agreement failure was a result of the people‘s resistance and of opposition in the national parliaments. Let us summon this resistance today and insist on our right to self-determination and thus on the disclosure of the various negotiation dossiers.
TTIP, TiSA and TAFTA are neoliberal constructs, which are in no way compatible with the European cultures and our national identity. They are anti-democratic projects that disenfranchise citizens and dismantle the nation state. The role that financial aristocracy and the new elites assign to the state and its citizens – i.e. to be a stopgap for billion-dollar losses of profits – needs a thorough correction.
The Swiss voters can request the necessary corrections by popular initiatives or referendums. In addition, we will vote for the National Council and the Council of States in autumn 2015 in federal elections. These are important opportunities to make a political decision for the independence of our country. The candidates who want to represent us in the next legislature are well-advised not to hide behind secrecy, but reveal their political views and attitudes. There is no room for hidden agendas in a direct democracy.     •

1    In Switzerland, for example, the production cost is much higher due to the organic production regulations and a generally higher level of costs.
2    Source: Le Monde diplomatique of 11.8.2013
3    Interpellation Trede
4    <link http: landesstreik versorgungskrise.html>

Genetically modified food from EU countries and the US instead of high-quality Swiss production?

The “Schweizerischer Bauernverband SBV” (Swiss Farmers’ Union) wants to

  • ensure the supply of the Swiss population with locally produced high-quality food
  • protect the existence of Swiss farmers.

The “counter-proposal”

  • does away with the protection of the “local” production – the real core of the initiative!
  • tries to slyly foist the unpopular agricultural agreement with the EU and the linking with TTIP on the Swiss people – an integration into the unprotected global agricultural free trade with all its “blessings” for consumers
  • thus aims directly at the perdition of Swiss farmers.

Is the Parliament permitted to declare something like that a “counter-proposal”?

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