Monday, August 14, 2006

To free trade with USA, or not to free trade, that's the question

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For some time now the rumours about Uruguay consolidating a free trade agreement (aka FTA, or TLC in spanish) with the United States of America have been going on (and on, and on).

The former government started negotiations to establish this agreement with the number one world power, and the foreign affairs office of the current government continued to work in the same direction.

After years of negotiations it now seems that the the situation, and the mood in the states are favorable to this kind of agreement, but now that everything is given to lock the deal, looks like our government is not like really really sure it'd be the best, or at least not everyone.

There have been a number of contradictory declarations coming from members of the government. Contradictory to the point of being funny. You would hear about a ministry saying that a FTA is not within the president's agenda, right after attending a meeting with the president and the rest of the ministries, and more or less at the same time read the president talking about the need to strenghten our relationship with the states. Just so that you know, the president Tabare Vazquez, is in favor, as is the ministry of economy, Daniel Astori, but others like Gargano, the ministry of foreign affairs, and the ministry of social development are not.

The president referred to this opportunity in terms of: "sometimes the train only passes once".

To understand the core of the contradiction, you should know that our current administration (which I voted), is formed by a leftist coalition, that ranges in the political spectrum from center to the extreme left, including ex guerrilla members (some say trained in cuba). Not so long ago, when they were opposition, they wouldn't tolerate, and critisized, any hint of negotiation with the states, but now the tide has changed, they are government and opinions are divided. How do this guys match old enemies, and ideals, with current economic needs?

Some related, interesting facts:
  • Every country that has signed a free trade agreement with the U.S. has seen profit out of it (mexico, chile)
  • The U.S. is Uruguay's biggest buyer
  • Today Uruguay pays tons to the U.S. only in taxes, for every product exported there.
  • Out of ten uruguayans, six are in favor, three are against, one just doesn't care.
  • The other two uruguayan important political parties are in favor of the FTA
  • The Mercosur as it is right now, is incompatible with this sort of agreement, made out of the block
  • There's nothing confirmed yet between Uruguay and the U.S.
Makes me wonder to what extent do old ideals prevent the current administration from making smart moves?


Anonymous said...

You say others have made profit out of FTAs with the US and mention Mexico as an example. Well, no doubt somebody in Mexico has made big money from dealing with US corporations and allowing them to export their polluting and employee-exploitative industries. But ask the women in the maquiladoras, the sweatshop workers and the people of southern Mexico if they think they're better off. The current form of FTA is really a free pass to multinational companies to make their own laws in other countries. It is a 'bloodless' coup of countries who believe that the US is a benevolent neighbor. Beware. Make agreements with your closest neighbors but be very careful about entering into a Faustian deal with the US and its corporations.

Anonymous said...

It's a shame that the term "Free Trade" SOUNDS so beneficent. The label was probably invented by lawyers, who spend their entire careers undermining "objective values".

From the standpoint of somebody who lives in the U.S., it's readily observable that NAFTA has been beneficial to multi-national corporations and governments (but NOT to the citizens of the countries in which such free trade agreements are in force.)

In plain English, ALL free trade agreements are anti-labor and anti-environment. Show me one that isn't! Clearly, this can't be a good situation for the majority of the population.

After NAFTA, the next benchmark is the Central American Free Trade Agreement (CAFTA), which recently passed, courtesy of the de-facto Bush administration, in coalition with other well-positioned globalists.

The global power elites intend to create a series of interlocking trade agreements, in order to form the Americas into one large trading block once the Free Trade Agreement of the Americas (FTAA) is signed.

Even more ominous is the fact that free trade agreements are designed to undermine the sovereignty of nations, and self-determination of the people. This is not a "leftist" concept; it is simply the fact of the matter!

The U.S. government will continue doing everything it can to bribe, coerce, and entice the nations of South America into joining their free trade club. Instead of "one big happy family", it will be a situation where bureaucrats and foreign tribunals will dictate the terms of how the rest of us should live. (Or, more correctly speaking, how THEY would like us to live!)

Here in the U.S., and elsewhere, the power elites hold closed secret meetings in which armed guards keep the public and the news media out. Ask yourself this -- Would somebody conducting honest and forthright business have the need to use armed guards to keep the public from finding out about about something that will radically alter their lives?

Do a relatively miniscule number of powerful people have the right to impose their will on the majority? At best, this is an extremely undemocratic process. At worst, it is a recipe for disaster, the utter and complete loss of freedom for working people throughout the world!

Anonymous said...

Bullshit. Your denounciations of "corporate America" clearly display where you're coming from. México has more than quadrupled its exports to the United States, has made huge gains in productivity and wages and has practically eliminated employment in Northern México. All of this in the middle of a gigantic, heavily burocratic federal government, with somewhat heavy taxes, barbaric levels of corruption, monopolies in services, etc. If México got its act together, it could profit even more. For other examples of the benefits of free trade, go ask the Chileans, or the Singaporeans, or the Australians, or the whole continent of Europe for that matter (that applies only to intra-European trade of course).

A free pass to multinational companies? Yes, please! But the idea that they make up their own laws? That's bullshit. It simply isn't so. Otherwise, how do you explain the billions of Dollars that American investors have lost in Latin America due to reckless nationalizations, absurd economic policies and communism? All the way from Fidel Castro's coup d'etat to Evo Morales and Hugo Chávez, Latin America is so hostile to "corporate America" that it's actually a miracle that they might still be interested in investing here. If they really are those mighty, demonic, scheming evil vortexes of out-of-control capitalism, then how do you explain the expropiations in Venezuela, Bolivia and now even in Argentina?

The label of "free trade" is clearly descriptive of what it is: the only ones who use deceitful slogans are commmunists. Free trade means that the government shall not interfere in the free exchange of goods and services, through prohibitions, tariffs, subsidies, quotas, discriminatory treatment, etc. It's very clear.

The type of person who has benefited the most from NAFTA is not to be found in the United States. It's the average Mexican worker, who has found more and better jobs with better wages and better conditions. The maquilas (NAFTA) are the best thing that have happened to México since Benito Juárez was President. Only Communists like AMLO are against NAFTA, and not even he is so stupid as to come out fully against it. Why? If you're going to feed me some crappy answer about American power or hegemony, then please explain to me the existence of PeMex: a fully nationalized oil company right next to the USA, not once subjected to a grab, conquest or purchase by American investors.

How is a free trade agreement anti labor? That's just dumb. By definition, the exchange of goods means that labor is employed in the production of said goods. Of course, I know what you mean by "labor". You mean unions, you mean progressives, you mean communist ideas of redistributing wealth and controlling society. That's why free trade is so great. It tears to shreds the bullshit retarded ideas that people like you have. Anti-environment? Foreign companies have to operate according to the same laws as national companies. Where's the anti-environmentalism in free trade? Why don't you just come out against capitalism as a whole? I bet you US$ 100 that you consider capitalism to be the enemy of the innocent worker, the independent female, the poor ignorant "Third World" citizen who is taken advantage of, gay people, intellectuals, etc. Guess what. You're full of shit! Why don't you come out of the closet and proclaim your support of communism instead of disseminating lies over the Internet? It's because of morons like you that Latin America has done so awfully bad this century. For following the dictates of elitists like yourself who claim to have the right formula for "balancing" society, redistributing wealth as if it belonged to you in the first place, and so on.

By the way, the "public" you speak of who protest WTO meetings? They're no "public". That's another of your bullshit lies. They are union people, subsidized Korean farmers, communist activists, Palestinian sympathizers, radical environmentalists, feminists and all the loony types of the global left. The real public doesn't give a shit about your pet causes and supports free trade.

gabouy said...

First of all I'd like to thank everyone for leaving your thoughts on the subject, which, as we all can see, is quite controversial.

In my humble opinion, it's time for latin america to stop blaming everyone else for our own problems, we have a wealth of natural resources (well, not particulary uruguay ;), that lots of others (rich others) don't, and yet can get out of the hole we are in.

Free trade is not the silver bullet, it's just that... free trade, to be able to export without paying taxes to the buying country. Making the whole thing more profitable.

The only drawback I can see so far for Uruguay in this kind of agreements are the small font letters in the contract that the US may write, like pledging alliance to some U.N. motion in the future, backed by them (like attacking iraq), or even worse, giving up sovereignty to some natural resource, like water.

This post was in part inspired by a book I read recently, written by Andres Oppenheimer, called "Cuentos Chinos". The book introduces and tries to analyze, the "smart moves" that made some countries progress, like Ireland, Eastern Europe, China, India. All of which come from situations very similar to those existing in latin america. I think is worth it, if you are able to read spanish, I do recommend it.

again, thanks, bye

Anonymous said...

Another good thing about an FTA with the states for Uruguay is that hardly any products are made in the US any more. We buy everything from other places, mostly China, so it is not likely that a lot of workers in Uruguay will lose jobs because of competition from the US. We export a lot of food products, but with Brazil and Argentina as neighbors Uruguay probably imports a lot of food already.

The main benefit may be if the agreement requires Uruguay to lower your own tariffs and taxes on imports. They are a very unfair way for the government to raise money, because the prices go up for poor people who only have enough to live on.

I read your post about the income tax proposal that was being debated, (maybe it is the law now) and that would be a better way to collect taxes, if it is kept simple and fair.

I am thinking of retiring in Montevideo in a few years, and want you to know how interesting and useful I find your blog. Please keep it going.

Anonymous said...

great discussion.... Being from Canada, and having a background in Political Studies and Economics, I'd like to share some of Canada's experience regarding Free Trade with US. I'm no expert, but I have witnessed the changes in the Canadian economy since the 1988 FTA, and the 1993 NAFTA. Canada and the US do over $1Billion US$ in trade, every day.

That has increased dramatically over the last 15 years. It has been, for the most part very good for Canada. However, here are the caveats....

-You won't win a trade dispute with the US, even though you have a binding dispute settlement mechanism (study the softwood lumber deal for more insight)

-Things will go well, as long as you're the resourse-based economy, and they need resources.

-At US election time, be prepared for protectionist rhetoric.

-The "free trade" deal with the US will only work if it benefits them...they have the larger end of the stick. If your economy benefits, that's a bonus.

-The mere fact of reducing trade barriers, from what I can see increases productivity, encourages economies of scale and results in lower prices.

-Free Trade, for Canada has meant:
trouble for smaller, less efficient manufacturers.

-It has been good for specialised manufacturers as they have found markets in the US.
-Many US factories located in Canada who did local prodcution
for the Canadian market were shut down due to their inefficiecy. However, new jobs were created.

-Canada now has it's lowest unemployment levels since the 1950's.

BOTTOM LINE: Free Trade with the US and Uruguay can be very beneficial, however, expect economic changes. Most of all, don't expect to be fairly treated by the US (so, status quo!)


Anonymous said...

First, your web site is excellent. Second, in regards to the free trade agreement I think in one aspect it would be very beneficial to Uruguay : selling beef. I believe ovetime this trade agreement would open up the U.S. market to excellent grass fed Uruguayan beef. This could be very beneficial to UY. UY would come out ahead on this deal.

Anonymous said...

Mexicans are using US corn to make tortillas because the US corn is cheaper.This is made possible by the Massive subsidies paid to US farmers.This is forcing people off the land in Mexico.To compete with that Mexico exports its people to the US thru neccesity caused by the FTA.The Americans benefit with all the cheap labor.

Grace said...

It will not work in fact, that is exactly what I think.

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