US-Peru Free Trade Agreement Approved – My thoughts

December 5th, 2007

It is extremely difficult to properly articulate an argument without others inferring, often incorrectly, what they think you mean and what they think you believe. More so with a subject as complex as the Free Trade Agreement between Peru and the United States, which overall, members of both Governments have shown themselves widely in favour of.

As is often the case, people always see in things what they want to see. People only think of themselves. People defend their points of views tirelessly and aren’t open to reason or argument. Few people, very few, tend to see or even look for both sides of the argument believing that what they and their group of like minded “individuals” think is either morally or intellectually right.

This, in the case of the FTA (or TLC in Spanish), is evidenced by die-hard socialists damning free trade, and right-wing wealth-owners ignoring its wrongs. Examples of these groups would be the ever-vocal Peruanista and the white elite in Lima who only care about their ability to cheaply buy US products.

I don’t want to fall into any trap by arguing for or against free trade or this agreement, but I would like to list a selection of what I consider facts. Prove me wrong if you will.

  1. Removal of tariffs in trade makes both sides richer and both economies more efficient. It removes other costs associated with inefficiency.
  2. Removal of trade barriers while US subsides its farmers is wrong and a violation of the very definition of free trade. Free Trade agreements stacked in favour of one side are not Free nor are the ethical.
  3. Many Peruvian agricultural workers will be out of work and their families quite literally out of food.
  4. If one country does something (agriculture) better or cheaper than the other, in an efficient world the better country should be producing it. Subsidies perverse this, making both sides suffer.
  5. Many workers losing jobs is not a bad thing. Removal of inefficiency benefits the majority (not the minority) and creates wealth which leads to more jobs created.
  6. US investment in Peru will see weaker national companies overtaken by US ones, profit will be sucked out of Peru back to US.
  7. Any profit sucked out of Peru will be ploughed straight back in so that more profit can be suck out – no net loss. Economies work by a flow of money.
  8. US investment in Peru will create US-provided jobs in Peru replacing lost Peruvian ones. Arguments against this are nationalistic and patriotic but have no affect on workers ability to feed their families or not.
  9. The wealthy elite of Peru have made little effort to look of for the non-wealthy. The wealthy elite control the Government and vote in favour of themselves. Alan Garcia, a member of this elite promised when elected a complete renegotiating of the FTA in order to weigh it in favour of Peru. Garcia lied to his anti-FTA supporters and voted in favour of his ability to buy a new American car cheaply.
  10. Removal of trade barriers with the US means an disproportionated amount of jobs created for each one lost. Not only will US companies come to Peru, but so will other companies from latin america and beyond. Production for export to the US is suddenly more cheaper in Peru. Brasil, Argentina, Ecuador, Colombia and more are already on there way to starting production in Peru.
  11. Those with jobs lost would do better for their families by spending less time protesting and more time looking for a higher paid newly created (or newly vacant) job.
  12. Implementation of the FTA should be slow to facilitate changes such as (11) in the economy. The US as the stronger partner should have made sure of this. Peru as a negotiator had to ask for this. Those in control of both sides of the agreement have proven themselves a mix of incompetent and/or heartless.
  13. Weakness in the agreement for Peru are Peru’s technical fault, and the US’s ethical fault.
  14. Peru’s pledge to enforce drug patents will cause poor Peruvians to suffer and die. Drug companies lie when they say investment in new drugs would be effected by cheaper versions sold in the third world.
  15. Environmental protections were carefully negotiated so that they have little effect in the real world.
  16. Peru has some of the toughest labour laws in the world and these will need to be respected by investors. The FTA reinforces these protections, a good thing for workers.
  17. Protectionism in economies in an inefficiency in the flow in capital which in the end makes everyone less wealthy than they would otherwise be. When the stronger is the protectionist and the weaker forced to abandon protectionism, both sides are sill poorer but one is even more so.

I would be interested to hear and comments or additions to this list. Interpretation, opinions and belief mean nothing. Only things that are true are fact.