Free Trade Phonies

The Summit of the Americas was doomed to fail on its agenda to resurrect the Free Trade Area of the Americas (FTAA) because the FTAA isn't free trade. It is preferential trade that does not help in the movement towards truly free trade because it causes distortions in trade flows between countries within and without the area. It also (like the Central American Free Trade Area [CAFTA]) is burdened by many non-trade related areas like intellectual property protection (and in other agreements, trade and environmental standards not related to freeing trade). Even leaving aside the handouts to U.S. corporations that are often embodied in these trade agreementts, the idea of free trade areas (FTA) will not even theoretically lead to free trade because the gains to enlargement shrink and the costs increase as the size increase. In the theoretical literature, it is likely that there will be around 5 FTAs in equilibrium. In contrast to this, multilateral trade agreements (the Uruguay round which created the WTO from GATT and the current Doha round) which has brought to a head the problems of developed countries' agricultural subsidies and trade protection. However, this is the format for agreements that will lead to the most progress towards free trade and will, assisted by favorable domestic policies, do the most to reduce poverty and inequality across the world. Dump the FTAA, CAFTA and NAFTA and focus the energy on Doha and improving the transparency of the WTO so people see how it works and do not get wrapped up in the WTO-bashing myths that have inflamed activists in the developed world against it.