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The Trouble with Free Trade

Why this 'free-trader' accepts it's not perfect...

IT SEEMS like we are going to be talking a lot about trade in the coming months, writes Nathan Lewis of New World Economics in this article first published at Forbes.

I am basically a free-trader, but I find that my other free-trader comrades tend to be a little too dogmatic about these things. There are a number of problems related to free trade, which we should drag up and discuss.

In the distant past, sometimes the only trade between states – besides illegal smuggling – was in the form of a diplomatic mission. Today, trade takes place via treaty. The General Agreement on Tariffs and Trade, of 1948, was replaced in 1995 with the World Trade Organization.

At the most basic level, a trade treaty implies no loss of sovereignty. It is just an agreement to allow people to buy and sell. However, in practice, a lot of the trade treaties of the past seventy years have developed, over time, into a substantial loss of sovereignty, and consequently, a substantial transfer of power to supra-governmental autocratic institutions, which are beyond the reach of democratic processes.

In other words, unelected bureaucrats telling you what to do. And who do these bureaucrats answer to? It is, by appearances, a monarchy without a monarch. But, maybe the monarch simply wants to remain unseen for now.

The model of this process has certainly been the evolution of trade treaties among European governments. The European Coal and Steel Community was established by the Treaty of Paris in 1951. Its supposed purpose was to make a common market in coal and steel. However, along with it came a series of supranational governmental bodies, which were hardly necessary to buy and sell coal. These included: a High Authority ("high authority"?) of appointees, a Common Assembly (which was a sort of international parliament), a Special Council (which was a sort of executive branch), and a Court of Justice.

In short, it had all the framework of a supranational government, albeit one in the form of a parliamentary monarchy. All of trade coal and steel.

This grew into the European Economic Community, established by the Treaty of Rome in 1957. It absorbed the ECSC's institutions, and largely mirrored them. The EEC's "European Parliament" had about as much power as the Roman Senate under the Emperors – which is to say, hardly any at all, except as a vestige of Rome's republican past, and a distraction from the reality of imperial absolutism. The European Parliament's role was part of a "consultation procedure," which meant that it could give an opinion that could then be ignored. Later, it acquired a sort of veto.

In 1993, the EEC was further expanded into the European Union, with the Maastricht Treaty. Beyond the trade aspects, the EU included a Police and Judicial Cooperation in Criminal Matters, a Common Foreign and Security Policy, and a plan to eventually use a single currency, once again issued by a supranational entity, the European Central Bank. In 2007, the Lisbon Treaty combined these elements into the European Union that we have today. In it, the European Commission – the unelected executive branch – makes proposals to the European Parliament and European Council, which basically have a veto power alone. However, even this veto is not a deal-killer. Rather, the proposal goes back to the Commission for revision and resubmission. In the end, through a process of attrition if necessary, the Commission gets its way.

This template, of a supposed free trade agreement serving as a cover story to institute a gradually-expanding supranational authoritarian government, has been applied beyond the EU. The North American Free Trade Agreement of 1994 mostly applied to tariffs alone, but it does include a process for international resolution of disputes – a sort of judicial branch. President Clinton also added two side agreements, a North American Agreement on Labor Cooperation, and a North American Agreement on Environmental Cooperation.

This was perhaps as far as the globalists felt they could push the matter at the time, possibly remembering their failure to get the US Senate to approve of the League of Nations in 1919. As it was, the NAFTA proposal passed the House by a narrow 234-200 margin, and inspired a powerful third-party presidential bid by NAFTA-rejecting Ross Perot in 1992. However, both Clinton and President George W. Bush were long thought to be pressing for a more complete North American Union, which would include free passport-less migration between the US, Mexico and Canada – in effect, the elimination of borders – such as was laid out by this 2005 proposal from the Council on Foreign Relations.

Around the same time, Bush, Mexican President Vicente Fox, and Canadian Prime Minister Paul Martin "created" a Security and Prosperity Partnership of North America, to which the US supposedly "agreed" to without any Senate vote.

All of this has been getting a lot more serious in recent years, with the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP). Unlike NAFTA, both proposals come with a raft of supragovernmental organizations, in the European model, and substantial erosion of national sovereignty. What is in them? We don't know for certain, because it's a secret. President Obama threatened to prosecute any member of Congress who quoted from the texts, calling it "leaking classified information."

It would be, in a matter of a few years, the end of the United States, just as France, Germany and Italy are slowly fading into quaint terms of geography. Some government would continue to exist, but it would no longer resemble that one established in 1789, and would be, at its core, authoritarian rather than democratic.

Whatever your stance on trade, these supra-governmental constitutions masquerading as trade agreements need to be discarded, as President Trump and Congress are likely to do.

I would go so far as to eventually cancel the United States' participation in the United Nations. This time under a cover of "world peace" instead of "free trade", participation in the UN was ratified by the US Senate in 1945, after a short discussion and following the recommendation of Alger Hiss, who was the Director of the US State Department's Office of Special Political Affairs. As acting secretary-general of the San Francisco United Nations Conference, he is also thought to be the primary author of the United Nations Charter. He then served as the acting secretary general at the United Nations itself in 1945, until the appointment of the first official secretary general, Trygve Lie, in 1946.

The April 1945 issue of Political Affairs, the official publication of the US Communist Party, said:

"Great popular support and enthusiasm for the United Nations policies should be built up, well organized and fully articulated...The opposition must be rendered so impotent that it will be unable to gather any significant support in the Senate against the United Nations Charter and the treaties which will follow."

Hiss was later outed by Whittaker Chambers as a communist agent, and convicted in 1950.

Some think that the UN Charter mimics the Soviet Constitution of 1936, whose creation was overseen by Joseph Stalin. Despite offering universal sufferage and an apparent bicameral legislature, it should surprise no-one that it was little more than a cover for absolutist control.

Soon after, in 1950, the communist Red Army of North Korea poured into South Korea. The new United Nations, flexing its newfound powers, jumped to the defense. In practice, this meant the US military. But Congress did not have to vote on a declaration of war – one of its primary Constitutional responsibilities – because it had already signed away that decision-making power to the UN.

Today, we have globalists rather than communists; free trade instead of world peace. But free trade doesn't require any super-government: just let people trade. It doesn't have to be any more complicated than that, and shouldn't be.

Formerly a chief economist providing advice to institutional investors, Nathan Lewis now runs a private investing partnership in New York state. Published in the Financial Times, Asian Wall Street Journal, Huffington Post, Daily Yomiuri, The Daily Reckoning, Pravda, Forbes magazine, and by Dow Jones Newswires, he is also the author – with Addison Wiggin – of Gold: The Once and Future Money (John Wiley & Sons, 2007), as well as the essays and thoughts at New World Economics.

See the full archive of Nathan Lewis articles.

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