Matt Stoller: “Free Trade” Pacts Were Always About Weakening Nation-States to Promote Rule by Multinationals

 Source: nakedcapitalism

By Matt Stoller, who writes for Salon and has contributed to Politico, Alternet, Salon, The Nation and Reuters. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller. Originally published at Observations on Credit and Surveillance

Here’s part one of this series on the origins of NAFTA and our current trading regime.

It’s amazing what you find in the Congressional Record. For example, you find American political officials (liberal ones, actually) engaged in an actual campaign to get rid of countries with their pesky parochial interests, and have the whole world managed by global corporations. Yup, this actually was explicit in the 1960s, as opposed to today’s passive aggressive arguments which amount to the same thing.

Here’s the backstory.

As I wrote in part one of this series on the origin of modern American trade policy, the first real mention of NAFTA in the Congressional record that I could find came from a hearing in 1967. This was a Joint Economic Committee hearing conducted just after a major series of global trade talks known as the “Kennedy round”, from 1964-1967. The Kennedy round went quite far in reducing explicit tariffs, and was a capstone to the trading regime of tariff reductions that FDR and Cordell Hull put in place in 1934 after the Smoot-Hawley tariffs.

After the Kennedy round ended, liberal internationalists, including people like Chase CEO David Rockefeller and former Undersecretary of State and an architect of 1960s American trade policies George Ball, began pressing for reductions in non-tariff barriers, which they perceived as the next set of trade impediments to pull down. But the idea behind getting rid of these barriers wasn’t about free trade, it was about reorganizing the world so that corporations could manage resources for “the benefit of mankind”. It was a weird utopian vision that you can hear today in the current United States Trade Representative Michael Froman’s speeches. I’ve spoken with Froman about this history, and Froman himself does not seem to know much about it. But he is captive of these ideas, nonetheless, as is much of the elite class. They do not know the original ideology behind what is now just bureaucratic true believer-ism, they just know that free trade is good and right and true.

But back to the 1967 hearing. In the opening statement, before a legion of impressive Senators and Congressmen, Ball attacks the very notion of sovereignty. He goes after the idea that “business decisions” could be “frustrated by a multiplicity of different restrictions by relatively small nation states that are based on parochial considerations,” and lauds the multinational corporation as the most perfect structure devised for the benefit of mankind. He also foreshadows our modern world by suggesting that commercial, monetary, and antitrust policies should just be and will inevitably be handled by supranational organizations.

Here’s just some of that statement. It really is worth reading, I’ve bolded the surprising parts.

“For the widespread development of the multinational corporation is one of our major accomplishments in the years since the war, though its meaning and importance have not been generally understood. For the first time in history man has at his command an instrument that enables him to employ resource flexibility to meet the needs of peopels all over the world. Today a corporate management in Detroit or New York or London or Dusseldorf may decide that it can best serve the market of country Z by combining the resources of country X with labor and plan facilities in country Y – and it may alter that decision 6 months from now if changes occur in costs or price or transport. It is the abilityt o look out over the world and freely survey all possible sources of production… that is enabling man to employ the world’s finite stock of resources with a new degree of efficiency for the benefit of all mandkind.

But to fulfill its full potential the multinational corporation must be able to operate with little regard for national boundaries – or, in other words, for restrictions imposed by individual national governments.

To achieve such a free trading environment we must do far more than merely reduce or eliminate tariffs. We must move in the direction of common fiscal concepts, a common monetary policy, and common ideas of commercial responsibility. Already the economically advanced nations have made some progress in all of these areas through such agencies as the OECD and the committees it has sponsored, the Group of Ten, and the IMF, but we still have a long way to go. In my view, we could steer a faster and more direct course… by agreeing that what we seek at the end of the voyage is the full realization of the benefits of a world economy.

Implied in this, of course, is a considerable erosion of the rigid concepts of national sovereignty, but that erosion is taking place every day as national economies grow increasingly interdependent, and I think it desirable that this process be consciously continued. What I am recommending is nothing so unreal and idealistic as a world government, since I have spent too many years in the guerrilla warfare of practical diplomacy to be bemused by utopian visions. But it seems beyond question that modern business – sustained and reinforced by modern technology – has outgrown the constrictive limits of the antiquated political structures in which most of the world is organized, and that itself is a political fact which cannot be ignored. For the explosion of business beyond national borders will tend to create needs and pressures that can help alter political structures to fit the requirements of modern man far more adequately than the present crazy quilt of small national states. And meanwhile, commercial, monetary, and antitrust policies – and even the domiciliary supervision of earth-straddling corporations – will have to be increasingly entrusted to supranational institutions….

We will never be able to put the world’s resources to use with full efficiency so long as business decisions are frustrated by a multiplicity of different restrictions by relatively small nation states that are based on parochial considerations, reflect no common philosophy, and are keyed to no common goal.”

I’m doing this series on the origin of the modern trading regime because of the current controversies over trade policies, including the Trans-Pacific Partnership. It’s striking how, when you look into these efforts, these agreements are not and never have been about trade. You simply cannot disentangle colonialism, the American effort to create the European Union, and American trade efforts. After their opening statements, Ball and Rockefeller go on on to talk about how European states need to be wedged into a common monetary union with our trade efforts and that Latin America needs to be managed into prosperity by the US and Africa by Europe. Through such efforts, they thought that the US could put together a global economy over the next thirty years. Thirty years later was 1997, which was exactly when NAFTA was being implemented and China was nearing its entry into the WTO. Impeccable predictions, gents.

In previous research efforts, I’ve found that there was a serious elite liberal effort called “Atlanticism” to create an explicit world government, and that this effort really did influence how our current leaders think about international policy-making. By 1967, Ball wasn’t an Atlanticist, he dropped his illusions about the ability to combine the globe into one polity. But he was still a utopianist – he didn’t seek an explicit world government, he wanted to build a set of supranational institutions that could manage all the important economic questions, while national leaders got to argue about symbols.

I guess it turns out that the conspiracy theorists who believe in UN-controlled black helicopters aren’t as wrong as you might think about trade policy, and not just because United Technologies, which actually makes black helicopters, has endorsed the Trans-Pacific Partnership. Oh sure they’re wrong, but so are the people who deny that our trade agreements are just about trade. They aren’t. These agreements are about getting rid of national sovereignty, and the people who first pressed for NAFTA were explicit about it. They really did want a global government for corporations. At the time, of course, multinationals didn’t treat American workers like disposable objects, this was the era of the “Treaty of Detroit.” So Ball wasn’t as naive as he would sound today if he used these same words; it wasn’t totally crazy then to assume that global multinationals might operate in good faith. Moreover, given that there had just been two world wars because of nationalism, it also wasn’t crazy to hope that corporations would “wash away national boundaries”.

But what’s interesting is more the why than the what. Ball in particular expressed his idea of a government by the corporations, for the corporations, in order to benefit all mankind. Keep that in mind when you think you’re being paranoid.

The full hearing can be downloaded here, though it is a big file.