Published on Sunday, December 28, 2003 by the Boulder Daily Camera / Boulder, CO
'Free Trade' is a Real Misnomer
by Jeff Milchen
Americans swarm to anything that's free — both literally and rhetorically — so corporate PR departments naturally employ rhetoric like "free trade" and "free markets" to advance their agendas. But it's a mystery why opponents of trade agreements that elevate corporate interests above democracy concede the terms of debate by calling for "fair trade, not free trade."
International trade agreements erect trade barriers as often as they remove them. As Wayne Andreas, CEO of agribusiness giant Archer Daniels Midland said "There is not one grain of anything in the world that is sold in the free market. Not one. The only place you see a free market is in the speeches of politicians." Well-acquainted with both illegal price fixing and legally wielding political power to extract taxpayer subsidies, Andreas knows his stuff.
Not only do treaties like NAFTA outlaw forms of protectionism that serve the public interest — such as safeguards for healthy air, clean water and safe workplaces — they also preclude or destroy competition in many business realms.
A driving force behind most trade agreements is corporate pressure to expand the most costly forms of protectionism — patents, copyrights and other monopolies grouped under "intellectual property rights."
Many such rights are essential to ensure that writers, researchers, musicians and others receive just compensation for their work. Often, however, what's patented is taxpayer-funded research. Rather than benefiting the public, it is given away or sold for a pittance to corporations that reap huge profits under trade agreements that internationalize their monopoly on a product.
Take the hotly-debated prescription drug market. Eleven of the 14 most medically significant drugs developed in the United States between 1970 and 1995 originated with government research.
$500 million in public money funded research and testing for Taxol (the best-selling cancer drug ever), beginning in the 1960s — decades before its commercial debut. So what return did taxpayers get from this potentially lucrative investment that could have reduced our taxes or made cancer treatment affordable to all? Nothing.
Actually, worse than nothing.
First, the federal government granted exclusive production rights to Bristol-Myers Squibb Inc. for a pitiful 0.5 percent royalty. Then Americans paid Squibb $687 million between 1994-1999 alone for Taxol purchases via Medicare at markups that would make street drug dealers blush — up to 2000 percent over production costs! Such profits would be impossible without government-created monopolies that resemble corporate socialism more than a free market.
Meanwhile, we've collected just $35 million in royalties and Squibb executives gain more through investments in politicians than Taxol research. And while import tariffs rarely increase product prices more than 25 percent, patent-protected monopolies can gouge us for 20 times the cost we'd see in a free, competitive market. Thus pharmaceutical manufacturers enjoy a stunning median profit margin of 17 percent—more than five times the median for Fortune 500 industries.
Such market distortions aren't unique. From another angle, the Consumers Union recently issued a detailed report showing that independent pharmacies beat chain competitors in price, service and overall satisfaction. So why have more than 10,000 independent pharmacies disappeared since 1990?
In addition to massive advertising power to falsely convince shoppers that chain stores provide better value, government discrimination again is a major factor.
Congress forbids states from letting local businesses compete against mail order or Internet vendors in a free market by prohibiting states from collecting state and local sales tax from those remote vendors on interstate sales. So in 45 states, a community-serving business competes against an effective federal handicap that averages 8.3 percent of a product's cost.
n Pennsylvania, the latest health plan for state workers mandates filling prescriptions at Rite Aid or online, so employees lose their choices and important personal service.
Where are those politicians and "free market" think tanks that object to "limiting choice" or advocate for states rights when it's small businesses disadvantaged? The truth is that political power now determines which markets will or will not be free.
The core objection of most Americans (and citizens of other nations) to proposed international trade agreements remains the subordination of democracy to the wishes of transnational corporations, but the false labeling of these agreements should not be ignored. Distinguishing theoretical free markets from corporate capitalism — where economic power translates readily into market-distorting political power — is essential for any intelligent debate on trade and economic policy.
Jeff Milchen directs ReclaimDemocracy.org, a non-profit organization working to restore democratic authority over corporations. He co-founded the Boulder Independent Business Alliance, which helps locally owned independent businesses compete successfully against corporate chains.
Copyright 2003, The Daily Camera