Stop Calling It “Free Trade!”

By Jeff Milchen
December, 2003

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 of what he speaks.

Not only do treaties like the proposed FTAA outlaw forms of protectionism that serve the public interest–such as safeguards for healthy air, drinkable water and a safe workplace–they also preclude or destroy competition in many business realms.

A driving force behind most existing and proposed trade agreements is politically-powerful corporations’ pressure to expand the most costly and anti-competitive forms of protectionism–patents, copyrights and other monopolies grouped under “intellectual property rights.”

Many such rights are essential to ensure 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. According to a 1995 Massachusetts Institute of Technology* study, eleven of the 14 most medically significant drugs developed in the United States between 1970 and 1995 originated with government-funded 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 National Institutes of Health granted exclusive production rights to Bristol-Myers Squibb Inc. for a pitiful 0.5% royalty. Then Americans paid the corporation $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 profit margins would be impossible without the government-created monopoly that resembles 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.

Imposing these obscene profit margins abroad (through trade pacts that poor countries often have little choice in signing) effectively mandates suffering and death to bolster corporate profits in many instances. For example, poor countries that import generic AIDS drugs that save thousands of lives have been sued to halt the practice as a violation of trade treaties.

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 those 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 sales tax from 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.

Amplifying such handicaps are corporate actions like that of the “big three” U.S. automakers inserting last-minute language into the United Auto Workers’ latest contract that says workers’ insurance will cover only mail-order prescriptions.

Another recent report noted that Pennsylvania’s health plan for state workers mandates that they fill prescriptions at Rite Aid or via online vendors. The automakers and the state government may save a few dollars, while their employees lose important personal service and communities lose irreplaceable businesses.

Where are those politicians and “free market” think tanks that object loudly to “limiting choice” or advocate for “states rights” when it’s small businesses who are disadvantaged? Apparently they don’t like to confront the fact that political power now determines which markets will or will not be free.

“Free market” mythology aside, the core reason for citizens to reject any new trade agreements that expand corporate power is the creation of international commerce rules that trump democracy. But in doing so, citizens should not concede the false premise of these pacts being about “free trade.”

We should shift debate to democratic terms and reject language that stacks the deck against us. Distinguishing theoretical free markets from our reality of corporate capitalism would be a fine place to start.

Jeff Milchen is a former executive director of Reclaim Democracy.

See also: NY Times Rails Against Fake Drugs, but Ignores the Role of Corporate Power in Creating the Demand (2012)