Poorer Countries Should Abandon Free Trade Agreements

Free trade is the process of liberalization of market from governments’ interventions. Under free trade policy, all economic resources from all countries involved are subject to price as a reflection of supply and demand, thus making price as the sole determinant for resource allocations.

The characteristic of free trade are:

1. Trade of goods without taxes or any kind of barriers

2. The free movement of labor between countries involved in the agreement

3. The free movement of capital between and within countries involved in the agreement

4. Free access to markets

Free trade ensures the same playing rules for a competition, although does not necessarily ensures a fair competition for all the parties involved.

Free trade creates an equal business environment. By signing the agreement, countries will put their private sectors to compete with other countries’ private sectors in equal terms. For poorer countries, it means their private sectors – whom are relatively weaker – will compete against much stronger companies. The regulation may be equal, but the players capabilities are certainly not. It would be like a football match between Manchester United and Malaysia National Football Team – there might be a level playing fields, but Manchester United will still win every time. [[http://www.the90thminute.com/index.php/soccer/2009/07/manchester-united-defeats-malaysia-xi-national-team-3-2-2-0-recap-and-video-highlights/]]

Without the government intervention, the private sectors, commonly farmers or small companies, will fail to protect their production. It happened in Senegal, when it open its market, and should lower the tariff of tomatoes during 1994 to 2001. The country was producing about 73,000 tonnes of tomato concentrate by 1990. In 1996/7, hitted by the imports from EU, the production decreased to 20,000. The EU’s exports of tomato concentrate to Senegal increased from 62 tonnes in 1994 to 5,348 tonnes in 1996 due to the increased access to Senegal’s market (an 8625,81% increase). Since then, there has been stagnation in Senegal’s tomato processing industry with declining prices of tomato concentrate and a lack of credit and investment resources available to processors.

The EU farmers, on the ther hand, have easy access to credit and qualified labour compared to the Senegalese counterparts, and they are able to produce tomatoes more cheaply for the European processing industry. Moreover, in 1997 alone, the
EU paid out US$300 million in export subsidies to tomato processors. [[ http://www.ivcs.org.uk/ijrs/April2007/Effects%20of%20market%20liberalisation%20on%20rural%20producers.pdf%5D%5D

This example of Free Trade comes to show how countries that does not have an equal competitive advantage are expected to play against a more stronger player and, in the process, failled miserably.

However promising the benefit of Free Trade the richer country claims, the reality shows that inherently Free Trade is never a fair ground to compete and therefore should be abandoned.

“The measure of the wealth of a nation is indicated by the measure of its protection of its industry; the measure of the poverty of a nation is marked by the degree in which it neglects and abandons the care of its own industry, leaving it exposed to the action of foreign powers.” – Congressman Henry Clay.

The price for a free trade is more expensive than the benefit it brings. The practice of free trade agreements will undoubtingly give market access to much richer country. This then will, so they claim, give chances for poorer countries to attract investment and improve growth prospects, and in some cases, even expand their own corporate sector – a fine answer for all the problems in this world.

However perfect it may sound, the hypothetical condition can only be valid in a circumstance where particular industries in the poorer countries has comparative advantage. In truth, most of the companies does not have (if any) comparative or competitive advantages. Being so, these companies whenever a free trade agreement is applied, left alone to compete without government’s protection, will never develop and then in the long run will die.

Harsh reality portrays that after a country opens their market, the first sector to suffer is the employment sector. Poorer countries will find their skilled workers moving to greener pasture (Seeking higher wage) thus leaving the workforce inside the country being cheap labor (the main attraction for foreign companies) [[http://www.dollarsandsense.org/archives/2003/0103dollar.html]]. Meanwhile foreign corporations will also compete for commodities with higher financial capital and stronger purchasing power, raising the living standard of the whole poorer country’s society. No matter how beneficial it might seem by getting access to the new market, the practical thing can differ so much because free trade premise is based only on the potentials that can be reaped, but not on the technical requirements that need to be fulfilled before it can reap the potential.

Before we continue this debate, firstly we would like to acknowledge the effort from the opposition when they cite ASEAN on its “commitment” supporting a fair FTA. It just comes to show the “distance” the opposition has to go into arguing a” fair” FTA, as oppose of using any examples from the NAFTA agreement or the recent EU – Mexico “Global Agreement”.

However we would like to argue that although the ASEAN document showed their “commitment” in conducting a “fair” FTA it shouldn’t be used as proof for an argument. Why? Simply because citing ASEAN, an FTA advocate, would be a biased source. We from the proposition wouldn’t even be surprised if there is an ASEAN document that goes to claim that FTA would feed the poor, heal the blind, or even cure cancer.

This proof of bias was evident in the claim from an ASEAN document, cited by the opp as proof for their argument – The Thailand Phenomena. The document claims regarding Thailand’s economic success due to the FTA with China contain misleading numbers.

While the documents highlights high percentage number of growth it did not showed inside the document the economic indicator of Thailand after the FTA, here is what the document is missing [[http://www.imf.org/external/pubs/ft/weo/2006/01/data/dbcselm.cfm?G=2001]]:

1. Inflation rate in Thailand rose every year from 2003 – 2007

2. Growth rate of the GDP decreased every year

3. Thailand’s account balance decreased from 8 trillions USD to deficit 4 trillion USD in four years (a 150% decrease of their account prior to the FTA)

When in contrary China enjoyed a steady increase in their account balance of 400% in those same four years.

While Thailand, sadly to say did not increase their GDP (despite the percentage of increase of all the durian, mangosteen, and mango they enjoyed). Thailand did not come as a valid example from the opposition; on contrast it only further proves that Free Trade is not Fair Trade.

Having cleared the opposition’s “Thailand example”, we would like to take in the Thailand example as a supporting evidence for our argument that Free Trade is not Fair Trade.

We would like to extend the invitation to the opposition to provide a more sustainable argument with proof how FTA would bring more benefit than harm.

This debate has been set by the proposition to make a wider case for FTA. It is not only about poor countries who should not engage in FTA but for countries in general who are poorer compared to their trading partners.

If the opposition feels that this debate is more about poor third world countries having an equal trading terms with the U.S or the E.U for the promise of economic growth, then we want to know HOW in their arguments will FTA succeed in this. Because when it comes to economic freedom regarding the development of a country including all of its citizens, promises and assertions will not stand.

There is little or no evidence to support claims that free trade lifts people out of poverty, and it is the burden of the opposition to prove otherwise.

We however will continue to point out that there is more harm in joining FTA, that the price of Free Trade is not only far from being free instead it comes with a hefty price.

We find it appropriate for the proposition to return the favor from the opposition team (citing an example from Asia) by citing an example from South America, more specifically Mexico. We only need to look into a compelling document titled “A Warning to the Global South – The EU – Mexico Free Trade Agreement Seven Years On” [[http://www.tni.org/reports/altreg/eumexicofta.pdf]] to confirm the harm of FTA.

In the year 2000 Mexico signed a “Global Trade Agreement” with the EU, which the WTO applauded as “the first, the fastest and the best” FTA agreement in the world. In the agreement the EU managed to persuade Mexico to deregulate 95 % of their goods and service industry. The EU at that time claimed the agreement not only as a representation of trade but for “regional development” in South America. Mexico circa 2000 AD was becoming the beacon of social and economical success by opening itself to the EU.

However, as advocate of the FTA, making promises and unsubstantiated claims are always easier said than done. As reflected in the reality after the FTA, the condition speaks for itself [[http://www.tni.org/reports/altreg/eumexicofta.pdf Page 28]]:

1. GDP Growth in Mexico during the first three years of the agreement was only 1%

2. Mexico currently suffers from a growing trade deficit with the E.U

3. Mexico trade balance deficit has risen 80% since the EU – Mexico FTA went into effect

4. High concentration of investment from foreign investment now controls the economy

5. Lack of job creation by foreign companies kept the rural area of Mexico undeveloped, and

6. Basic service companies (water and electricity) has been denationalized to foreign corporation

7. The presence of European companies in strategic sectors such as water, electricity and banks has not promoted enhanced quality, rather, on the contrary, an oligarchic market with high prices and widespread abuse of consumers.

The example of Mexico also showed that although FTA opens the opportunity to enter a wider market (the EU) it is not in the same playing level, as the main export of Mexico is only oil and the main export of the EU are banking, electricity, water treatment, car manufacturing, and so on.

When using Mexico as an example, it becomes evident that the loss of their basic sectors, the lack of employment, the control of the economy by foreign corporation, and the deteriorating trade situation of Mexico is, plainly speaking, an expensive price to pay for the promise of “economic growth” the opposition uses as an argument. Instead according to the example stated, the promise of growth was non existent.

This example should be not only be a warning for the south american continent but for every country who are already or are in the process of joining a FTA.

We would like to further emphasized why Free Trade is not Fair Trade.

When a FTA is signed both country’s market is liberalized, it is the corporation from the stronger country that will first move to take it’s position.

The FTA practice in a country is only as good as the corporation that enters the country. When we look at past experiences, we can all see that the conclusion is “not good”. These behemoth are not interested in the “regional development” or “democratic clause” both trading country committed into in the agreement.

These behemoths of trade saw these FTA as merely an act of taking maximum profit in a new emerging market.

“”Ask anyone who has worked in a corporation and they will tell us that corporations are only interested in “making profit”.””

In fact, as summarized regarding the EU – Mexico “Global Agreement” it has been stated that “The EU-Mexico FTA has mainly helped European companies by lowering their production costs and enabling them to use Mexico as a platform for shipping goods to markets that have greater purchasing power, as well as higher income markets in Mexico “

How can we show that these corporation aims for profit rather than the interest of the host country? We only need to set one example in the form of the Nestle Corporation. Nestle has enjoyed enormous growth during the early 1990’s when many trade barriers crumbled (Mainly in Africa and South America). During these growths, Nestlé’s atrocities are listed from farmer exploitations, union crackdown to the famous unethical marketing of Nestlé’s baby milk that has been linked to the death of 1.5 million deaths of infants in Africa. [[http://www.corporatewatch.org.uk/?lid=240#pollution]]

Even recently, Nestle has clearly violated the sovereignty of Ecuador’s Labor regulation when it openly fires 13 employees on the basis that they are involved with a union. [[http://www.rel-uita.org/sindicatos/rel-nestle_ecuador-eng.htm]]

A vivid case of this argument existed in, again, Mexico where corporation interests are placed ahead of the worker. When continental tires took over a tyre manufacturing plant in mexico, they applied new rules in their profit making mechanism which included:

1. 12 hour work a day

2. No sunday off

3. No profit Sharing

4. Increased output without pay raise

Enraged since the new foreign buyer has clearly violated the law, the worker went on strike and left the factory to shut down. Going to local authorities, The Local Conciliation and Arbitration Board, which is charged with resolving conflicts between workers and owners to report the situation. They were then surprised when shamelessly the board took sides with the owners and declared the strike illegal, refusing to recognise its validity even though the owners had violated the law [[http://www.tni.org/reports/altreg/eumexicofta.pdf page 22]]. This is merely one of the many examples of the abuse that has happened in countries applying FTA.

Our point is, a country can never deregulates its market for the promise of “economic development” then open it’s infant market to compete with big corporations. Especially when there has been rampant case of abuse by major corporation taking advantage of the FTA, whose sole purpose is to “make maximum profit”. This is a risk countries should take on assessing the benefit of FTA, where we have clearly shown that it cause more harm than the benefit it promised.

The free trade foundation is of comparative advantage. The countries that are involved should have a significant comparative advantage against its partner. This model should work perfectly if the agreement is exclusive between only two countries.

So, for example Country Y, which has a comparative advantage in commodity A, B, and C, while Country Z, which has a comparative advantage in commodity D, E and F, the two countries can sign the agreement and shares the advantage of global trading.

But Adam Smith, contrary to HC Andersen, could never guarantee a happily ever after ending, because unlike marriage, free trade agreement is not monogamy. Country Y, can also sign a free trade agreement with country X, which supplies commodity E, G, and H. It (Country Y) could also sign an agreement with Country W, which supplies commodity E, I, and J.

So now, country Z, X, and W will compete in the market of country Y for the same commodity (E). So there is now a competition between them. But, what is wrong with the competition, isn’t all trades involves competition?

Following opposition’s assumptions, given that consumers tend to choose the cheap between the convenient (scroll down, see No point 3) [[http://debatewise.com/debates/1053-poorer-countries-should-abandon-free-trade-agreements]], the competition between country Z, X, and W will become a “race to the bottom”, where the condition causes the reduction of price to its lowest level.

If they are richer countries that can subsidize their commodity there will be no problem. For example, Europe with its Common Agricultural Policy [[http://ec.europa.eu/agriculture/publi/capexplained/cap_en.pdf]].

For poorer countries, to preserve profits while keeping its competitiveness in unreasonable price, the only option is to lower its labour wage. Chile, as an example, is proud of its status as one of the most open countries in the world. It has signed 47 free trade agreements. [[http://www.oxfam.org/en/campaigns/trade/real_lives/chile]]

In the agricultural industry, Chile exports products such as grapes (for wine), fruit, and salmon. The cost that Chile has to pay to preserve profit for transnational companies is an increased insecurity for millions of women workers; being paid below minimum and losing their labour right.[[ibid]]

In the fruit-picking sector, 75% of women work more than 60 hours a week in season, on temporary contracts, and a third of them do not earn even the minimum wage. Half of these women have no contract, and therefore there is no welfare system to support them if disaster struck.[[ibid]]

This is also evident in China with its textile industry. Minimum legal wages in the developing countries hovered around US$30-50 a month. This is equivalent in China to 240-400 RMB a month. The legal minimum wage in Shenzhen, the Chinese city with the highest minimum wage, is only equivalent to US$42. China has set its minimum wage standards very low, to the point that it is even compete with Vietnam and Cambodia – two countries where the cost of living is lower than in China. In Mexico, El Salvador and Nicaragua, the wage levels are slightly higher than Asian wages, but this competitive disadvantage is largely cancelled out by the proximity of Central America to the American market, the biggest market of textile. [[http://rspas.anu.edu.au/~anita/pdf/AChancp461.pdf]]

China biggest competitor for US market is Mexico; today China and Mexico are competing neck and neck for the American market, each supplying around 15% of all apparel imports to the US. [[ibid, p3]]. Mexico, having their status as a country with FTA with the US, enjoys the advantage of geographical distance to the US. Along the US-Mexican border assembly plants called maquiladoras have mushroomed, employing about a million migrant workers in various labour – intensive industries. This number is still small compared to the 12 million in Guangdong province alone, but, justifying opposition’s claim on growth, it represents a 150% increase in Mexico since 1990 [[The Economist, July 7th 20 01, pp. 27- 30]].

The 150% increase is huge for an economic indicator, but align with our a priori before, the increase did not affect labour wage. The minimum legal wages in Mexico are almost double compared to Shenzhen, and this produces pressures on Mexican wage trends. In the manufacturing sector, real wages dropped by 20% during the 1990s. According to the ILO’s estimate, the migrant workers’ wages in Mexico’s apparel industry shed 28% of their purchasing power in the period between 1994 and 1999. [[http://rspas.anu.edu.au/~anita/pdf/AChancp461.pdf]]

This is the bitter reality of free trade, which fails in increasing labour’s welfare, as a price of macroeconomic growth. Mexico is one of the countries that aware with this problem. That is why Mexico was the last country to sign a FTA with China, delaying China’s entry into the WTO. Mexico perhaps by now knew by learning from past mistakes, that when the trade barriers are removed, it would have much to lose. But the international pressure was too great for Mexico to stand its ground. [[ibid, p4]]

The opposition tried to defend the case of FTA based on the logic that even though there will be natural selection in the private sector competition, but each sector will have a winner. And from that fact, it is sufficient to claim that FTA offers more benefit, often in the form of industrial structure becoming more specialized. There are at least two points that we think why this view can be extremely dangerous.

First is the logic of minimizing your risk to ensure sustainability of economic growth by spreading your risk. The opposition used the example of export growth of Thailand’s durian commodity as the success of FTA. Our question is what will happen if say there is a significant drop in durian’s price? What will then happen with Thailand economic growth, if Thailand’s only reliable private sector is from the durian sector? We believe that the opposition example of the economic growth experienced by Thailand through the path of becoming specialized in its development confirm that free trade is not free after all.

Second, if in many examples in Africa, a lot of its local industries died because they have not matured when they were exposed to foreign competition. As a result of this, those that survived become too specialized while the others went extinct. The opposition claimed that this will still result in positive gain, but we believe not only the net gain cannot be measured, hence cannot be ensured if positive gain does exist, but also it undermines the value of democracy since the only employment that exists can only be derived from those industry that become specialized.

In other words, how can we guarantee the surviving sector will provide as many as employment as those who have lost the jobs from the losing sector? How can we ensure the transfer of skill from different sectors can be ensured?

Ghana is one of the example. At least 120 factories since 1988, mainly because of competitive imports. The garment, leather, electrical, electronics, and pharmaceuticals sectors have been particularly hard hit. In 1990, even the New Match Company, the only safety match company in the country, closed.[[http://countrystudies.us/ghana/88.htm]] In 2000, Ghana lost US$43 for every one of its 20 million people. In the same year, Ghana received aid worth just US$31 per person.

Over the 15 years since trade was liberalised, Ghana’s population has lost the equivalent of US$510 per person – a huge sum, given that per capita GDP in 2000 was just US$330. It’s as if everyone in Ghana stopped working for one and a half years. [[http://www.christianaid.org.uk/Images/economics_of_failure.pdf]]

As the example of Lee Chong Wei that opposition believes can beat the whole UK’s badminton team by himself confirms our notion that FTA for poorer country isn’t a fair trade. Why? Because in the correlation of our MU vs Malaysian national team example, Lee chong wei counts only as one employment, but MU can contribute to eleven employments, not even counting the secondary team. That’s why it’s not fair, we’re talking about 11 jobs as a football player against 1 job as a badminton player.

The rebuttal and the argument so far from the opposition has only cluttered this debate. We are lost in their assertion and worst of all, their spanish citation. We would want to read their documents so that we might point inconsistencies as we did in their earlier citation, but alas with their brilliant strategy they have found our weakness.

However the proposition’s argument till this point remained unchallenged, we have stated documents (in english) that clearly reflects the current situation in Mexico yet they still claim that “There is null intervention from any other country regarding our water and electricity”. From then it comes to our conclusion that they will only read documents written in spanish [[http://instantrimshot.com/]].

In summary, what was our case?

Deregulation of markets forces medium and small business from different industries to compete in equal terms with big corporation. These will inevitably causes many business to shut down as they cannot compete with the much bigger corporation that already has an existing big markets to support their operation (as oppose to their smaller counterparts). Free Trade is not Fair Trade.

These liberalization of markets has caused unemployment, increase in trade deficit, account balance deficit, decrease in growth, and rampant abuse by foreign presence in the country. Case in point, Mexico (A warning to the global south – EU – Mexico Global Agreement [[http://www.tni.org/reports/altreg/eumexicofta.pdf]]). It is the labor, the middle, and lower class, the wheel of the economy that is being the worst hit by Free Trade. Free Trade is not Free Trade.

What has been our point? Obviously; Free Trade is not Fair Trade, and Free Trade is not Free Trade. Repetition is indeed tedious, but it does deliver our message.

Why is this bad?

Well obviously, FTA brings more harm than good to the economy (everyone should got this point by now) and it did not show any impact to development, and more importantly because the opposition failed to prove otherwise.

When the opposition release an argument such as “agreements are to be respected” it only shows their desperation in maintaining existing FTA.

Why then should this be abandoned?

Well most importantly, because they CAN abandon it and throughout this debate our examples have shown how FTA caused more harm than any benefit. Although we doubt that world leader will be persuaded after reading our arguments, because of their obvious intelligence in managing economies, the debate goes as follow:

“poorer countries should abandon FTA” and our two points (Yes, Free Trade is not Fair Trade and is not Free Trade) has shown that if FTA is signed for the sake of economic development, this debate has shown how reality beg to differ.

Having remained unchallenged, we beg to propose this motion.

We want pace the opposition’s centre of attention; the economic growth. If we compare Mexico’s and Myanmar’s (Burma) GDP, we can cut false assumption, case in point[[http://www.imf.org/external/pubs/ft/weo/2006/01/data/dbcoutm.cfm?SD=2003&ED=2007&R1=1&R2=1&CS=3&SS=2&OS=C&DD=0&OUT=1&C=273-518&S=NGDP_RPCH-NGDPPC&CMP=0&x=59&y=8]]:

1. Mexico’s GDP in 2003-2007, varied from 1.4% (2003), to 4.2% (2004), while

2. Myanmar’s GDP, from 2003-2007, varied from 3.0% (2004), to 13.8% (2003)

Comparing current conditions between the US of A’s “enemy of democracy” and a country that shares 2,000 miles border with US is unfair, but if we really want to take the growth rate into account, then it is clear that the free trade agreement does not give a significant upperhand.

Three points can be derived from the opposition’s argument:

1. Free trade is the only way to sell surplus.

2. Without free trade, the importer country will put unreasonable tariff barrier.

3. 1973 oil crisis is caused by the absence of free trade

The first two points can be dismissed as false, while the third point is just absurd. Allow us to elaborate.

Free trade doesn’t moves international trading; instead it is the two things called the demand and supply. So, any country that has a product surplus should not be worry, because as long as there is a demand in international market, the commodity can be sold. If the demand is low, irrespective of free trade, the sale will not be high.

This leads to the second point, where the opposition placed tariff into a wrong logic. It is important to see, that it is not the cost that counts in trade, but the profit, in exchange to the value.

Tariff is not the burden of supplier, instead the customers bears it. It is true that customer can get a cheaper price from free trade, but it is not true that the supplier could get a higher profit margin. It is also not true, that because there is tariff the exporter will get lower margin. The profit margin is relatively the same, irrespective of tariffs.

The tariff barrier from the importer country will only take the import product at a same or slightly more expensive price from the local product. A slightly more expensive price will not cease sales, because of one reason, the demand is there. The importer country will not put unreasonable tariff, also for another reason, demand. The country should make sure that it is affordable enough for the customer, so the national demand can be fulfilled.

At last, regarding the point of the 1973 oil crisis, we do not found the idea on how free trade will make Arab still sold oil to Israel’s ally during the war. If the opposition could prove this, we, willingly, will promote free trade as a path to world peace (poorer countries excluded).

The opposition tried to rebut our argument by labeling us both absurd and false. We quote “ In a desperate attempt to rebut our argument, the proposition managed to identify three vital issues which to their broad view are false and in some cases just absurd.”

This message of our absurdity is supported by the so called economic theory from the opposition, as we quote “ They failed to mention that the model of supply and demand is part of microeconomics, & that it hardly interferes drastically in macroeconomics matter.” In the opposition’s view, there is hardly a connection from microeconomic behavior to macroeconomic matters, thus there’s no case for abandoning FTA because there is no harm thanks to no connection whatsoever.

Let’s clarify this. Indeed we failed to mention that for several reasons as listed below:

1. Of course there is relationship between microeconomic matter and macroeconomic matter. The most common macroeconomic indicator is GDP, and it is a sum of all products and services from all sectors, microeconomic, over a period of time.

2. The relationship can go both ways. Eg.: “The monetary policy from federal reserve which economist believed to have fueled the consumption binge in American housing sector by providing cheap credit for extended period of time.” Or using the opposition example of free trade in ASEAN region that the increase in export for certain products is the responsible factor in boosting the area’s GDP.

3. Both fiscal and monetary policy, governments tools in dealing with macroeconomic matters, are measures to control inflation, minimum wages, investment rate in regards to sustain growing GDP and hence employment. As we can see the existences of both policies, fiscal and monetary, is due to the acknowledgement that microeconomic policy can lead to unwanted macroeconomic situations, hence government initiatives are often required.


In other words, we didn’t mention that simply not because we do not believe that microeconomic matters won’t interfere with macroeconomic matters. Instead we do believe it does interferes closely with each other.

On the other hand, how will the opposition defend the case for the benefits of FTA when the innovations in microeconomics won’t result in any improvement whatsoever in macroeconomics situations? What is the purpose of doing FTA then, when there’s hardly relationship between those two economic disciplines?

That is why we believe what the opposition labeled us as absurd with their arguments only shows the ambiguity of their arguments for defending the case of FTA. When there is no correlation, what’s the purpose of FTA? We on the other hand believe because there is obviously clear correlation, hence there are justified risks and harms of doing FTA.

Responding to this point is completely a waste of time, because this is far from the motion in hand. However, it is a moral calling for us to advocate that one person that agrees with our motions (that poorer countries should abandon free trade agreements). We should not make them feel as bad as Brutus (or Bruto, in Spanish).

We agree that agreement should be respected. And withdrawal from any agreement with any parties (except with the devil) act as a part of respecting the agreement, because any good agreement has a way to withdraw from it.

We are afraid that dear opposition team have mixed the meaning of “withdrawal from an agreement” and “outlawing the agreement”.

Outlaw means to violate the agreement while the party still bounded to the agreement, for example, the US steel tariff in 2002 [[http://www.nytimes.com/2003/03/27/business/wto-rules-against-us-on-steel-tariff.html]]

Withdraw, however, means that the party declared to stepped out from the agreement.

We would like to thank the opposition to cite a readable link (meaning: in English), so we could state that a withdrawal from an agreement shows respect to the agreement, and of course to other parties, as long as it is done properly.

Let us see again their citation on article 65 (yes we did read it) to cite sentences that wasn’t attached in their argument [[http://untreaty.un.org/ilc/texts/instruments/english/conventions/1_1_1969.pdf]]:

1. A party which, under the provisions of the present Convention, invokes either a defect in its consent to be bound by a treaty or a ground for impeaching the validity of a treaty, terminating it, withdrawing from it or suspending its operation, must notify the other parties of its claim. “The notification shall indicate the measure proposed to be taken with respect to the treaty and the reasons therefor.”

The first point states that it is OK to withdraw, as long as there is notification to other parties. Lets continue to the second point:

2. If, after the expiry of a period which, except in cases of special urgency, shall not be less than three months after the receipt of the notification, no party has raised any objection, the party making the notification may carry out in the manner provided in article 67 the measure which it has proposed.

The mysterious part of the second point is on “manner provided in article 67”. Then, they jump into the conclusion that “it is impossible to say all free trade agreements are withdrawn worldwide, since it would affect 2nd and 3rd parties and it is completelly illegal.” WOW.

Surprisingly, if we continue to article 67, the only manner expected on it is:

1.The notification provided for under article 65, paragraph 1, must be made in writing.

Assuming all of the governments of poorer countries are at least literate, and can submit the notification in writing, the withdrawn process should be completely legal.

Let us take Mexico as an example. According to NAFTA document, chapter 22, article 2205 [[http://www.sice.oas.org/trade/nafta/chap-22.asp#A2205]]:
” A Party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties.”

IF Mexico want to withdraw, technically they will not have any problem. With literacy level above 90% [[http://stats.uis.unesco.org/unesco/TableViewer/document.aspx?ReportId=121&IF_Language=eng&BR_Country=4840]], we conclude that Mexico’s government can write a notice to other parties, to make it legal. And they should not be worry that withdrawing will affect 2nd and 3rd parties, since if a Party withdraws, the Agreement shall remain in force for the remaining Parties.

So if Uncle Sam said, ” Et tu, Brute?” Mexico may reply, “read the document, it is legal”.

Ah, the use of Mexico as an example again. We believe that it is invalid to use Mexico. It is just a random coincidence moved by miracles, and if you imply that it is not miracles because miracles does not happen so frequently, we are here to say that with so many “Jesus” in the population, it is possible. Lol, just kidding, our rebuttals are on the next paragraph.

As proven before that there is (of course) legal tool to withdraw from a FTA, there will be no serious harm of withdrawing from FTA, since the FTA countries only contribute 7.5% of the world GDP, and 92,5% of the world’s GDP (excludes US GDP) comes from NON FTA countries [[http://www.trade.gov/fta/index.asp]] (yes, it is the same source as theirs, they misunderstand the source, we hope it wasn’t done deliberately).

About the comparative advantage, we believe it is also clear from the beginning that we never denied that FTA gives some benefit, but we argued that the cost of FTA outweighed the benefit; security is just one benefit that are outweighed by the cost. We will not come with new examples, since previous examples on our arguments is enough for that. Our main reason can concluded in two points:
1. The overall numbers from various indicators will show deficit.
2. Even though the indicators is increased, the welfare of the poor in the countries is jeopardized.

The example for the first statement is Ghana, which receives $ 31 in aid per capita, but suffer $ 43 as a loss. [[http://www.christianaid.org.uk/Images/economics_of_failure.pdf]].

For our second point, comes Chile, which is praised by the opposition as the highest-of-everything-good and the lowest-in-anything-bad [[http://imf.org/external/pubs/ft/weo/2008/02/weodata/weorept.aspx?pr.x=37&pr.y=17&sy=2007&ey=2007&scsm=1&ssd=1&sort=country&ds=.&br=1&c=213,263,268,273,218,278,223,283,228,288,233,293,238,243,248,253,298,258,299&s=NGDPDPC&grp=0&a]]. but they close their eyes to situation where millions of women workers being paid below minimum and losing their labour right [[http://www.oxfam.org/en/campaigns/trade/real_lives/chile]]. It is a tragedy of modern civilization, where the wealth of a country was built above the agony of poor people. The irony proved that FTA failure for poorer countries is a systemic failure; even one of the most success countries cannot overcome it.

Back to Mexico, our stance is still the same. We cannot negate history, and we will never able to give example where Mexico could survive the crisis without NAFTA. We admit that FTA secured Mexico on 1994. But the security there is still outweighed by the cost.

For the feeling of security, Mexico trade balance deficit has risen 80% since the EU – Mexico FTA went into effect. If it is regarded as an “OK” situation by the opposition (because according to them, “there will always be a nation with a bit more of advantage (even if it is a quarter of a cent) and that is normal.”), it cost Mexico welfare problem, as example shows that lack of job creation by foreign companies kept the rural area of Mexico undeveloped, and high concentration of investment from foreign investment now controls the economy. (please refer to “Free Trade is not Free Trade (opposition as an example)”).

By this point we want to emphasize that free trade is not free at all. It cost the poorer countries its economic control. They may argue that losing small part of economic control is just a loss of little liberty, but this little liberty caused inability to provide welfare, and a less control because the industry specialization narrowed the industry fields, which may caused problem for skilled workforce to adapt. In other case, competitive sectors also unable to absorb workforce from uncompetitive sectors. This will increase unemployment, which may cause social problems.

At the end, if we sum the benefit from the loss, we will still see a total loss, without any benefit. Summed up wisely in a quote:

“Any society that would give up a little liberty to gain a little security will deserve neither and lose both.” Benjamin L Franklin. [[http://es.wikipedia.org/wiki/Benjamin_Franklin]]

“All the countries in the world cannot be equally powerful, but they may be equally free.” It rhymes well, but gives us no reason not to abandon free trade agreements.

We wouldn’t even considering giving a rebuttal, but then again we do have some tile left. Even though it’s not perfect, but hey so does bilateral agreement between states.

Ok, sovereignty. We should clarify the opposition’s misunderstanding on sovereignty concept. From their argument, they stated, “By establishing a judgement in which one country is forced to trade within a default trading limit, not just we are violating its sovereignty, but also denying its right to be equal.”

Sovereignty concept is affiliated to territorial. For example if country A put limitation on commodity X trading in Country B, it violates sovereignty, but if country A put limitation on commodity X imports in its country that comes from country B, it solely the sovereignty of country A, because the government has a right to regulate things under its territory. Country A do not violate Country B sovereignty and country B should respect it as Country A sovereignty.

Now, back to the case, we should see first the aim that a country should serve. A country is formed by a social contract by its citizen, where individual person give up some rights to a government or other authority in order to receive or maintain social order. When we talk about country and its policy, this social order should be put as first among others.

We believe that any country should maintain social order to achieve the highest objective of the country, the welfare of its citizen. Justice and equality is just an attribute to maintain social order, so the welfare can be achieved.

From this bigger picture, we can see that equality is not the purpose on itself, but it serve higher objective, that is the welfare. The model of equality that is given by the opposition is was proven by our arguments as harming the social welfare. That is why, being equally free is not as cool as it rhymes.

We believe that by not joining a free trade agreement does not cause inequality between the countries. In fact, by not joining FTA, countries has more freedom in deciding what is best to its country. FTA makes the country loss its flexibility to adjust their trading policy to current domestic situation.

The oppositions urges us to be equally free, but what is the purpose of being equally free? Just to have a noble ideals? Our reasons for their arguments is always the same, there are expensive cost that should be paid, and it outweigh the benefit. We are not interesting in explaining it again, it is already well explained.

In short, it is not about whether our proposal are noble ideals or not, it is about whether it would bring better welfare or not to the citizens, the value we profess is far more worthy.