Columban Center for Advocacy and Outreach

Free Trade and Economic Inequality

February 14, 2014

  Chloe Schwabe, CCAO Advocacy Associate

“Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world… This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacra­lized workings of the prevailing economic system… Meanwhile, the excluded are still waiting.” –Pope Francis, The Joy of the Gospel

In President Obama’s State of the Union speech earlier this month, perhaps spurred from Pope Francis’ words, he focused on income inequality in America. However, one elephant in the room that the Administration is currently promoting a new free trade agreement called the Trans-Pacific Partnership (TPP) that represents 40 percent of the global economy. Based on the results of past trade agreements, the TPP raises concerns for greater inequality amidst growing inequality in the U.S. and the world.

The U.S. is negotiating the TPP with the governments of many countries where Columbans serve –  Chile, Peru, Japan, Mexico, Australia, and New Zealand, and six more countries with the potential for more to join. A few examples from Columbans in countries that already have free trade agreements with the U.S. give insight into the impact of these agreements on the most vulnerable communities.

In Chile, Cesar Correa of the Columban JPIC Office noted that while the macro-economic indicators for Chile continue to strengthen, these benefits are not seen on the community level and the gap between the rich and poor is increasing. In La Oroya, Peru, an impoverished community outside Lima, the children have high blood lead levels  due tothe Doe Run lead smeltering plant. Rather than pay foe remediation,  Doe Run sued for lost profits under the Peru-US trade agreement..  Similarly, Philip Morris is suing Australia for billions of dollars over cigarette packaging that discourages smoking under the US-Australia agreement. These lawsuits under the investment chapter take funds away from governments that they could use to meet the needs of the most vulnerable.

A new study in New Zealand put in doubt this country’s gains from the TPP and the government reduced the projections from 5 billion to $2-3 billion, raising questions about how much other countries will gain from the TPP. But there is evidence of losses. In Mexico, wages have stagnated, and the gap between rich and poor has not decreased in the two decades of NAFTA. Evidence in fact associates NAFTA with growing income inequality in Mexico, Canada, and the United States.

When it comes to free trade, Pope Francis’ words resonate. While free trade can mean an opportunity for more inclusiveness and justice, the reality is that it doesn’t work that way. As long as trade policies are motivated by greed and largely influenced by corporations that wield economic power, the economically poor will be excluded from any benefits that trade agreements promote.

As the Obama Administration seeks to wrap up the TPP before President Obama’s trip to Asia in April, they are seeking “Fast Track” trade authority to pass the TPP. Members on both sides of the Aisle have concerns about renewing “Fast Track.” “Fast Track” derails the democratic process by limiting debate on trade legislation, skipping typical Congressional committee procedures, and doesn’t guarantee that what Congress asks the president to negotiate on their behalf actually has to be in the text of the final bill. By sidelining Congressional consultation, “Fast Track” trade authority violates a tenant of Catholic Social Teaching that calls us to ensure community participation for the common good Express your opposition to Fast Track by taking action here.