IS that your point??

see this Primer as a jumping off point:
WHAT IS FREE TRADE?
by
RON PAUL

Mr. PAUL. Madam Speaker, I asked for this Special Order this
evening to talk about trade. We are going to be dealing with permanent normal
trade relations with China here soon, and there is also a privileged resolution
that will be brought to the floor that I have introduced, H.J.Res. 90. The
discussion in the media and around the House floor has been rather clear about
the permanent normal trade status, but there has not been a whole lot of talk
yet about whether or not we should even really be in the World Trade
Organization.

I took this time mainly because I think there is a lot of
misunderstanding about what free trade is. There are not a whole lot of people
who get up and say I am opposed to free trade, and many of those who say they
are for free trade quite frankly I think they have a distorted definition of
what free trade really is.

I would like to spend some time this evening
talking a little bit about that, because as a strict constitutionalist and one
who endorses laissez-faire capitalism, I do believe in free trade; and there are
good reasons why countries should trade with each other.

The first reason
I would like to mention is a moral reason. There is a moral element involved in
trade, because when governments come in and regulate how citizens spend their
money, they are telling them what they can do or cannot do. In a free society,
individuals who earn money should be allowed to spend the money the way they
want. So if they find that they prefer to buy a car from Japan rather than
Detroit, they basically have the moral right to spend their money as they see
fit and those kinds of choices should not be made by government. So there is a
definite moral argument for free trade.

Patrick Henry many years ago
touched on this when he said, `You are not to inquire how your trade may be
increased nor how you are to become a great and powerful people but how your
liberties may be secured, for liberty ought to be the direct end of your
government.’ We have not heard much talk of liberty with regards to trade, but
we do hear a lot about enhancing one’s ability to make more money overseas with
trading with other nations. But the argument, the moral argument, itself should
be enough to convince one in a free society that we should never hamper or
interfere with free trade.

When the colonies did not thrive well prior to
the Constitution, two of the main reasons why the Constitutional Convention was
held was, one, there was no unified currency, that provided a great deal of
difficulty in trading among the States, and also trade barriers are among the
States.

Even our Constitution was designed to make sure that there were
not trade barriers, and this was what the interstate commerce clause was all
about. Unfortunately though, in this century the interstate commerce clause has
been taken and twisted around and is the excuse for regulating even trade within
a State. Not only interstate trade, but even activities within a State has
nothing to do with interstate trade. They use the interstate commerce clause as
an excuse, which is a wild distortion of the original intent of the
Constitution, but free trade among the States having a unified currency and
breaking down the barriers certainly was a great benefit for the development and
the industrialization of the United States.

The second argument for free
trade is an economic argument. There is a benefit to free trade. Free trade
means that you will not have high tariffs and barriers so you cannot buy
products and you cannot exert this freedom of choice by buying outside. If you
have a restricted majority and you can evenly buy from within, it means you are
protecting industries that may not be doing a very good job, and there is not
enough competition.

It is conceded that probably it was a blessing in
disguise when the automobile companies in this country were having trouble in
the 1970s, because the American consumer was not buying the automobiles, the
better automobiles were coming in, and it should not have been a surprise to
anybody that all of a sudden the American cars got to be much better automobiles
and they were able to compete.

There is a tremendous economic benefit to
the competition by being able to buy overseas. The other economic argument is
that in order to keep a product out, you put on a tariff, a protective tariff. A
tariff is a tax. We should not confuse that, we should not think tariff is
something softer than a tax in doing something good. A tariff is a tax on the
consumer. So those American citizens who want to buy products at lower prices
are forced to be taxed.

If you have poor people in this country trying to
make it on their own and they are not on welfare, but they can buy clothes or
shoes or an automobile or anything from overseas, they are tremendously
penalized by forcing them to pay higher prices by buying domestically.

The competition is what really encourages producers to produce better
products at lower costs and keep the prices down. If one believes in free trade,
they do not enter into free trade for the benefit of somebody else. There is
really no need for reciprocity. Free trade is beneficial because it is a moral
right. Free trade is beneficial because there is an economic advantage to buying
products at a certain price and the competition is beneficial.

There
really are no costs in the long run. Free trade does not require management. It
is implied here on conversation on the House floor so often that free trade is
equivalent to say we will turn over the management of trade to the World Trade
Organization, which serves special interests. Well, that is not free trade; that
is a misunderstanding of free trade.

Free trade means you can buy and
sell freely without interference. You do not need international management.
Certainly, if we are not going to have our own government manage our own
affairs, we do not want an international body to manage these international
trades.

Another thing that free trade does not imply is that this opens
up the doors to subsidies. Free trade does not mean subsidies, but inevitably as
soon as we start trading with somebody, we accept the notion of managed trade by
the World Trade Organization, but immediately we start giving subsidies to our
competitors.

If our American companies and our American workers have to
compete, the last thing they should ever be required to do is pay some of their
tax money to the Government, to send subsidies to their competitors; and that is
what is happening. They are forced to subsidize their competitors on foreign
aid. They support their competitors overseas at the World Bank. They subsidize
their competitors in the Export/Import Bank, the Overseas Private Investment
Corporation.

We literally encourage the exportation of jobs by providing
overseas protection in insurance that cannot be bought in the private sector.
Here a company in the United States goes overseas for cheap labor, and if, for
political or economic reasons, they go bust, who bails them out. It is the
American taxpayer, once again, the people who are struggling and have to compete
with the free trade.

It is so unfair to accept this notion that free
trade is synonymous with permitting these subsidies overseas, and, essentially,
that is what is happening all the time. Free trade should never mean that
through the management of trade that it endorses the notion of retaliation and
also to stop dumping.

This whole idea that all of a sudden if somebody
comes in with a product with a low price that you can immediately get it stopped
and retaliate, and this is all done in the name of free trade, it could be
something one endorses. They might argue that they endorse this type of managed
trade and subsidized trade; but what is wrong, and I want to make this clear,
what is wrong is to call it free trade, because that is not free
trade.

Most individuals that I know who promote free trade around
Washington, D.C., do not really either understand what free trade is or they do
not really endorse it. And they are very interested in the management aspect,
because some of the larger companies have a much bigger clout with the World
Trade Organization than would the small farmers, small rancher or small
businessman because they do not have the same access to the World Trade
Organization.

For instance, there has been a big fight in the World Trade
Organization with bananas. The Europeans are fighting with the Americans over
exportation of bananas. Well, bananas are not grown in Europe and they are not
grown in the United States, and yet that is one of the big issues of managed
trade, for the benefit of some owners of corporations that are overseas that
make big donations to our political parties. That is not coincidental.

So
powerful international financial individuals go to the World Trade Organization
to try to get an edge on their competitor. If their competitor happens to be
doing a better job and selling a little bit lower, then they come immediately to
the World Trade Organization and say, Oh, you have to stop them. That is
dumping. We certainly do not want to give the consumers the benefit of having a
lower price.

So this to me is important, that we try to be clear on how
we define free trade, and we should not do this by accepting the idea that
management of trade, as well as subsidizing trade and calling it free trade is
just not right. Free trade is the ability of an individual or a corporation to
buy goods and spend their money as they see fit, and this provides tremendous
economic benefits.

The third benefit of free trade, which has been known
for many, many centuries, has been the peace effect from trade. It is known that
countries that trade with each other and depend on each other for certain
products and where the trade has been free and open and communications are free
and open and travel is free and open, they are very less likely to fight wars. I
happen to personally think this is one of the greatest benefits of free trade,
that it leads us to policies that direct us away from military
confrontation.

Managed trade and subsidized trade do not qualify. I will
mention just a little later why I think it does exactly the
opposite.

There is a little bit more to the trade issue than just the
benefits of free trade, true free trade, and the disadvantages of managed trade,
because we are dealing now when we have a vote on the normal trade status with
China, as well as getting out of the World Trade Organization, we are dealing
with the issue of sovereignty. The Constitution is very clear. Article I,
section 8, gives the Congress the responsibility of dealing with international
trade. It does not delegate it to the President, it does not delegate it to a
judge, it does not delegate it to an international management organization like
the World Trade Organization.

International trade management is to be and
trade law is to be dealt with by the U.S. Congress, and yet too often the
Congress has been quite willing to renege on that responsibility through
fast-track legislation and deliver this authority to our President, as well as
delivering through agreements, laws being passed and treaties, delivering this
authority to international bodies such as the UN-IMF-World Trade Organizations,
where they make decisions that affect us and our national
sovereignty.

The World Trade Organization has been in existence for 5
years. We voted to join the World Trade Organization in the fall of 1994 in the
lame duck session after the Republicans took over the control of the House and
Senate, but before the new Members were sworn in. So a lame duck session was
brought up and they voted, and by majority vote we joined the World Trade
Organization, which, under the Constitution, clearly to anybody who has studied
the Constitution, is a treaty. So we have actually even invoked a treaty by
majority vote.

This is a serious blunder, in my estimation, the way we
have dealt with this issue, and we have accepted the idea that we will remain a
member based on this particular vote.

Fortunately, in 1994 there was a
provision put in the bill that said that any member could bring up a privileged
resolution that gives us a chance at least to say is this a good idea to be in
the World Trade Organization, or is it not? Now, my guess is that we do not have
the majority of the U.S. Congress that thinks it is a bad idea. But I am
wondering about the majority of the American people, and I am wondering about
the number of groups now that are growing wary of the membership in the World
Trade Organization, when you look at what happened in Seattle, as well as
demonstrations here in D.C. So there is a growing number of people from various
aspects of the political spectrum who are now saying, what does this membership
mean to us? Is it good or is it bad? A lot of them are coming down on the side
of saying it is bad.

Now, it is also true that some who object to
membership in the World Trade Organization happen to be conservative free
enterprisers, and others who object are coming from the politics of the left.
But there is agreement on both sides of this issue dealing with this aspect, and
it has to do with the sovereignty issue.

There may be some labor law and
there may be some environmental law that I would object to, but I more
strenuously object to the World Trade Organization dictating to us what our
labor law ought to be and what our environmental law ought to be. I highly
resent the notion that the World Trade Organization can dictate to us tax
law.

We are currently under review and the World Trade Organization has
ruled against the United States because we have given a tax break to our
overseas company, and they have ruled against us and said that this tax break is
a tax subsidy, language which annoys me to no end. They have given us until
October 1 to get rid of that tax break for our corporations, so they are telling
us, the U.S. Congress, what we have to do with tax law.

You say, oh, that
cannot be. We do not have to do what they tell us. Well, technically we do not
have to, but we will not be a very good member, and this is what we agreed to in
the illegal agreement. Certainly it was not a legitimate treaty that we signed.
But in this agreement we have come up and said that we would obey what the WTO
says.

Our agreement says very clearly that any ruling by the WTO, the
Congress is obligated to change the law. This is the interpretation and this is
what we signed. This is a serious challenge, and we should not accept so easily
this idea that we will just go one step further.

This has not just
happened 5 years ago, there has been a gradual erosion of the concept of
national sovereignty. It occurred certainly after World War II with the
introduction of the United Nations, and now, under current conditions, we do not
even ask the Congress to declare war, yet we still fight a lot of wars. We send
troops all over the world and we are involved in combat all the time, and our
presidents tell us they get the authority from a UN resolution. So we have
gradually lost the concept of national sovereignty.

I want to use a quote
from somebody that I consider rather typical of the establishment. We talk about
the establishment, but nobody ever knows exactly who they are. But I will name
this individual who I think is pretty typical of the establishment, and that is
Walter Cronkite. He says, `We need not only an executive to make international
law, but we need the military forces to enforce that law and the judicial system
to bring the criminals to justice in an
international
government.’

`But,’ he goes on to say, and this he makes
very clear, and this is what we should be aware of, `the American people are
going to begin to realize that perhaps they are going to have to yield some
sovereignty to an international body to enforce world law, and I think that is
going to come to other people as well.’

So it is not like it has been
hidden, it is not like it is a secret. It is something that those who disagree
with me about liberty and the Constitution, they believe in internationalism and
the World Trade Organization and the United Nations, and they certainly have the
right to that belief, but it contradicts everything America stands for and it
contradicts our Constitution, so, therefore, we should not allow this to go
unchallenged.

Now, the whole idea that treaties could be passed and
undermine the ability of our Congress to pass legislation or undermine our
Constitution, this was thought about and talked about by the founders of this
country. They were rather clear on the idea that a treaty, although the treaty
can become the law of the land, a treaty could never be an acceptable law of the
land if it amended or changed the Constitution. That would be ridiculous, and
they made that very clear.

It could have the effect of the law of the
land, as long as it was a legitimate constitutional agreement that we entered
into. But Thomas Jefferson said if the treaty power is unlimited, then we do not
have a Constitution. Surely the President and the Senate cannot do by treaty
what the whole government is interdicted from doing in any way.

So that
is very important. We cannot just sit back and accept the idea that the World
Trade Organization, we have entered into it, it was not a treaty, it was an
agreement, but we have entered into it, and the agreement says we have to do
what
they tell us, even if it contradicts the whole notion that it is the
Congress’ and people’s responsibility to pass their own laws with regard to the
environment, with regard to labor and with regard to tax law.

So I think
this is important material. I think this is an important subject, a lot more
important than just the vote to trade with China. I think we should trade with
China. I think we should trade with Cuba. I think we should trade with everybody
possible, unless we are at war with them. I do not think we should have
sanctions against Iran, Iraq or Libya, and it does not make much sense to me to
be struggling and fighting and giving more foreign aid to a country like China,
and at the same time we have sanctions on and refuse to trade and talk with
Cuba. That does not make a whole lot of sense. Yet those who believe and promote
trade with China are the ones who will be strongly objecting to trade with Cuba
and these other countries. So I think a little bit more consistency on this
might be better for all of us.

Alexander Hamilton also talked about this.
He said a treaty cannot be made which alters the constitution of the country or
which infringes any expressed exception to the powers of the Constitution of the
United States.

So these were the founders talking about this, and yet we
have drifted a long way. It does not happen overnight. It has been over a
50-year period. Five years ago we went one step further. First we accepted the
idea that international finance would be regulated by the IMF. Then we accepted
the idea that the World Bank, which was supposed to help the poor people of the
world and redistribute wealth, they have redistributed a lot of wealth, but most
of it ended up in the hands of wealthy individuals and wealthy politicians. But
the poor people of the world never get helped by these programs. Now, 5 years
ago we have accepted the notion that the World Trade Organization will bring
about order in trade around the country.

Well, since that time we have
had a peso crisis in Mexico and we had a crisis with currencies in Southeast
Asia. So I would say that the management of finances with the IMF as well as the
World Trade Organization has been very unsuccessful, and even if one does not
accept my constitutional argument that we should not be doing this, we should at
least consider the fact that what we are doing is not very successful.