The European Union (EU) is an anti-democratic, neoliberal project. It imposes austerity on the populations of member states, legislates for widespread privatization and leads to low growth-rates. Those leading the anti-EU, pro-Brexit charge want Britain to sign “free trade” deals with the US and growing economies. What they don’t tell you is that the very EU policies they claim to oppose are cut-and-paste into “free trade” deals outside the EU. British Prime Minister Boris Johnson’s Brexit plans–assuming he has any–risk yanking Britain from a neoliberal EU whilst trapping the country in an ultra-neoliberal “free trade” deal with Trump’s America. In my new book, Privatized Planet: “Free Trade” as a Weapon Against Democracy, Healthcare and the Environment, I argue that “free trade”–EU or non-EU–is bad for working people: and we have NAFTA as a historical model to prove it.
There are a lot of serious problems with the EU: it is anti-democratic, hinders state-aid rules, privatizes public assets and feeds hard-right political narratives critical of the EU’s anti-working-class economic agenda. But precisely the same exploitative EU laws afflicting Europeans are cut-and-paste into the non-EU “free trade” deals championed by many Brexiteers.
Consider the Japan-EU Free Trade Agreement (JEFTA). In addition to lowering barriers to trade, JEFTA includes provisions to “liberalize” (i.e., deregulate) Japan’s financial and investment markets. This means that “free trade” could allow unstable financial products to tie Japan’s “real economy” (construction, manufacturing, etc.) to volatile EU money markets. People on both the left and right understand this; hence the rejection by grassroots demonstrators of the EU’s proposed, JEFTA-type Transatlantic Trade and Investment Partnership (TTIP) with the US: a multilateral “free trade” deal which would have enabled US corporations to sue European governments while protecting investors and the intellectual property rights of big corporations.
The texts that constitute JEFTA, TTIP and others are much the same as that which made the North American Free Trade Agreement (NAFTA), signed between the US, Mexico and Canada in the 1990s. If Britain leaves the EU under a right-wing or hard-right government, its people could be forced into a NAFTA-style “free trade” deal with Trump’s America.
The kind of people pushing for a hard Brexit want the UK to cease being a “vassal state” of the EU and instead become the 51st State of the USA.
Both Nigel Farage of the Brexit Party, a close pal of Donald Trump, and Prime Minister Boris Johnson who was endorsed by Trump, want to see the UK sign a so-called free trade deal with the US. Such a deal will mean opening the UK—including, very likely, the National Health Service–to US procurement, the importation of dangerous financial products, the privatization of what is left of public services, the capture of pension- and health insurance markets, and the undermining of domestic intellectual property by US monopolies.
Maastricht and the Neoliberal agenda
From its outset, the modern EU was a neoliberal project.
It was achieved via the Maastricht Treaty of 1992 and the Lisbon Treaty of 2009. Members were obliged to cut social provision under the pretext of keeping debts and deficits in check–even during recessions when increased public spending is often necessary.
Political scientists Robert Bohrer and Alex Tan note that Maastricht “brought austerity across the member states, in spite of high levels of unemployment in the region.” It mattered not that 13 out of 15 governments were left-wing. EU rules meant that they had to pursue economic policies typically associated with the right. European Monetary Union (EMU) countries were committed to keeping their deficits below three percent of GDP and their national debts at less than 60 percent. By the end of 1997, 14 out of the 15 countries had met the target “due to austerity measures and more flexible economic conditions.” The pattern was repeated more severely after the financial crisis (circa 2008), when EU member states imposed crushing austerity on their populations while meeting private-sector debt repayments.
Returning to the late-1990s, having proved that they could punish their populations sufficiently with austerity, 11 countries were admitted to the EMU. These measures were particularly cruel in light of the recession hitting Europe at the time. Germany’s unemployment, for instance, was worse than at any time since the 1930s. Bohrer and Tan speak of “austerity required by the Maastricht criteria” [emphasis added], with governments “unable (or unwilling) to stem the tide of unemployment by expensive propositions such as expanding the public sector.” They note the European Union’s “general retrenchment of welfare state benefits … as countries seek to remain in the acceptable deficit and debt zones … Europe, like other regions, has witnessed an erosion of domestic control over economics as a result of global competition.” They warn that “the heady days of nationalization and heavy state intervention” are over.
Britain’s austerity (2010-present) was not imposed by the EU, which, due to Britain’s opt-outing out of the euro as its currency, has no jurisdiction over Britain’s fiscal and monetary policy. Rather, the Tory-Liberal coalition government’s (2010-15) imposition of austerity mirrored the EU’s neoliberal agenda. In terms of “free trade” specifically, any post-Brexit UK deal with the US would mean that the UK (GDP $2.6 trillion) would be the weaker partner compared to America (GDP $19.3). It would, therefore, be in a more vulnerable bargaining position and likely be obliged to accept a slash-and-burn approach to regulation. In anticipation of such a “deal,” consider what the non-EU North American Free Trade Agreement (NAFTA) did to the alliance’s weakest member, Mexico. A similar though admittedly not as severe fate could await the UK; “not as severe” because the UK’s economy is more robust than Mexico’s, but still nowhere near as powerful as the US’s or the EU’s as a whole.
NAFTA: “The Perfect Dictatorship”
As Europe entered a disastrous single currency and neoliberal period via the EU, the US, Canada and Mexico entered into a trilateral agreement: NAFTA. Former US Trade Representative Carla A. Hills writes that NAFTA “prohibited barriers such as local-content and import-substitution rules, which require producers to ensure that specified inputs are produced domestically.” Consequently, domestic production in Canada and especially Mexico was harmed. Two million Mexican farming families went out of business thanks to cheap and subsidized US agricultural
imports. Many tried to enter the US in search of work and were met with President Bill Clinton’s wall, Operation Gatekeeper.
Mexico’s ex-Finance Minister Jorge G. Castañeda writes: “NAFTA did provide life support to what the writer Mario Vargas Llosa famously called ‘the perfect dictatorship’, which otherwise might have succumbed to the democratic wave sweeping Latin America, eastern Europe, Africa, and Asia.”
Castañeda concludes that real incomes have stagnated in Mexico across the entire economy. Undoing many of its 1970s poverty-reduction policies, Mexico initiated neoliberal economic reforms in the 1980s, laying the groundwork for further reductions and eliminations of tariffs. Devaluation of the peso in 1994-95 crashed much of the Mexican economy, setting the US dollar against the already weaker peso. These factors, combined with NAFTA, resulted in a “stunning setback in wages” (Polaski).
Under a points-based immigration system, the UK would not experience an increase in American migrants the way the US experienced Mexican migration after NAFTA. Rather, if the US opens low-tax tech companies in the UK, the UK will likely see increased numbers of skilled, tech-savvy Indian and Chinese migrants. That’s because the government doesn’t want to spend money training British programmers. The individuals who were motivated to vote Brexit in part or in whole due to racism and xenophobia will be even more upset with Brexit than staying in the EU because, instead of seeing white, Polish and Romanian EU migrants taking “British” jobs (as they see it), they will be offended by the presence of non-white, non-EU immigrants.
Under NAFTA, Mexico took on the role of assembly plant for US products. As Carla A. Hills says: “[A] large percentage of that output returns home [i.e., to the US] as imports of intermediate goods, which allows US firms to focus on the higher-end task of assembling finished products.” Sandra Polaski, then-Deputy Undersecretary for International Affairs at the United States Department of Labor, says that by the time NAFTA was imposed, arrangements were “concentrated in the auto parts, electronics, and apparel sectors” and that Mexico was transformed into a service provider, with its large labour force assembling goods for re-export to the US; much like China today.
Consider what could happen to the UK under such a “free trade” deal with the US. In the 1980s, a governmental decision was made to de-industrialize the UK in an effort to compete with EU member states by having a competitive advantage over the EU with British services, as opposed to manufacturing.
Post-Brexit, British production could increase again.
However, to make that happen, more tax-free US factories, mega-stores and warehouses could open on British soil. The people who voted Brexit on xenophobic grounds will find that “their” low-skilled jobs in British-based US stores, like ASDA and Apple, will be taken from low-skilled, EU workers like Poles and Romanians, and given instead not to them, but to non-EU migrant workers from countries like Ukraine and Moldova.
Under Maastricht, the policies of left-wing and right-wing European governments blended because supranational policy came to dictate fiscal and monetary outcomes. The same applied to Mexico after NAFTA.
Brexiteers argue that Britain will be able to “dictate the terms” of its own “free trade” deals outside EU control.
No doubt Mexican pundits naively believed that their leaders would also be able to dictate the terms of “free trade” with the US during the NAFTA negotiations.
Before backpedaling, President Trump already let slip that “everything’s on the table” with regards to the UK’s beloved National Health Service. National Insurance contributions pay for the NHS. They present the US with a potential market worth £130bn. As I also document in Privatized Planet (2019, New Internationalist), the US Chamber of Commerce published a report entitled, “Selling Splints to Europe,” indicating how the corporate lobbyists behind “free trade” want to capture European, including British, health markets.
The US already has its tech firms–Microsoft, Apple and Google–directly involved in British patient-care; be it computers that store data or nurses completing often pointless bureaucracy via iPads. Other “free trade” deals, like the as-yet unsigned Trade in Services Agreement, discuss accessing data, which could include patient data. Current texts discuss granting foreign–in this case, US–corporations national privilege. They have plenty of loopholes to allow the US to continue subsidizing its massive drugs market while denying host-nations, like the UK, to do the same; all in the name of fair competition: or “levelling the playing field,” as Trump calls it.
Working people must oppose all forms of “free trade” and be careful not to fall for corporate globalization repackaged by the likes of Boris Johnson and Nigel Farage as nationalism.
Dr. T.J. Coles is a columnist with Axis of Logic, an associate researcher at the Organisation for Propaganda Studies, and the author of several books, including Human Wrongs (iff Books)