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The Panama – US free trade agreement has been in the news again. Panama is pushing for US ratification, it was already ratified in Panama under the last government. The US is looking at free trade deals with Panama, Colombia and South Korea.

In my opinion, realistically a worthless opinion, the deal is bad for the people of both countries. Panama is a country of three and one half million people, that is less than half the population of Phoenix Arizona. The US has over one hundred times the total population. The impact of selling some more stuff to Panama is not going significantly impact the US economy.

What is is that Panama can buy from the US that will benefit US businesses? The answer is food. The corporate agriculture industry in the US is a strong beneficiary of government subsidies. It costs less to raise a chicken in the US than in Panama, in part because the chickens are raised in cages and feed growth hormones and in part because the US uses tax payers money to help subsidize the Meat Processors.

For my example of pending disaster I am going to focus on chickens, a mainstay of the diet in Panama.

“Until fifteen or twenty years ago, the meatpacking workforce in the United States was unionized, virtually all white, and highly paid, earning about eighteen dollars an hour, adjusted for inflation. During the Reagan era, following offers for millions of dollars in local tax subsidies, meatpacking companies moved away from big cities into the country. Although the move put them closer to the animals and thus allowed them to save on transportation costs, labor was in short supply in the new rural locations. By then, only a few companies dominated the field, and production lines were sped up to keep competition tight. By 1992, average wages fell to twelve dollars an hour, and by 1995 unionization was half of what it was in 1963. Today, the processing and packing plants are largely staffed by low-paid, non-union workers, who are often paid only six dollars an hour. To staff the plants and fill the positions that result from the remarkably high turnover rate, many companies have actively recruited in areas of high unemployment, such as southern Texas, as well as in many Latin American countries, such as Mexico and Guatemala.”

Harvard Latino Law Review

So by using tax money, corporate welfare, with tax changes done in the era of a “conservative government” in the US, two things happened, US workers lost their jobs and meat packers contributed to the immigration problems by importing Latin American workers to displace more costly legal workers.

The free trade agreement with Panama will likely mean local Chicken processors will be undercut putting inferior US products into the groceries here. The prices to the consumer might be a little lower but most of the profits from saved import duties and lower cost of goods will remain with those who own the distribution businesses, not passed on to consumers. There is no motivation to pass the savings on and even if there was the current employees in the industry will be losing their jobs and therefore the ability to buy chicken.

So what does free trade to to benefit the average Panamanian, nothing, except possibly the loss of his farm, his job and then his land. Maybe after he has lost everything he will become an illegal immigrant so he can work at Tyson in the US helping to process chicken for Panama?

What is the benefit to the average American of free trade agreements, nothing. It is a good thing if a country wants to encourage consumption of imported goods or can make reciprocal agreements that benefit the business owners on both sides. It is a looser if a country destroys jobs to import cheaper stuff they could have produced themselves.

Consider the Most Favored Nation status of China as a US trade partner. It is one sided free trade, the US gives great incentive of reduced tariffs to China so US companies can buy goods cheaper in China than they could from US factories. China maintains tariffs on US goods. IF free trade does provide lower prices to US consumers it then costs them their jobs.

I have heard people complaining that 47% of the people in the US do not pay taxes. Aside from tax evaders this means almost half of the people in the US cannot earn enough money to pay taxes. This is not an issue of the government paying them an entitlement. This is function of jobs being exported due to bad trade deals.

Brazil, a growing economy has very high tariffs, 85% on cars is an example. The outcome of this is manufacturers opened factories in Brazil to make cars. It was the only way to sell them without a huge tax penalty. Brazil without free trade is prospering, the US is failing and now they want the same for Panama?

Apple and Foxconn their production partner are considering a plant in Brazil to build iphone, ipads and more there. Why, Brazil will not charge tariffs on homebuilt items and the government is reportedly offering tax incentives for them to come. Contrast that to General Electric which has just announced they are moving their medical imaging business from New York to China.

If the US wants to really see an economic recovery slap a 100% tariff on all good made in China, or all goods from anyplace that can be made in the US. Watch the factories reopen and the tax base increase. Who would be hurt, short term multinationals, long term no one once the plants are reopened the Henry Ford ethic of paying your workers enough to buy a car would return the investment. Instead workers around the world are entering a new age of slavery, incur debt and be a slave to pay it off.

Maybe Panama should learn from these words, but if you disagree, have no fear no one will read them.