Center for American Progress

Use Free Trade Agreements to Fight Corruption and Promote Democracy

The debate over free trade has captured headlines this primary season – John Kerry calls companies that take jobs overseas while not paying their share of taxes "Benedict Arnolds," and before dropping out, John Edwards based his opposition to free trade agreements (FTAs) on the job losses they cause. These points raise important policy questions about how our country adjusts to the realities of globalization and what role our government should play in helping its workers adapt to economic changes.

One problem with FTAs is that they do little to promote good democratic governance and fight corporate and government corruption among our overseas trading partners. Though some transparency and anti-corruption standards are present, institutions for enforcement are lacking, and the standards themselves are usually weak.

We should design future FTAs to promote political and economic reform by having strict conditions for establishing and enforcing anti-corruption laws and ensuring a basic level of political rights and civil liberties.

"Trade not aid" has been a slogan since the Clinton administration, and the notion that nation-building, democratic enlargement, and the promotion of free market economies abroad are intertwined with vital national security objectives has been a standard feature of American foreign policy in the post-Cold War era. By promoting economic growth and greater political rights and civil liberties, the United States can only increase the chances for more stability, prosperity, and peace around the world.

Last spring, the Bush administration unveiled plans to create a U.S.-Middle East free trade area as part of a broader initiative to support political and economic reform there, and it has begun bilateral trade negotiations with some countries in the region.

In most Middle Eastern countries, a coterie of political and economic elites holds most of the power, with many governments using a combination of brute force and repression to maintain control. Many countries in the region consistently receive low scores on Transparency International's annual corruption index. On the whole, countries of the Arab Middle East receive low scores for respecting political rights and civil liberties. In response to efforts by the United States and others, some countries in the region have chosen a path of "tactical liberalization" – implementing minor political and limited economic reforms, without truly opening up the ruling elite's monopoly on politics or economy to competition.

Why then create free trade agreements that run the risk of promoting corruption and further entrenching regimes by offering more opportunities for political and economic elites to line their pockets?

Designed properly, FTAs can help break this power monopoly, which in some cases – such as Saudi Arabia – has fed Islamist terrorists like al Qaeda.

Countries in the region need these trade agreements more than we do. The region has missed out on the waves of globalization and democratization in the 1990s. Since 1980, the Middle East's share of global trade has dropped by more than half, while its population has doubled. Tariffs in the Middle East are among the highest in the world, with some countries' tariffs averaging above 20 percent.

Without stricter anti-corruption and good democratic governance standards, the free trade agreements would lower import tariffs but fail to introduce greater transparency and competition into these country's economies and politics. This would effectively raise the profit margins for ruling elites, strengthening the power monopoly these elites have and creating less incentive for political and economic reform.

Designing free trade agreements with these additional standards can only create more incentives for reform. While it is debatable whether using the stick of trade sanctions helps or hurts the cause of political reform – Cuba and Myanmar stand out as prominent examples of how long countries can resist external pressures – the carrot of an FTA holds out the possibility of promoting not only our economic interests, but also our values and broader national security interests.

As the United States moves forward in negotiating FTAs with countries in the Middle East – whether under a Kerry or Bush administration – it should insist on stricter anti-corruption laws and good democratic governance standards that ensure the rule of law and greater respect for citizens' basic political rights and civil liberties.

Brian Katulis is a research consultant who has worked in the Middle East with Freedom House and the National Democratic Institute. He previously worked at the State Department and National Security Council during the Clinton administration.

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 (Brian Katulis)

Brian Katulis

Former Senior Fellow

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