How "Free Trade" Has Led Foreign Co.'s to Own and Control 1/4 of the U.S.A.
Author: Thomas Heffner
Published On: 03/14/07
Source: www.EconomyInCrisis.Org
If you still think "Free Trade" is good policy, try to explain why foreign
interests now own 1/4 of this country.
Based on recently released figures from the US Department of Commerce, as of year end 2005, the rest of the world owned $2.7 trillion more of the US than the US owned of the rest of the world. This is an increase of $2.2 trillion over the past 10 years.
In gross terms, as of the year end 2005, foreign interests owned at least $12.7 trillion of US interests. This is roughly 1/4 of the total household net wealth of this country. In percentage terms, this is nearly double that of the amount of 1995 when foreign ownership of US interests was roughly 1/8 of total household net wealth.
The US net international investment position (what we own of the rest of the world minus what they own of us) has been decreasing by 22% per year over the last 20 years. In other words, in the past 20 years, foreign interests have accumulated $11.5 trillion of US assets.
So what does this have to do with "free trade?" Coincident with the adoption of "free trade" measures such as NAFTA and WTO, the US trade deficit has fallen off a cliff. In the 10 years preceding NAFTA, the aggregate US trade deficit was about $900 billion. In the 10 years following NAFTA, that amount skyrocketed to over $3 trillion.
Foreign acquisitions of US companies in the 10 years after NAFTA totaled $1.2 trillion up from just $340 billion in the preceding years in the late 80's and early 90's when everyone feared that the US was losing ownership to foreigners. The fear was well founded, it was just well short of the mark.
Only a truly naive individual would fail to see the connection between the massive losses of funds through our trade deficit and the massive increase in foreign ownership of this country in the same period. Not only have we lost control of our companies and industries, but our government debt now stands at 45% owned by foreign interests.
What is significant about this foreign control of government debt is that we borrow roughly $300 to $400 billion per year (nearly 100% from foreign sources). Foreign interests now own claims to government debts of almost six times our annual average borrowing. If these foreign governments were so inclined, they could swamp our debt market effectively cutting off our ability to borrow. With this kind of negative leverage, we have lost our ability to negotiate.
The net result to our standard of living is that with our negative savings rate and our massive trade deficits, it is unlikely that we will be able to somehow clear the indenture to our foreign lenders without massive inflation.
So when "free traders" argue abstractly about supposed benefits to the consumer, to corporations, to companies, and to the world's impoverished, ask them when these benefits will come, how large will they be, and at what tremendous cost will we have to endure before they magically appear.
Before too long, we won't own enough of this country to benefit from the profits the companies generate (that this country needs to sustain itself and grow) as the profit and taxes will go to the foreign country and the technology will reside with the foreign company.
We have blithely sanctioned the economic occupation of our country for private profit with the result that we are now beholdened to and sustained only at the behest of foreign employers, central banks, and dictates not unlike the colonial imposition that bound this country prior to its hard-fought independence.
Based on recently released figures from the US Department of Commerce, as of year end 2005, the rest of the world owned $2.7 trillion more of the US than the US owned of the rest of the world. This is an increase of $2.2 trillion over the past 10 years.
In gross terms, as of the year end 2005, foreign interests owned at least $12.7 trillion of US interests. This is roughly 1/4 of the total household net wealth of this country. In percentage terms, this is nearly double that of the amount of 1995 when foreign ownership of US interests was roughly 1/8 of total household net wealth.
The US net international investment position (what we own of the rest of the world minus what they own of us) has been decreasing by 22% per year over the last 20 years. In other words, in the past 20 years, foreign interests have accumulated $11.5 trillion of US assets.
So what does this have to do with "free trade?" Coincident with the adoption of "free trade" measures such as NAFTA and WTO, the US trade deficit has fallen off a cliff. In the 10 years preceding NAFTA, the aggregate US trade deficit was about $900 billion. In the 10 years following NAFTA, that amount skyrocketed to over $3 trillion.
Foreign acquisitions of US companies in the 10 years after NAFTA totaled $1.2 trillion up from just $340 billion in the preceding years in the late 80's and early 90's when everyone feared that the US was losing ownership to foreigners. The fear was well founded, it was just well short of the mark.
Only a truly naive individual would fail to see the connection between the massive losses of funds through our trade deficit and the massive increase in foreign ownership of this country in the same period. Not only have we lost control of our companies and industries, but our government debt now stands at 45% owned by foreign interests.
What is significant about this foreign control of government debt is that we borrow roughly $300 to $400 billion per year (nearly 100% from foreign sources). Foreign interests now own claims to government debts of almost six times our annual average borrowing. If these foreign governments were so inclined, they could swamp our debt market effectively cutting off our ability to borrow. With this kind of negative leverage, we have lost our ability to negotiate.
The net result to our standard of living is that with our negative savings rate and our massive trade deficits, it is unlikely that we will be able to somehow clear the indenture to our foreign lenders without massive inflation.
So when "free traders" argue abstractly about supposed benefits to the consumer, to corporations, to companies, and to the world's impoverished, ask them when these benefits will come, how large will they be, and at what tremendous cost will we have to endure before they magically appear.
Before too long, we won't own enough of this country to benefit from the profits the companies generate (that this country needs to sustain itself and grow) as the profit and taxes will go to the foreign country and the technology will reside with the foreign company.
We have blithely sanctioned the economic occupation of our country for private profit with the result that we are now beholdened to and sustained only at the behest of foreign employers, central banks, and dictates not unlike the colonial imposition that bound this country prior to its hard-fought independence.