FTAA, Eh?

A bigger, badder trade deal

by Robert Moberg

In These Times magazine, April, 2001

During his first months in the White House, George W. Bush has already tilted politics against worker safety and for tax giveaways to the rich, but on one front- trade and global economic agreements-there has been remarkable continuity from the Clinton era, just as Clinton extended the agenda of the first Bush regime. However, the younger Bush inherits a public skepticism about corporate globalization that has deepened since his father was in office.

Despite major losses on NAFTA, creation of the World Trade Organization, and trade relations with China during the Clinton years, the opposition movement-based on unions and environmental groups-has grown enough in breadth and militancy to win some battles and regularly rattle the elite corporate chiefs and global trade and finance officials. Most notably, opponents disrupted the Seattle WTO meeting and contributed to derailing a Multilateral Agreement on Investment (MAI) among the rich countries. They also blocked renewal of the president's "fast track" trade authority, which would force Congress to vote yea or nay on trade agreements without amendments or extensive debate.

In broad terms, the battles in the near term will follow the same lines as over the past decade. Fast track-repackaged as "presidential trade promotion authority"-will again be the major fight in Congress this year, but the biggest street fight-in Quebec City and dozens of U.S. cities in late April-will be over the Free Trade Area of the Americas (FTAA), a proposed extension of an even more pro-corporate NAFTA to the Western Hemisphere. In each case, the crux of the conflict will be whether new global economic agreements will provide meaningful protection for the environment and labor rights.

Yet just as popular pressure is forcing government leaders to take labor and environmental issues more seriously, those movements are looking beyond securing such safeguards. Most global economic agreements, like the nascent FTAA, are now less about trade and tariffs or other barriers and more about investment, property rights, privatization, deregulation and greater power for corporations at the expense I' of governments. The critics of globalization still have -a long way to go to secure labor rights and environmental responsibility as part of all global economic arrangements. Yet at the same time, they are broadening their demands to include greater citizen control over corporations, new models of development (including elimination of debt from most poor countries) and new financial regulation to stabilize the global economy. split within conservative, pro-business ranks, not unlike when some nationalist Republicans voted with the left-leaning Democrats on trade issues in recent years. Other business groups, like the Chamber of Commerce, and key conservatives in Congress, like House Majority Leader Dick Armey, oppose any reference to labor or the environment in trade deals. The first indications from Bush's trade representative, Robert Zoellick, suggest hostility to such provisions despite talk of flexibility.

But the Business Roundtable's shift also poses a challenge to the opponents of globalization. It's clear that the business groups want any labor and environmental provisions to be as weak as possible, providing political cover without real results. They want to avoid binding obligations or tough enforcement (some might accept monetary fines as penalties for labor and environmental violations, but not the kind of trade sanctions reserved for protecting corporate interests). Yet increasingly labor advocates and environmentalists want stronger measures that go beyond governments pressuring each other to enforce their own laws. They want agreements that would enable workers and citizen groups, not just governments, to initiate actions and that would apply sanctions and penalties against individual corporate violators as well as governments.

How far will critics compromise with this more accommodating wing of big business in order to strike a deal. At the end of the NAFTA debate, the major environmental groups split, with several of the moderate organizations endorsing NAFTA because of the side agreements on labor and the environment that Clinton had negotiated. Their disappointment with those side agreements helped to consolidate later opposition to fast track.

A key test may come in a vote on the bilateral trade agreement with Jordan negotiated at the close of the Clinton administration. For the first time, labor and environmental protections-with provisions for enforcement-are included in the text of a trade agreement. Moreover, the Clinton administration invited the AFL-CIO to join discussions of the language during the negotiations. While U.S. Iabor participants did not get everything they wanted, they concluded (along with their Jordanian counterparts) that the terms were acceptable. However, Jordan is a special case: A very small country, it trades little with the United States; its new labor laws are quite progressive; and there's a foreign policy interest in strengthening the Jordanian economy to foster peace in the Middle East.

Still, Public Citizen's Global Trade Watch criticized the Jordanian agreement as a model for future deals because the language is loose (for example, calling on the parties to "strive to ensure" that they don't relax their domestic environmental or labor laws for economic gain) and that the obligations and enforcement mechanisms are far weaker than for business interests (such as intellectual property rights).

Some Democrats are pressing Bush to submit the Jordanian agreement promptly, testing the administration's willingness to accept the labor and environmental language, but lowa Republican Sen. Charles Grassley has suggested lumping fast track authority together with the Jordanian deal and a Vietnamese bilateral agreement (which does not include labor or environmental protections) as well as potential bilateral agreements with Singapore and Chile.

Although the Senate seems likely to remain a safe haven for trade deals, the House is up for grabs, with crucial votes likely to be swung by campaign contributors, friction between the two political parties, or foreign policy interests in voting for a package that includes trade deals with Vietnam or Jordan. Without Clinton in the White House, Democrats may be more willing to oppose Bush and fight for a new model of trade agreements, but anti-globalist right-wing Republicans might also feel party pressure to back Bush. In any case, labor, environmental and other progressive critics of corporate globalization are already planning grassroots pressure campaigns on legislators from both parties.

At the end of her term, Clinton trade representative Charlene Barshefsky expressed skepticism about the need for fast track authority. Indeed, the Clinton administration negotiated hundreds of trade agreements without fast track, which has been used only five times since it was first granted to President Nixon. But fast track has both symbolic and practical value for the administration, in suggesting to trading partners that it can deliver approval of any terms negotiated. Bush had wanted fast track or at least progress toward it-before the Summit of the Americas in Quebec on April 20 as part of his campaign to accelerate negotiation of the FTAA.

Although Quebec largely will be a formal display by hemispheric heads of state (with the substantive ministerial negotiations occurring earlier in April in Argentina), the Bush administration has made the FTAA a top priority and would like to accelerate negotiations to conclude a deal in two years rather than the scheduled four. American corporations are anxious to consolidate their historic dominance over the region and to use the deal to influence negotiations at the World Trade Organization. While discussions about new agreements on services and agriculture continue at the WTO, it is uncertain whether there will be support for a new broad round of negotiations when the WTO meets in tiny Qatar this fall, far removed from the protesters of Seattle but still riven by internal disagreements that blocked a new round in 1999.

FTAA negotiating groups from 34 countries (excluding Cuba) have come up with an FTAA text that, in the language of negotiators, is "heavily bracketed," meaning that most of the tough points are unsettled. So far that text has been kept secret, although citizen groups in the United States have sued to get it released. But judging from position papers or other documents from the Canadian and U.S. government, it is possible to get some sense of what the FTAA might be like.

Although the proposed FTAA is often described as NAFTA for the Americas, it actually "goes far beyond NAFTA in its scope and power," according to Maude Barlow, chairwoman of The Council of Canadians, Canada's largest public advocacy group. "Essentially, what the FTAA negotiators have done, urged on by the big business community in every country, is to take the most ambitious elements of every global trade and investment agreement-existing or proposed-and pull them all together."

The FTAA will likely include the worst-that is, the most pro-corporate and anti-democratic-elements of both NAFTA and the WTO (as well as the failed MAI). For example, while NAFTA focused on trade in goods, the FTAA is likely to open up trade and investment in all services, including health, education and other now predominantly public services. The United States is pushing for rules that would open up all services to international corporations unless they were specifically excluded, rather than selectively agree on "liberalization" of specific service sectors.

The FTAA is also likely to include the NAFTA provision- not in the WTO-that gives corporations the right to sue governments over violations of the agreement and to have the decisions made by secretive international tribunals with no (or perhaps minimal) public voice. Under NAFTA, corporations have successfully sued governments to overturn regulations or receive compensation for potential lost profits as a result of regulations protecting health and the environment. For example, the Ethyl Corporation forced Canada to reverse its ban on the sale of a dangerous gasoline additive, and Metalclad Corporation won a judgment requiring Mexico to pay $16.7 million on the grounds that environmental laws prohibiting its toxic waste processing plant were the equivalent of expropriation.

Judging from available information, the FTAA would prohibit regulation of speculative capital flows (such as Chile formerly imposed). It would adopt standards on safety and health from the WTO that give higher priority to trade and put stricter limits on regulation than under NAFTA. It would impose tougher protection of intellectual property rights, like patents (including the criminal penalties for violations established under NAFTA but not the WTO). It would open the door to privatization of many public services through rules on government procurement and competition.

The United States is essentially offering the promise of freer access to its domestic market and greater multinational investment in Latin America in exchange for rules that strengthen the dominance of corporations-mainly based here-over the economies and governments of the hemisphere. The FTAA would lock in the model of development-maximizing exports, shrinking the public sector-that has already been imposed through the structural adjustment programs of the International Monetary Fund with unimpressive results and great hardship for the vast majority of Latin America. It also would put additional downward pressure on Mexican wages as more Latin American countries compete for the transfer of United States manufacturing or other portable work to the broader new free trade area. This in turn would exacerbate threats to many jobs and wages in the United States.

There is apparently-but not surprisingly-no provision for protection of labor rights or the environment in the FTAA. The United States claims to have raised the issues but found no support. But unlike NAFTA, where the main Mexican labor federation supported the government's hostility to labor rights, there appears to be unity among the hemispheric labor movement for labor rights in the FTAA. There is also a growing network of environmental and other citizen movements working together throughout the Americas.

Government negotiators are also divided. Canada's trade minister Pierre Pettigrew has opposed the right of investors to sue governments. Canada also has been involved in trade tiffs with both Brazil and the United States. Brazil is reluctant to accelerate negotiations, since it wants to consolidate its growing influence in South America, and despite defection by Chile, the Mercosur nations of the southern cone-including Brazil-put a higher priority on their common market than on the FTAA. Small Caribbean countries are worried that their special needs are being ignored.

While the Bush administration sets its sights on negotiating the FTAA, it is ignoring the potential time bomb of the growing U.S. trade deficit, which, based on the experience with NAFTA, might grow even bigger with the FTAA.

Over the past three years, the trade deficit-driven mainly by a rapidly growing imbalance in imports and exports of manufactured goods-has soared, reaching a record 3.7 percent of GDP at the end of last year. Developing countries with low wages and few labor rights, especially China, are accounting for a growing share of the deficit. The growth of the U.S. economy has masked a dramatic trade-related phenomenon: Although manufacturing jobs usually increase during a boom, since early 1998 the United States has lost more than 400,000 manufacturing jobs.

This has had devastating consequences on some industries, like steel, which suffers from "dumping" by desperate exporters in a world with an excess of capacity to produce steel and depressed markets outside of the United States. The shrinkage of American manufacturing is partly a result of global trade deals and shifts of investment by U.S. companies to other countries; it is also partly a result of an overvalued dollar. A more general problem is that the incomes of the world's working population, including those in the United States, have not grown enough to buy the goods being produced. Indeed, in much of the world, as inequality grows, the buying power of working people is actually declining, partly as a result of the deregulated global economy. The result is that the U.S. and world economies are in a precarious position.

Much of the U.S. boom, which has made possible the consumption of the world's exports, has been financed by a stock market bubble and a great increase in consumer debt by the majority of Americans without stock portfolios. But with the bubble bursting and job losses mounting, the United States cannot so easily buy everyone's goods. The Federal Reserve needs to lower interest rates to stimulate the economy and to reduce the value of the dollar, but a depreciating dollar would hurt many countries, including Japan, that are already vulnerable. It could also lead to withdrawal of investment in the United States, the world's largest debtor nation (as a result of our ongoing trade deficits).

Will all this lead to a global financial crisis? AFL-CIO economist Tom Palley likens the problem to a bathtub, where the level of debt created by trade deficits is the water in the tub. As long as there's more space, the water-or deficits can keep gushing in. But a crisis comes when the tub is full. The problem is nobody knows how big the tub is. But the growth in trade deficits is clearly unsustainable over a very long period.

So at a time when deregulation and corporate globalization have increased the instability and inequality of the global economy, the rich countries-led by the United States-are pushing for less restraint on corporate power and international markets. If an international crisis does occur, threatening the global system, workers will still be the primary victims. If those workers were able to organize to raise their wages and social income supports, then the developing crisis might be averted or lessened.

The coming battles over fast track, the FTAA, WTO agreements on services, and other global policy disputes are, at heart, questions of redistribution of wealth and power. Echoing his domestic initiatives on taxes, personal bankruptcy regulations and workplace safety, Bush's agenda for the global economy is to accelerate the redistribution well underway to those who are already rich and powerful, even at the risk of the system as a whole.

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