Vol. VI, Bulletin No. 6. May 1, 2001
Negotiating a New Trade/Investment Pact for the Whole Hemisphere
High Stakes, But the Deck Is Stacked
Few modern topics rival free trade for generating glittering generalities. Take the glowing arguments made to expand the North American Free Trade Agreement (NAFTA) to the whole Western Hemisphere. During the Summit of the Americas in Quebec City last month, President Bush bestowed high praise on that seven-year-old agreement as the model to apply to 31 more countries. In an April 21 radio address, for example, he said: "The people of Canada, Mexico, and the United States have benefited greatly from the North American Free Trade Agreement."
Really? "For some people, NAFTA clearly has been a success," Jeff Faux, president of the Economic Policy Institute, states in a report released on April 10. Investors and financiers have been the chief beneficiaries. "This should not be a surprise," Faux writes, inasmuch as [NAFTA] was designed to bring extraordinary government protections to a specific set of interests--investors and financiers in all three countries who search for cheaper labor and production costs."
NAFTA a Flop for Most Working Men and Women
The Institute's report, "NAFTA at Seven," examines the agreement's impact on working men and women in all three nations. For them, "NAFTA has thus far largely failed," Faux charges, because it has imposed a "continent-wide pattern of stagnant worker incomes, increased insecurity, and rising inequality."
In a section of the report on the United States, Economist Robert E. Scott points out that NAFTA contributes to the negative impact of globalization on the majority of American workers:"The growth in U.S. trade and trade deficits has put downward pressures on the wages of 'unskilled' (i.e., non-college-educated) workers in the U.S., especially those with no more than a high school degree. This group represents 72.7% of the total U.S. workforce and includes most middle- and low-wage workers. These U.S. workers bear the brunt of the costs and pressures of globalization."The report also covers the impact of NAFTA on workers in Mexico and Canada, as analyzed by economic experts in the two countries. Here are excerpts from those assessments:
'Go Back to Drawing Board for a Better Model'
- Mexico: "While NAFTA has benefited a few sectors of the economy, mostly maquiladora [export] industries and the very wealthy, it has also increased inequality and reduced incomes and job quality for the vast majority of workers in Mexico. In many ways (such as the stagnation of manufacturing's share of employment), the entire process of development has been halted, and in some cases it even may have been reversed." -- Carlos Salas, economist at the Colegio de Mexico and an author of "The State of Working Mexico."
- Canada: "NAFTA has made it easier for Canadian policy makers to bring about a 'structural adjustment' of the economy in line with the dominant U.S. model. Advancing and entrenching these policies in a treaty has secured investor rights, reined in interventionist government impulses and bargaining table demands of labor, and provided against future governments' backsliding [i.e., revising its policies]. These policies have had, with some exceptions, an adverse impact on the employment and income of working people in Canada. This is not an unintended consequence since, in essence, these policies transfer power from workers to management and investors, from wages to profits, from the public sector to the market." -- Bruce Campbell, director of the Canadian Center for Policy Alternatives.
Summarizing, President Faux of the Economic Policy Institute writes:"The experience [with NAFTA] suggests that any wider free trade agreement...that does not give as much priority to labor and social development as it gives to the protection of investors and financiers is not viable. Rather than attempting to spread a deeply flawed agreement to all the Americas, the leaders of the nations of North America need to return to the drawing board and design a model of economic integration that works for the continent's working people."For more evidence of how NAFTA harms worker interests, see a new report by Human Rights Watch, "Trading Away Rights: The Unfulfilled Promise of NAFTA's Labor Side Agreement." For recommendations on what a hemispheric agreement should look like, see Alternatives for the Americas, a report sponsored by a network of labor and citizens organizations throughout the Americas.
Imposing the Priority of Capital over All
In a document published in September 1981 Pope John Paul II emphasized two major principles:
The world's present trade/investment system, as shaped predominantly by the United States, violates both principles. That system doesn't just reverse labor's priority over capital. It elevates the right to property to a supreme international right enforceable by international sanctions, and at the same time it ignores worker rights completely. The result is a protectionist system safeguarding the institutions of footloose capitalism, particularly multinational corporations, and raising them to a position of dominance in the global economy.
- that the right to property is not absolute, but that it "is subordinated to the right to common use, to the fact that goods are meant for [the benefit of] everyone."
- that capital ("the whole collection of means of production") is subordinate to labor in accordance with the "principle of the priority of labor over capital."
Role of U.S. Power Elite Criticized by Free-Trade Economist
Jagdish Bhagwati, an economist with unassailable conservative credentials, has described the self-serving role of Wall Street's financial firms as part of a U.S. "power elite" -- including top officials of the World Bank, the International Monetary Fund, and the Treasury and State Departments -- imposing on the world the protection of the freedom of capital everywhere."This powerful network, which may aptly, if loosely, be called the Wall Street-Treasury complex, is unable to look much beyond the interest of Wall Street, which it equates with the good of the world," Bhagwati wrote in the May/June 1998 issue of Foreign Affairs.That powerful network operates in high gear during trade/investment negotiations. The operation is largely bipartisan, even though some of the leading actors have changed under the Republican administration. In dozens of intergovernmental meetings, such as those for the Free Trade Area of the Americas, U.S. negotiators take the lead to insure that trade/investment agreements clearly recognize the supreme right of capital and that it is protected through meaningful enforcement mechanisms.
One promising deviation from that concerted policy is the bilateral trade agreement negotiated last year between the United States and Jordan, subject to Congressional approval. In an April 9 editorial, the Washington Post, no crusader for worker rights, praised the agreement's "mild" provisions on labor and environmental standards. But the U.S. business community, led by Thomas J. Donohue, head of the U.S. Chamber of Commerce, is militantly opposed.
Sole Worker Rights Trade Initiative Targeted for Elimination
Usually business lobbyists count heavily on the governments of developing countries to strike out such provisions. This time that didn't happen, since Jordan signed the agreement. But the Chamber has persuaded President Bush to perform the surgery before it is presented to the U.S. Congress. No deviation allowed, however mild it may be.
In his speech to the Quebec summit on April 21, President Bush said: "Our commitment to open trade must be matched by a strong commitment to protecting our environment and improving labor standards." He immediately added: "Yet, these concerns must not be an excuse for self-defeating protectionism." A truism. A truism that should apply to each and every aspect of trade, so why issue an alarm only about labor/environmental standards when the actual and proposed texts of trade agreements, including FTAA, are laced with thousands of protectionist clauses, justified and unjustified?
September will mark the 20th anniversary of Pope John Paul's encyclical on human work (Laborem Exercens). A year ago, in an address to 200,000 people at a huge May Day rally in Rome, the Pope again called attention to the "fundamental order of the priority of work over capital, of the common good over private interest." "Solidarity, too," he said, "must be globalized."
The encyclical's anniversary will offer an occasion to highlight the flagrant contradiction between global practices and basic moral principles. Throughout the year, too, street demonstrations and other protests in dozens of countries, developed and developing, will be making their voices heard loud and clear for the globalization of solidarity.
The Economic Illusions of Politicians
Those anti-FTAA and anti-WTO protesters, of course, are just youths and others in need of education (as Alan Greenspan suggested recently). And the Pope? Pay no attention to him. After all, he's not an economist.
But it's not quite so easy to dismiss the insights of Dani Rodrik, professor of international political economy at the John F. Kennedy School of Government at Harvard University and author of "The New Global Economy and Developing Countries: Making Openness Work." The March/April issue of Foreign Policy magazine features Rodrik's article, "Trading in Illusions." It is a devastating attack on the prevailing "faith" (his word) in "utopian visions" (the magazine's words) about free trade and free capital mobility, a faith that Rodrik says has spread widely to political leaders. In the article, Rodrik does not mention NAFTA or the proposed FTAA, but his critique applies to them, as in these excerpts, for example:
How Confusing Cause and Effect Results in Bad Policy
- "Well-trained economists are justifiably proud of the textbook case in favor of free trade....However, in their zeal to promote the virtues of trade, the most ardent proponents are peddling a cartoon version of the argument [for free trade], vastly overstating the effectiveness of economic openness as a tool for fostering development....Neither economic theory nor empirical evidence guarantees that deep trade liberalization will deliver higher economic growth."
- "The [WTO] rules for admission into the world economy...are often completely unrelated to sensible economic principles...[and often] lack any economic rationale beyond the mercantilist interests of a narrow set of powerful groups in advanced industrial countries."
Rodrik points out how "globalizers" confuse cause and effect. Economic studies show "no systematic relationship between a country's level of tariff and nontariff barriers and its subsequent economic growth rate. If anything, the evidence for the 1990s indicates a positive relationship between import tariffs and economic growth. The only clear pattern is that countries dismantle their trade restrictions as they grow richer." Hence, "the globalizers have it exactly backwards. Integration is the result, not the cause, of economic and social development."
Rodrik is not the only economist to expose the "illusions" behind prevailing policies on trade and development. Another is Joseph Stiglitz, a mainline economist, who recently called the "Washington Consensus" about economic development a "religion." Early last year Stiglitz, in his swansong upon resigning as the World Bank's chief economist, gave a major address titled "Democratic Development as the Fruits of Labor," which is still available on the World Bank's Website. In it he deflated some of the basic assumptions of development economics but also some assumptions that most economists, at least in America, cherish and promulgate (such as treating labor as just another factor of production). Just a year ago I emailed Rodrik for his comments on Stiglitz's remarkable address, and with his permission I quote his reply:"What is striking about Joe's views is not that much their substance (similar and often more 'radical' views are expressed, using appropriate economics jargon, in academic seminars and conferences) but that they were offered by such a prominent neoclassical economist in a quasi-public domain. Economists tend to close rank, and defend the orthodoxy, in their public comments, even when their own research runs counter to them."Why this divergence between what some economists know and what they teach and preach? Could it possibly be "rational" self interest? That they know which side their bread is buttered on? Personally, I am convinced that many a U.S. Treasury economist knows the truth that the free trade rhetoric is designed as a cover up.
'Nike Shareholders for Justice' Launched
The women and men around the world working for Nike have a new ally: Nike Shareholders for Justice. Its purpose is to create an active Nike shareholders' lobby for the rights of Nike's workers. The campaign will purchase shares of Nike stock, and from that initial platform, will:
Says Jim Keady, director of the Living Wage Project, which is organizing the Nike shareholders initiative: "It is our hope and belief that shareholders are not solely concerned with maximizing financial returns on their investment, but are committed to human rights and respecting basic human dignity through responsible investing and action."
- Keep all Nike shareholders informed about the lives of workers in the factories of Nike's contractors and subcontractors.
- Bring workers from those factories to the United States to share their stories.
- Submit shareholder resolutions designed to improve the lives of Nike workers.
- Solicit support of large institutional investors for support of those resolutions.
The Personal Crisis of a Student Becomes Very Educational
"Sunshine" -- disclosure of the location of all the factories making footwear, wearing apparel, and other athletic equipment for Nike -- is one specific goal, which is shared by other anti-sweatshop groups, including the Worker Rights Consortium. Another goal grows out of Keady's personal experience at St. John's University in 1998, when he lost his job as assistant soccer coach because he refused to wear sneakers and other apparel bearing the Nike brand name.
The campaign is seeking the elimination of two requirements from Nike contracts with colleges and universities and their athletic coaches: 1) that all coaches and athletes must wear the provided equipment; and 2) that no coach or athlete can be critical of the Nike Corporation.
Stock Ownership as the Insiders' Tool for Reform
According to recent studies, nearly half of U.S. households own stock, directly or indirectly (e.g., through retirement accounts). Among those households, the direct owners of stock, those with voting rights in a corporation, are in the minority. But if only a minority of that minority were mobilized, they could foment a revolution not just at Nike but throughout corporate America. It's a big if, but the only thing necessary for the triumph of evil is for good men and women to do nothing.
Diary: Getting Myself More Focused
I am not renewing my longtime subscription to the New York Review of Books. I almost changed my mind after receiving the April 26 issue, the last one before expiration. In it I read and clipped a long, insightful article by Brian Urquhart on a new book, "A World Made New: Eleanor Roosevelt and the Universal Declaration of Human Rights." I also read intriguing articles by George Kennan (on foreseeing the fate of Russian Communism), Gary Wills (on ideological clashes at the top levels of the Catholic Church), Oliver Sacks (on the workings of the human brain), and Ryszard Kapuscinski (on death in the Sudan)
Did I really want to give up that kind of in-depth analysis? I once explained to a friend that if I were stranded on a desert island with my reading choice limited to one periodical, it would be the New York Review. But I am not stranded on a desert island. Apart from two newspapers every morning, almost every afternoon I find my mailbox stuffed with periodicals. I just can't keep up with them all. The New York Review, sadly, is the first casualty.
I tell myself that, as a mere mortal not blessed with total recall, I must focus my reading to conform much more closely to my writing interests, as illustrated by what's on this Website. And beyond that, I must focus my writing interests. Harness them, you might say. I have a tendency to gallop in too many directions. Over the years I have accumulated boxes and boxes and file cabinets full of material on China, for example. I'm tossing most of this out, though so far I've spared my collection of books on China.
Exploring a Fascinating Global Arena
The area I'm determined to concentrate on much more is trade/investment and human rights. The more I look into that vast area, the more it fascinates me, even though the details can be quite boring. Rightly oriented, the world's trade/investment regime (otherwise known as globalization) is a God-given instrument for humankind -- all humans, not just the fortunate few. But it is difficult to understand the vast potential of that regime, because of its magnitude and complexity and the fog of jargon and oversimplifications that surround it.
Take "trade." It's a nice short word that fits snugly into headlines and soundbites. But it covers a multitude of sins (and virtues). I put quotes around "trade," because there's so much involved in that simple word. A director general of the World Trade Organization once claimed, "We are writing the constitution of the global economy." That's an understatement. What's being written, mostly in secret by unelected officials, are not only the constitution of a new world order but the laws and regulations of that global order -- not a world government, true, but a system of global governance. The modern world does need some kind of global governance, but not the kind that is biased on protecting only the rights of business people and investors.
I have no credentials as an economist or a trade specialist. I say that without apologies. Thank God, more and more non-professionals are asserting themselves in so-called trade matters. The credentialed experts covet these issues as their own exclusive property. Let the wise men decide -- that's the ancient claim that abhors democratic decision-making. The struggle over these issues is a historic drama of our times. It deserves many more witnesses, and many more participants.
Human Rights for Workers: Bulletin No. VI-6, May 1, 2001
Robert A. Senser, editor
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