Vol. XII, Bulletin No. 12                                                    December 2007
Doubts about Trade Pact 'Breakthrough'
"A remarkable breakthrough, [because] it secured enforceable basic labor rights and environmental standards."  That's what House Speaker Nancy Pelosi called a bipartisan deal on the U.S.-Peru Free Trade Agreement shortly after the House approved it by a bipartisan 285 to 132 majority.  Dissenting, 116 Democrats and 16 Republicans voted No in the November 8 decision.

That same day, a scholar specializing in labor law publicized his own dissent.  Mark Barenberg, Colombia law school professor, criticized the agreement's labor provisions as being largely toothless.  "There is no meaningful mechanism for continuous verification that Peru is complying with basic labor rights," he said.  "It won't help real workers in real workplaces."

In a nine-page paper, Barenberg provides his analysis of the agreement's shortcomings on labor policy.  Three existing U.S. trade laws already covering Peru are "weak, unreliable, and inadequate" in protecting the rights of workers, he charges, but the labor provisions of the new agreement are even worse. 

Right to File Complaint Denied to Unions and Other Groups

Under existing laws, for example, labor organizations and human rights organizations can influence compliance with the law by filing petitions charging a trading partner's labor violations, which can lead to trade sanctions if non-compliance continues.  But under the Peru agreement "private parties" have no such right. Only the President, that is the U.S. Trade Representative, can initiate an action against Peru. (USTR has never initiated a complaint under existing agreements.)

Despite such doubts, on December 4 the Senate by a 77-18 majority gave its approval to the Peru FTA (officially, a Trade Promotion Agreement, or TPA). Voting No were 17 Democrats.  The five Senators who are campaigning for the Presidency all skipped the vote, but had made their positions known earlier.

Among the absent Democratic Senators, Joe Biden of Delaware and Christopher Dodd of Connecticut were opposed to the accord; Senators Clinton and Obama supported it, largely because of its alleged improved labor and environment conditions.  The only Republican absentee, John McCain, favored it.

After casting his No vote, Senator Sherrod Brown, the junior Senator (Democrat) from Ohio, in a press release called the new agreement "another job killing trade agreement that will shut down our factories, hurt our communities, and send more unsafe food into our kitchens and consumer products into our children's bedrooms."   He criticized the current trade model (also incorporated in the administration's pending FTAs with Columbia, Panama, and South Korea, none of which are likely to come up for vote this year.
 
Why Bipartisan Trade Deal Will Disappoint
Even if -- if -- the Congress has indeed made a historic breakthrough on labor rights in trade agreements, the actual results of this deal will almost certainly be disappointing.  That's because it ignores the main reason why so many Americans are fed up with foreign trade: the job insecurity caused by the huge outflow -- past, present, and future -- of U.S. jobs to China and other foreign countries.
 
The November NBC/Wall Street Journal poll throws light on the negative American mood toward trade.  It found that 60 percent of respondents agreed with the statement that "foreign trade has been bad for the U.S. economy, because imports from abroad have reduced demand for American made goods and cost jobs here at home" [my emphasis].  Only 30 percent agreed that "foreign trade has been good for the economy, because demand for U.S. products abroad has resulted in economic growth and jobs for Americans here at home and has provided more choices for consumers."

The U.S. government fact sheet touting the labor chapter of the U.S.-Peru agreement makes no claim that it will end or slow the outflow of U.S. jobs  It doesn't do so because, honestly, it couldn't. The agreement's labor chapter is aimed at improving the conditions of Peruvian workers, through Peru's government commitment to respect the "internationally recognized labor rights," including the right to unionize (in itself a long-range project). 

Sorry, No Level Playing Field for Workers

Of course, U.S. workers would benefit if Peru's laws and practices were to create a "level playing field," in which American and Peruvian workers competed on more or less equal terms. That goal was part of the motivation behind the original demands, now a half century old, to link trade and worker rights. 

Nobody claims that the labor chapter will create anything close to a level playing field, although talk about a historic breakthrough leaves the impression that it will.  And USTR's "facts" about the labor chapter says explicitly that it "would not alter U.S. law."

In a statement commending the Senate for its approval, President Bush did not make that mistake. He said the Peru agreement "will level the playing field for American exporters and investors."  He did not claim it makes a level playing field for American workers.  He expressed only the belief that it "will strengthen economic growth and job creation in the United States."

So it is easy to understand why President Jim Hoffa of the Teamsters called it "outrageous that Congress and the Bush administration have approved yet another job-killing trade agreement at a time when American families are seeing their jobs shipped overseas, their food and toys tainted, their wages decline, and the houses foreclosed upon."

It Pays To Read Trade Accords Carefully
Asked in the miid-November Democratic debate why he came out so strongly against the Patriot Act, Congressman Dennis Kucinich replied: "That's because I read it."  I can make the same claim about the just-approved U.S.-Peru Free Trade Agreement.  I read it.  Not all 531 pages (without counting the 581 pages of tariff schedules).

Because the administration considers it a model to follow in later agreements, I read and re-read its most important parts -- especially the labor chapter, of course, but also those on intellectual property rights and investment.  I even printed out dozens of pages of the accord for more thorough analyis.

Agreement's Labor Section Is Slim in Size and in Protections

The labor chapter has only 10 pages, one of the slimmest among the agreement's substantive chapters.  By contrast, the intellectual property rights chapter has 37 pages, and the investment chapter has 46.  That disparity is a clue to how the agreement grants far more protection to the rights of property than to the rights of labor.  The text of the three chapters confirms that imbalance. 

Most worrisome of all is the chapter protecting foreign investment, since U.S. investments abroad provide the grease for off-shoring production and jobs.  Its 46 pages are extraordinarily thorough in protecting investor rights, to the almost total exclusion of investor responsibilities.  It even protects investors against "measures equivalent to expropriation or nationalization," and gives foreign investors exclusive recourse to international arbitration to decide what that means when, for example, a government decides to increase minimum wages.  Because of this special treatment, the chapter has a glaring omission -- it does not specify that regulations to enhance worker rights, such as on-the-job safety and health, do not qualify as "measures equivalent to expropriation or nationalization."

Or take "Enforcement of Intellectual Property Rights," a 11-page section. It is thick with details on how a host government, through its executive and judicial procedures, complete with civil and criminal penalties, must enforce the rights of owners of patents, copyrights, and a broad range of other intellectual property. 

ILO Conventions Mentioned, Not Enforced

The labor chapter has nothing remotely similar.  What would you expect from a "Enforcement of Labor Laws" section that is barely one third of one page in length?  It asserts that Peru "shall not fail to effectively enforce its labor laws, including those it adopts in accordance with [obligations related to the International Labor Organization's Declaration of Fundamental Principles and Rights at Work.]" 

A footnote explains that those obligations refer only to general ones in the Declaration itself:  that is, not to the more specific ones in the ILO conventions on which the Declaration is based.

Besides, to be considered a violation, it must affect trade or investment between the United States and Peru. This is a heavy requirement for proof not laid down in any other part of the agreement.  It means that the assassination of (say) 20 trade union leaders would need to impact trade statistics before it is considered a violation of the agreement. 

Economist Rodrik on Clinton's Trade 'Pause'

In a long interview with Hillary Clinton on her views on a variety of subjects, she was asked what she meant by saying that as president she would take "time out" on new trade and investment deals.  In her response, published December 3, she wrote in part:

Well, what I have called for is a time-out which is really a review of existing trade agreements and where they are benefiting our workers and our economy and where the provision should be strengthened to benefit the rising standards of living across the world and I also want to have a more comprehensive and thoughtful trade policy for the 21st century. There is nothing protectionist about this. It is a responsible course. The alternative is simply to pick up where President Bush left off and that’s not an option.... 

It’s not that we’re starting on some totally different approach to trade-- it’s that we have to take stock of where we are today. And specifically with Doha and with these large global agreements, again we have to see what works and what doesn’t work.  We have benefited through most of the 20th century from trade. It has helped to raise American standards of living, it has helped to create jobs....

And I am concerned by some of the provisions that would prevent countries from for example enforcing stronger environmental and worker safety rules under the WTO. I think we have to take a hard look at this and do it in the right way and that is what I am proposing to do.

In a lengthy commentary published the same day, Clive Crook criticized Mrs. Clinton, mostly by quoting from his previous columns on the virtues of free trade and the [WTO's] multilateral trade agreements (as opposed to country-to-country U.S. trade pacts like the one with Peru) and the vice of some U.S. Presidential candidates' moving "left" in early electioneering.

'Hillary Has Some Sensible Things To Say About Taking a Breather'

Also the same day, Dani Rodrik, professor of economics at Harvard, came to the defense of Clinton's position.  He began a December 3 entry on his blog by writing:

Hillary Clinton has some generally sensible things to say in today's FT, for which Clive Crook takes her to task.  Basically, Hillary's point is that we need to take a breather from negotiating trade agreements on the accepted model, and think our way through what a new set of trade relationships might look like for the 21st century.
Developing that point, he added:

I read Hillary's interview...as an argument in favor of a renewed set of multilateral rules.  What she seems to be saying is: let's focus our energies on making sure we have a better set of (multilateral) rules, commanding greater legitimacy, instead of  pushing for continued market-access through traditional trade agreements.

As such, this is quite a defensible argument, in fact much more so than business-as-usual.  The real risk facing globalization today is not that markets are not open enough, but that political support for the existing set of rules is eroding to the point where it becomes difficult to maintain the openness we have.  It is a far better use of political capital to bring those rules into conformity with ordinary voters' sense of what is fair than it is to negotiate one market-access expanding agreement after another.

The economic gains from the existing strategy are meager; the economic costs of not pursing the legitimacy-enhancing strategy are huge.

Defective Policies, Defective Imports

"Join us in sending a message urging Congress to keep America safe this summer," said the appeal emailed on November 15 from the magazine, Consumer Reports. More than 275,000 persons had already signed a letter to congress demanding it stop unsafe imports.  I followed their lead, after tweaking a sample letter.

Later, after re-reading that letter, I had some second thoughts.  I expressed them in this email to Jim Guest, president of the Consumers Union, which publishes Consumer Reports.

I support your initiative to 'keep hazardous products OUT of U.S."  I sent your form letter to the decision makers in Congress, and I had it forwarded to close relatives and a friend in hopes that they too would put pressure on congress to act.  I did so instinctively out of concern for the children in my family and in other American families.  But it now dawns on me:  what about the children -- and the adults -- in the rest of the world?

The contaminated consumer goods that concern you and me -- the pet food, the dolls, the toys, the jewelry, and the rest -- are all outputs of a vast global production and marketing system unprecedented in it scope.  Take the poisonous toy beads called Aqua Dots in North America and Bindez in Asia.

As reported in a November 11 New York Times article ("China Confirms Poison Was on Toy Beads"), the beads
-- are made in the southeastern city of Shenzhen in China
-- in a factory owned by a Taiwanese toy manufacturer with a contracting office in Hong Kong,
-- are distributed to about 40 countries across Asia and Europe by Moose Enterprises, a company in Australia, and
-- are marketed in North America by a company in Toronto, Canada, Spin Master.
That listing leaves out the subcontractor in China that may have supplied the poisonous glue for the beads.

Globalized problems cry to be addressed in a globalized way.  Yes, we must protect Americans from poisonous imports, but what about people in the rest of the world?

We don't know how many children have died or been injured by this glue and other poisons in products sold this year in the United States and around the world.  We may never know.  But we do know, or should know, that the United States cannot handle this alone, or even in cooperation with Europe.  Nor, in this highly competitive global marketplace, can manufacturers and retailers do so.  The intergovernmental organization that regulates cross-border trade in goods and services, the World Trade Organization, must be involved.

Why the reluctance to recognize the WTO's responsibility?   I am afraid that our decision-makers are restrained by their belief in free trade ideology -- a belief that in its own way is as poisonous as the glue found in Aqua Dots.

Again, this initiative by the Consumers Union is commendable, but it is too insular.

Global Integration Minus Global Regulation
The Consumer's Union is far from alone in taking an insular approach.  So does the New York Times.

In an editorial titled "Reform and Consumer Safety," the November 19 Times urged Congress to pass a "law that would force reform on an agency [the Consumer Protection Safety Commission] that for too long has been led by foot-dragging political appointees."  Good idea. The editorial also criticized industry lobbyists and the Bush administration for fighting effective reforms that put consumer safety first.  Also a good idea, although the private toy companies deserve a public shaming for their lobbyists' actions.

Missing from the editorial was a recognition that this scandal has a global dimension that affect consumers across the world.. At least in this case, it should be uncontested that global integration needs global regulation.

Patent Rights Weak on Responsibilities
Thanks to extraordinary protections granted under intergovernmental rules -- including the just approved U.S. free trade agreement with Peru -- the world's top 10 pharmaceutical multinationals have a near-monopoly in the sale and distribution of drugs across the world.  As a result, the pharmaceutical industry is denying medicines to many millions of poor people throughout the world, Oxfam International charges in a carefully documented report "Investing for Life." 

As indicated by the report's subtitle, "Meeting poor people's needs for access to medicine thorough responsible business practices," Osfam is challenging the industry to change the way it does business in developing countries.

Jeremy Hobbs, Oxfam International's executive director, says: "Charging high prices, quashing generic competition, developing medicine only for those rich enough to pay, and fighting for harsher patent laws is an ineffective business strategy for new markets, as much as it is a moral outrage."

Among the shortcomings identified in the report is that the industry largely neglects research and development into diseases that predominantly affect poor people in developing countries.  For example, the industry has for 30 years developed no new medicine for tuberculosis, which kills nearly 2,000,000 people a year.

The report does not suggest any change in the highly protectionist and sanctions-backed intellectual property rules.  Rather it seeks to persuade the industry to change its practices in order "to capture the full potential of emerging markets."

Diary: Confessing an Addiction or Two

I am a political news junkie.  My problem is that I am obsessed with the race for the  Presidency..  Each morning I scan two newspapers for news about it.  During the day I often search the Internet for updates.  Then, most devotedly of all, I follow the evening talk shows, often for three full hours. Of course, I eat up every minute of the Presidential debates of both parties.

The other day I was wondering why I have so little time to do all the things I need to do. Like paying bills on time.  Like getting rid of all the old magazines, news clippings, reports, and other stuff piled up in my office. Like reading some new books I bought.  The answer, of course, is that politics has grabbed too much of my time.

It's not easy to face up to that fact. As a writer, I need to be up to date on how candidates stand on issues like trade and worker rights.   As a citizen, I need to know where candidates stand in order to cast an informed ballot on election day. Besides, the talk shows and debates can actually be entertaining, certainly more fun than cleaning out my file cabinets.  And I deserve some diversion, don't I?

After a few debates with myself, I voted for a compromise. I can't try a full cure.  I won't remove the most alluring temptation by switching off the prime TV political news channels.  Instead, I'll stayed tuned, and use that time to do productive work.  I mean, other productive work.  I'll empty the dish-washer.  I'll pay the bills that arrived in the day's mail.  I'll skim the magazines that have piled up to see whether there are any articles worth reading.  I'll do the same with a new book that has remained unread. 

Stuff like that I've already started to do.  Look for a self-evaluation in three or four months.  If it doesn't appear, draw your own conclusions.
*    *    *
Then There's My Trade Obsession

The thought that I am a trade junkie too may have crossed your mind.  I plead guilty.  In my writings on the Internet and elsewhere, I do concentrate on trade-related issues.  That's clearly evident in recent issues of Human Rights for Workers, especially this one. Call it an obsession, if you want, but I find it justified by two facts:  

Human Rights for Workers: Bulletin No. XII-12     December 2007           

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Robert A. Senser, editor
Copyright 2007
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