Vol. VI, Bulletin No. 7.                                                                           June 4, 2001

Trade Negotiations Ignoring the Real World

A Bungled Pact To Protect Corporate Foreign Investment Has
Lessons for Trade Policy-Makers, But Who Will Pay Attention?
The experts in Paris worked hard drafting a new international agreement on investment, and after three years of negotiations, they thought they had it pretty much wrapped up. But they were wrong.  Much to their surprise, their handiwork, the Multilateral Agreement on Investment (MAI), received an unceremonious burial in 1998. Why?

A post-mortem case study, "The Failure of the Multilateral Agreement on Investment (MAI) and the Absence of a Global Public Policy Network" by Katia Tieleman of the European University Institute, examines the reasons. From her timely analysis, policy-makers can draw important lessons on how to avoid failure in current trade and investment negotiations, especially those for creating a Free Trade Area of the Americas (FTAA) and for making changes in existing world trade agreements.

The major lesson: by all means, pay attention to the outside world, particularly to the views of "civil society" as represented by non-governmental organizations (NGOs). But that need didn't register in the small world of insiders negotiating the proposed investment agreement in the Paris-based Organization for Economic Cooperation and Development, or OECD, an intergovernmental agency made up of 29 industrial nations, including the United States.

Out of the OECD's Shadows Into the Limelight

Although the OECD is an important organization, it is "far away from the spotlight" (as Tieleman puts it), unknown to the general public and even to many policy-makers in OECD nations. So negotiators could work without having anyone on the outside look over their shoulders (although representatives of international business, the main proponents of the agreement, received de facto insider status). The short-term advantage of obscurity for the drafters turned out to be a fatal disadvantage.

Not that the basic idea behind the MAI was outrageous.  Having grown faster than international trade in recent years, foreign direct investment does need some kind of international rules. But the Paris negotiations for those rules to a large extent "took place in a political vacuum," Tieleman writes. She cites these signs of vacuity:

As a result, when details on the draft were leaked and widely publicized, especially on the Internet, the strong reaction of non-governmental organizations, joined by national unions such as the AFL-CIO, led to MAI's demise.  But its spirit lives on.

Following A Built-In Formula for More Failures

Review the above factors -- pitfalls, really -- that account for MAI's failure, and what will you find?  Eerily, you'll see the very same pattern in the many major and minor trade negotiations now planned or already going on, under a multitude of umbrellas, the largest being the World Trade Organization and the proposed Free Trade Area of the Americas.

Take the pitfalls one by one, starting with the role delegated to obscure trade experts, many only technicians hewing to their own narrow specialties. Then note the rest: a super-inflated definition of "trade" that includes investment and much, much else... the long documents that are not read by major decision-makers...the de facto integration of corporations into the negotiating and implementation process...keeping unions on the sidelines, frustrated...the rejection of any meaningful labor and environmental standards... the coolness, even hostility, toward NGOs.

Multiple Trade Agendas Greatly Overloaded

In a footnote Tieleman says that the MAI had "an over-ambitious agenda."  The FTAA and its kin have the same vulnerability. Their agendas are staggeringly overloaded.

The participants in the OECD/MAI negotiations miscalculated.  Will anyone learn from their bungling?  And soon?

(The Tieleman report is one of series of research studies on "Global Public Policy Networks," an approach to globalization that merits wider attention. For the report's text and background, see the Global Public Policy Website at www.globalpublicpolicy.net.  Also see a review by Bob Senser of the book, "Global Public Policy: Governing Without Government?" by Wolfgang H. Reinicke, director of the Global Public Policy Project.)
An Economist's Warning in the Economist

Rising Global Inequality and Its Perils

Global inequality is worsening rapidly, according to new research on the global distribution of income. So reports Robert Wade, professor of political economy at the London School of Economics, in a long article titled "Winners and Losers" in the April 28 issue of the weekly magazine, the Economist.

One reason he cites is that technological change and financial liberalization have increased the number of households whose members are already comparatively rich, while leaving the many millions of poor further behind. At the same time, the prices of goods and services exported from rich countries are increasing faster than the prices of goods and services exported by poor countries. "The poorer countries and the poorer two thirds of the world's population therefore suffer a double marginalization: once through incomes, again through prices," Wade writes.

New information technologies, he points out, have made more and more poor people aware of the sharp contrast between conditions in rich parts of the world and conditions in their own.  Those same new technologies give "unemployed and angry young people...the means to threaten the stability of the societies they live in and even to threaten social stability in countries of the wealthy zone."  At the same time, "economic growth in these countries often depletes natural capital and therefore future potential. More and more people see migration to the wealthy zone as their only salvation."

World Bank and Other Global Organizations Faulted for Myopia

Wade criticizes the World Bank, the International Monetary Fund, and other global organizations for a "lack of attention" to such trends. "They may be world bodies in the sense that almost all states are members, but they think in state-centric rather than global ways. They neglect not only matters of world income distribution, but also world inflation, world exchange rates, and world interest rates; and, in the case of the World Bank, the global environmental issues of the oceans, the atmosphere, and nuclear waste."

But why do elites in poor countries generally support the "the globalization agenda that Western states, business, and multilateral organizations have been promoting"?  Wade's answer:

"Part of the reason may be that elites in the developing world, like their counterparts in the rich world, are content to believe either that world inequality is falling, or that inequality is good because it is the source of incentives. They, like the multilateral economic organizations (and the reformers of Victorian England), worry about poverty. But they see no link between widening world income distribution and poverty; and they think that poverty can be fixed by providing the poor with welfare and opportunities without changing larger structures like income and asset distributions."
Like global warming, global inequality is diffuse and long-term in its effects, and thus easy to ignore, Wade writes in his concluding paragraph. "The question is how much more unequal world income distribution can become before the resulting political instabilities and flows of migrants reach the point of directly harming the well-being of citizens of the rich world and the stability of their states."

Who Deserves 'Lion's Share' of New Wealth?

Ordinary working men and women should get "the lion's share" of the new wealth created by globalization, Secretary of State Colin Powell told a meeting of the U.S. Advisory Committee on Labor Diplomacy May 9.

In his brief remarks Powell quoted a comment that a Latin American president made at the April Summit of the Americas in Quebec City:  that the benefits of expanded trade must reach a woman like Maria Soledad, a typical peasant struggling to improve her family's life. After endorsing that comment, Powell added his own.  Trade agreements, he said, "will not reach the promises we make unless we figure out a way that the Maria Soledad and the workers that produce it get a lion's share."

"The rights of workers must be protected and supported," he said (without citing specifics), and added he had talked "a great deal" about protecting worker rights in his recent meetings with foreign ministers.

Secretary of State Once a Member of Teamsters Union

During his half hour at the Labor Advisory Committee meeting, Powell mentioned his personal history with organized labor: his mother had been a member of the International Ladies Garment Workers Union, and as a teen-ager in a soft-drink bottling plant in New York City, he belonged to a local of the International Brotherhood of Teamsters.

The advisory committee is charged with recommending to the Secretary of State and the President policies necessary to implement labor programs effectively.  Powell said he looked forward to receiving--and "acting on"-- those recommendations.  (The committee's mandate, which was due to expire in May, has been extended to December 31, 2001.)  Tom Donahue, former AFL-CIO president who chairs the group, said that the committee is examining a number of issues, including the relation of labor policies and trade agreements.

Committee members include top representatives of labor, business, and government, as well as Anthony Freeman, director of the Washington branch office of the International Labor Organization.

(Powell's spoke without referring to the text his staff had prepared.  The quotes above are from a State Department news report and from notes I took as an observer at the meeting, which was open to the public, as all similar advisory committee meetings are by law.)
Income Share of U.S. Wealthy Expands

Income disparities between the rich and the rest of Americans have grown dramatically in recent years. That's the key finding of a study of income trends that the Congressional Budget Office issued last month. According to that study, after-tax annual incomes (adjusted for inflation) showed these significant changes over the 18 years between 1979 and 1997:

Although comprehensive data is not yet available for the years after 1997, the CBO study says that the "rapid rise in the share of incoming going to the top" continued at least into 1998 and 1999.

The Center on Budget and Policy Studies, a Washington research group, last month issued a lengthy report containing a detailed analysis of the CBO study.  The Center's report also analyzed the tax cut legislation that President Bush signed last month, and found that "after-tax income disparities, already larger now than at any other time in more than two decades, will widen further as a result of the tax legislation."

Toward a Better Life for Workers, But How?

Gap, the clothing retailer, doesn't own the factories that manufacture its products, but like its major competitors, depends on foreign plants to supply its stores.  On April 24 the New York Times published a lengthy report on a troubled factory in El Salvador named Charter, Taiwanese owned, one of the 4,000 factories with which Gap contracts for supplies.  Because of the difficulties Gap has faced in making some progress at eliminating sweatshop conditions at Charter, a Gap official told the Times that the company has learned "the limit of its own influence."

Here are two letters commenting on the Times article.  The first, written by a leader of the Global Alliance for Workers and Communities, an initiative partly sponsored by Nike, was published in the Times letters column  under the heading of Toward a Better Life for Workers. Its significance lies in its emphasis on recognizing the role of workers in improving their future.

The second letter, sent to the Times by Jeff Ballinger, a longtime critic of Nike and of the sweatshop system generally, was not published.  The significance of his letter is that it calls attention to a widely ignored flaw endemic to the global contracting-out system.

Letter published in the April 30 New York Times

    When it comes to improving conditions for workers in factories overseas ("Labor Standards Clash With Global Reality," front page, April 24), there are no easy solutions. Significant progress can be made only by companies bold enough to persevere when problems arise and to engage workers and communities in long-lasting change.

    We interviewed thousands of factory workers in Indonesia, Thailand, and Vietnam and found that they want a real voice in improving their futures. They have a lot to say about workplace conditions and want to participate in shaping training and other programs that will enhance their long-term prospects.

    If we want to make a positive difference in workers' lives, we must engage all stakeholders -- including corporations, workers, factory owners, unions and non-government organizations -- to spread the benefits of the global economy to those on the outside looking in.

Rick Little
Baltimore, April 24, 2001
The writer is chairman of the operating council of the Global Alliance for Workers and Communities.

* * *
Letter Sent to the New York Times But Not Published

     Business school case studies in the Eighties resolutely hailed the current model of apparel production outsourcing, well described in "Labor Standards Clash With Global Reality" (news article, April 24).  It seems that no one foresaw the serious downside to the companies' concentrating solely on design, marketing, and sales.  Control over production facilities was given up by major American firms coincident with the shift of most shoe and apparel production to authoritarian countries.

     While most consumers are now aware of the untoward results of this major change, very few stories have been written about the companies -- mostly Canadian or European -- that have kept control over manufacturing. The Spanish firm, Zara, has turned control over garment factories into a competitive advantage; the Canadian firm, Bata, was paying triple the minimum wage to Indonesian workers when I lived there a decade ago.

     Many of the more responsible companies, I have found, eschew expensive advertising campaigns.  The firms that depend heavily on advertising and huge endorsement contracts, on the other hand, threaten that improvements in workers' welfare will result in higher prices.

Jeff Ballinger
Director of Press for Change, a consumer-information organization that monitors labor rights in Asia.

Although Ballinger's letter was not published, it was circulated internationally on an Australian-based email "list-serv" that tracks sweatshop-related developments at Nike and elsewhere.

Building Solidarity Among Women Workers

Is globalization a blessing or a scourge?  For millions of women workers in Asia it is a scourge, according to the Bangkok-based Committee for Asian Women. The evidence is in the committee's new documentary video ("Dolls and Dust") and in its various publications, including Asian Women Workers Newsletter, as well as its Website.

The lead article of its October 2000 Newsletter, which was recently featured on that site, is headlined: "Globalization's Scourge: The Impact of Globalization on Women's Employment in the Philippines."  An article in its April 2001 print issue, which just reached me, reports on Sri Lankan women working in Middle Eastern factories making garments for export. Their situation, in brief, "could be called slave labor."

The committee is a regional organization of women workers dedicated to supporting the organizing efforts of their sister workers and promoting solidarity links among them within Asia and beyond. Its email address: caw@mozart.inet.co.th.  If you don't get the Newsletter, you don't get it.  My advice: subscribe for yourself, subscribe for friends.

Diary: Shame and Human Rights

Hours after writing the above article, I awoke in the middle of the night thinking about it. I reflected on how much more I might have said about the "slave labor" situation of Sri Lankan women working in Persian Gulf states. For example:

I tried to fall back to sleep, but I thought of the many other reports I have on my desk about the raw exploitation thriving under globalization.  Globalization is supposed to be a modernization process, a vehicle for human progress, no?  Then why is it infected with so many age-old customs of exploitation crassly in violation of human dignity?  Especially against women?  And what can bring about change, not in some distant future, but within the women's own lifetimes?

My thoughts wandered to a new book I recently read: "The Mobilization of Shame: A World View of Human Rights," by Robert F. Drinan, S.J., priest, lawyer, professor of law, human rights advocate, and former U.S. congressman. The book draws its catchy title from an Amnesty International campaign against human rights in Turkey.  In several places in the book, Father Drinan portrays the mobilization of shame as an important force for change during part of the 20th century (in South Africa, for example), but a neglected force of late. In an optimistic note about the future, he writes that non-governmental organizations like Amnesty, "fully engaged in the mobilization of shame," could revitalize U.S. government concerns for human rights.

How Do People Become Fully Engaged in Human Rights?

I didn't have the book at my bedside, fortunately, but I couldn't help wondering about the effectiveness of shame as a force for progress. Was it shame that motivated South Africans like Nelson Mandela and Archbishop Tutu in their courageous struggles against apartheid? Or that persuaded Eleanor Roosevelt to lead the campaign for establishing the UN Commission on Human Rights?  And is it shame that motivates Aung San Suu Kyi in Burma and Dr. Nguyen Dan Que in Vietnam to stay within their countries to fight for freedom there instead of leaving for Great Britain or the United States?

I've never met Eleanor Roosevelt, Nelson Mandela, Archbishop Tutu, Aung San Suu Kyi, or Dr. Nguyen Dan Que, but I do personally know dozens of people, male and female, young and old, in countries rich and poor, in different walks of life, who are dedicated to eliminating sweatshops, unionizing farm workers, helping refugees, and defending the defenseless in many other ways. For them the advancement of human rights is a regular part of their life, either for pay (often low) or for no pay at all.

What makes them tick?  Is it shame?  I think not. It's something else -- a positive force, conscience. Their ranks are increasing, though not fast enough. Their stories would make a great book, inspiring others to do likewise. Its title could be "The Mobilization of Conscience."

Email Woes: a Week of Letters Gone

I don't know where they went to, but last month all letters to senser.com disappeared during a week when I could not access my senser.com mailbox. The company whose server I use merged with a larger European firm, and the new outfit decided to improve their "hosting platform." In the resulting "migration" and change of procedures, I lost contact with my mailbox. Evidence of the "downside" of globalization, you might say.

The problem seems to have been solved, but the week of incoming mail is still lost.  My apologies to senders, whoever and wherever they may be. Meantime, I've added a new mailing address (see below), which is working well, at least so far.

Human Rights for Workers: Bulletin No. VI-7, June 4, 2001
http://www.senser.com
Robert A. Senser, editor
Copyright 2001
rasenser@earthlink.net  (Send e-mail)

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