Sen. Bunning Gets Lit Over Canadian Anti-Smoking Law

According to Inside U.S. Trade, Sen. Jim Bunning (R-Ky.) has placed a hold on the nomination of Miriam Saprio to the post of Deputy U.S. Trade Representative, due to concerns about …Canadian legislation to prevent tobacco marketing to kids?

Bunning has apparently halted the nomination proceedings to focus the Obama administration on the Canadian anti-smoking legislation, which some U.S. tobacco interests fear will block exports to Canada. The law is known as the Cracking Down on Tobacco Marketing Aimed at Youth Act, and was passed in the Canadian Senate in October. It has already been criticized as a so-called trade barrier, and has been placed on the WTO's Technical Barriers to Trade committee meeting agenda for this week. A U.S. source said that Brazil will likely speak in opposition to the law, but USTR has yet to decide if it will take a position.

Sen. Harry Reid (D-Nev.) has criticized Bunning’s move, saying the Obama administration “cannot dictate how the Canadian legislature does its job, any more than the Canadian Parliament can dictate how we do ours.” If Reid likes this, he should check out the recent USTR 2009 National Trade Estimate Report on Foreign Trade Barriers, which criticizes Canada and a number of American allies for their domestic safety and health laws.

U.N. Report Shows Global Wages Falling

On Nov. 3 the U.N. agency on labor, the International Labor Organization (ILO), released a 15-page report finding that real wages fell in countries around the world, including the U.S. and some other wealthy nations, raising questions about whether workers are sharing in any global economic recovery.

The report included data from 35 countries, and found that monthly wages have fallen almost 2 percent in the U.S. since January 2009. The ILO found that inflation-adjusted wage growth fell sharply around the world in 2008 to 1.4 percent, down from 4.3 percent in 2007, and wages continued to fall in a number of countries in 2009.

This continuing drop in real wages around the world illustrates the need for trade policies and agreements that protect workers’ rights and prevent a further “race to the bottom” in global wages. Fair traders have long warned that trade agreements such as NAFTA, CAFTA, and other NAFTA-type trade agreements would deflate wages and threaten workers’ rights. The ILO’s report on the drop in real wages for workers in the global economy is disturbing and makes a strong case for renegotiating these pacts and preventing new trade agreements based on the flawed NAFTA model.

How NOT to Deal with Too Big to Fail

Over at the Baseline Scenario, Simon Johnson once again makes a good banking reform suggestion coupled with a bad WTO-related strategy:

the consensus is moving towards the view that state-supported banking (i.e., operating through implicit guarantees on Too Big To Fail banks) constitutes an unfair form of protectionism.  Financial services in this guise do not currently fall within the remit of the World Trade Organization, but it would be a simple matter to extend its mandate in this direction. In any reasonable judicial-type process, involving relatively transparent weighing of the evidence [proponents of big banks] would be most unlikely to prevail.

We blogged on some of Simon's over-reverence for the WTO a while back. In fact, the WTO does have rules on financial services, they do require financial deregulation, and specifically, they make it more difficult - not easier - to solve the too big to fail problem.

To wit: the WTO's General Agreement on Trade in Services Article XVI(2):

In sectors where market-access commitments are undertaken, the measures which a Member shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory, unless otherwise specified in its Schedule, are defined as:

(a)        limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test;

(b)        limitations on the total value of service transactions or assets in the form of numerical quotas or the requirement of an economic needs test;

(c)        limitations on the total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test;(9)

(d)        limitations on the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test;

(e)        measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service;...

Financial services is a sector that countries can commit under the GATS, and over 100 countries did so for this market access obligation - including the US and EU. You can see what deregulators would like this provision:

1. It prohibits even non-discriminatory size caps (i.e. it's deregulation, not just liberalization);
2. It limits the ability of countries to specify that investment services can't be provided by a commercial bank, or make other requirements that certain services have to be provided by non-profits;
3. It contemplates five different ways that governments might try to limit size, and prohibits all of them - even at the subfederal level of government.
4. Then, there are other GATS-related rules, like GATS Article VI and the Understanding on Commitments in Financial Services that pose additional deregulation obligations on nondiscriminatory policies.

Even without these specific rules, the WTO dispute settlement system's 15 year track record of ruling against over 90 percent of challenged public interest laws should give pause to any reformer looking to utilize it to serve the public interest. It's interest is in maximizing trade flows, not preserving sound regulation.

The Stuff Nightmares Are Made of…

Just in time for Halloween, we’ve found a truly scary article about unprecedented NAFTA expansion: Erik Heinrich of CNN predicts that the upcoming conclusion of a “free trade” agreement between the European Union and Canada will likely begin a push for a NAFTA-EU trade zone, which would encompass nearly a billion people and would account for more than half of the world’s total GDP.

The president of Canadian Manufacturers & Exporters, the country’s largest trade and industry association, has said “the largest benefits will come from economic integration,” referring to increased foreign direct investment and access to government procurement, the very provisions of NAFTA fair traders have flagged as some of the most damaging aspects of the agreement and others based on the NAFTA model.

According to Steven Schrage of the Center for Strategic and International Studies (CSIS), (who opines that “it makes sense to integrate NAFTA with the EU,”) the Bush administration had a NAFTA-EU deal on its radar, but failed to make progress: “The ball is in the Obama administration’s court.” CNN does concede that a NAFTA-EU trade deal would likely be met with stiff opposition in the United States.

What an interesting way to sell this deal to the Obama administration: “The Bush administration thought this was a great idea!” I am comforted that Obama has expressed that he is fully aware of what he calls “NAFTA’s shortcomings” and has made a variety of trade promises that suggest he has no interest in continuing the Bush administration’s failed trade initiatives. As for Congress, the desire for a new trade agenda is illustrated by support for the Trade Reform, Accountability, Development and Employment (TRADE) Act, which currently enjoys support from 123 Democrats and two Republicans in the House of Representatives, including 10 committee chairs, 52 subcommittee chairs, and wide swaths of the Democratic Blue Dog Coalition, Congressional Black Caucus, Congressional Hispanic Caucus, and the New Democrat Coalition.

It still freaks me out, though.

How NOT to Seek Higher Office

It's really hitting the fan for Congressman Kendrick Meek, the likely Democratic contender for the 2010 Florida Senate seat. Meek recently withdrew his cosponsorship from two key pieces of legislation for progressives: the Single Payer Health Care bill (HR 676), and the TRADE Act (HR 3012).

Congress Daily (Oct 23rd, 2009 - subscription only) reports on the fury Meek's flip-flop has unleashed on himself:

Labor unions are furious with Rep. Kendrick Meek, D-Fla., for his decision this week to withdraw his name from a bill rapidly gaining support among House Democrats to renegotiate or scrap several major trade agreements.

One labor source called it "spineless," and people familiar with the matter said some unions were threatening to withdraw support for Meek's 2010 Senate bid. "It's very disappointing, especially considering he's got a pretty good labor record," said Lisa Kinard, director of federal legislation and regulation for the Teamsters Union.

The Hill additionally notes Meek's "abrupt" and conspicuously-timed reversal on the two measures:

The Florida AFL-CIO endorsed Meek for the Senate at an Oct. 7 meeting, which Meek touted in a press release on Wednesday, the same day he changed his sponsorship.

Thea Lee, a lobbyist for the AFL-CIO, said her organization supports Michaud’s legislation and that Meek’s decision to drop his sponsorship would be a subject of discussions.

Congress Daily notes another conspicuous fact:

The fracas was a step backward for Meek after good news arrived late last week, when Rep. Corinne Brown, D-Fla., announced she would not challenge Meek for the nomination.

Congressman Meek's statement on the floor offered not so much as an attempt at an excuse as to why he would changes his mind, but his spokespeople sound an awful lot like the Chamber of Commerce misleading talking points against the TRADE Act.

Working people in Florida will have to watch Meek closely to see whether his actions side with them and for reform of our unsustainable job-wrecking economic model, or with the Chamber of Commerce business as usual.

(Disclosure: Global Trade Watch has no preference among candidates for elected office.)

Killing Regs, Not Just Applying them Equally

I wanted to share a bit more about the Citigroup Global Services Summit soiree, which I posted on last week.

On a substantive level, what was the tenor of the conference? First, a reluctant concession to the political-economic reality that more financial services regulation might be necessary and/ or likely to be imposed; and second, some positioning against over-regulation, with veiled references to WTO disciplines against domestic regulations.

At the same time, because this was a meeting of WTO boosters, many folks claimed that trade deals would not prevent reregulation - no matter how lacking these arguments were on the merits. (On a parallel track, Goldman Sachs has recently been showing how to do this two step, first here, and then here.)

Here was WTO Secretary-General Pascal Lamy:

"As you all know, in the world of the GATS, ‘liberalization’ is essentially about opening specified sectors to competition on a non-discriminatory basis. It does not mean deregulation. It has long been recognized that opening up certain services, such as financial and telecom services, may require a regulatory framework in order to protect consumer interests, and ensure competitive markets. At this point in the services negotiations, this is very important. Let me repeat it: opening markets is one thing, you can do it more or less. Regulation is another. You can open and regulate, open and not regulate, not open and regulate, or not open and not regulate. At this moment, it is important to understand this. If you open your market, you are saying you are regulating foreign and domestic in the same way. It is no coincidence that the GATS Annex on Financial Services preserves the right of Members to take measures for prudential reasons even if they do not conform to its obligations under the Agreement.”

It's rare to see the titular head of an organization so blatantly misrepresent its purpose. Do the international nuclear agencies claim they're really food groups? Does the UN claim to do stand up?

As a report we put out last month shows, Lamy disregards a coterie of hairy provisions in WTO texts that would limit countries' ability to reregulate: this includes the Annex provision cited by Lamy.

Also, the WTO's own Appellate Body ruled that non-discriminatory bans on the supply of services, in sectors where full market access commitments have been undertaken, are quantitative limitations covered by GATS Article XVI(2) - and thus must be removed.

GATS Article VI also creates a mandate to discipline "non-discriminatory" regulations. And, as I noted in a recent post, the WTO secretariat explicitly says that many consumer protections - let alone requirements that banks reinvest in their communities - would be disciplined by either Article VI, XVI or XVII of the GATS.

How can anyone say with a straight face that this is just liberalization, not deregulation?

(HT to Ellen Gould for many of these points.)

Offshoring airline safety

Last week, NPR ran a three-part story on U.S. airlines sending airplane maintenance work - formerly a high-paying, unionized domestic profession - offshore, particularly to Central America and Asia. The lead story, To Cut Costs, Airlines Send Repairs Abroad, summarizes much of the relevant information, but the entire three parts are worth a read. Also note that this is not the first time that this issue has made headlines in recent years. At issue here are both the offshoring of quality jobs and the problems with regulating safety under today's trade model. Some of the money quotes from the first NPR story regarding the latter:

"The FAA does not require airlines to report exactly where they send their aircraft for which kinds of repairs. So, FAA inspectors are not sure which of the roughly 700 foreign repair shops they should inspect... The FAA's inspectors didn't even show up at some foreign repair stations to monitor their work for as long as three to five years."

The second story in the series details some of the questionable practices at one Salvadoran repair operation, Aeroman:

...[Aeroman] mechanics say managers keep pressuring them to fix the planes faster. For instance, if there's rust on a metal beam, but it's just a little over tolerance, "the supervisor says, 'Oh, just leave it like that,'" the mechanic says, through an interpreter. "'There's no need to repair it.'" [...] Another mechanic ticked off other problems at Aeroman. Some employees don't store glues at the required temperatures, he says. That means the glues could fail — which potentially means that parts of the airplane could fall apart... And this mechanic says some workers can't even read the airlines' repair manuals. The manuals are written in English, but some mechanics at Aeroman can't read English — including him.

Citigroup, Ward of State, Funds Conference Advising Bankers on Warding off State

Citigroup was birthed by the Clinton administration's financial deregulation proposals, and was most recently saved from total collapse by the Bush/ Obama administrations.

This is not a bank with an arms length relationship with government - in fact, so much not that Mexico may force Citigroup out of the country because of laws there against state-owned entities owning large banks like Banamex. (And, as if to prove that there's still no life beyond the nanny state, it seems that sources close to Citigroup are talking up the notion of further state assistance, this time via a NAFTA challenge.)

Apparently in Washington, having such a strong track record of dependence on taxpayer-funded policies like bailouts and trade pacts (not to mention government sign off for commercial banks to invest in toxic securities) does not disqualify you from funding a conference advising banks and other corporations how to get the guv'mint off your back.

Case in point. Last week, Citigroup helped put on the Global Services Summit here in DC. Many top corporations also lent a hand, such as Wal-Mart. Anyone willing to cough up at least $250 could go and be feted by the top brass in service-sector corporations and lobby groups, and enjoy a close personal audience with policymakers from around the globe.

I decided to go and check things out, and not only because I love filet mignon kabobs, of which copious portions were served during the reception hour. (Oh, and did I mention the party favor that was handed out: the cutest, Made-in-China Citigroup pig bank?)

No, I was curious to see whether my taxpayer investment in Citigroup was helping them turn their act around, or whether they were simply pushing more race-to-the-bottom policies. Did Citigroup and their ilk tame their ambition to deregulate in the wake of the financial crisis? What I found was quite the opposite: corporate lobbyists and government officials busily exhorted one another to push expansion of the WTO, the rules of which explicitly require further financial services deregulation. Here's just some of what they had to say about their vision of the corporate-government partnership to push such controversial WTO rules:

WTO Turnaround - Battle Continues Ten Years After Seattle

Ten years ago next month, 50,000 global activists shut down the WTO ministerial in Seattle. History was made when a devastating plan to expand the WTO's reign of corporate globalization was derailed.

On November 30, 2009 - ten years to the day of the Seattle protests - trade ministers and their corporate allies will meet in Geneva to try once again to expand the WTO, in spite of the global economic disaster caused by their failed policies.

We aren't letting it happen. Instead, we're helping to launch the WTO Turnaround campaign to mobilize fair traders to keep the pirit of Seattle alive, and demand an end to the WTO's expansion of corporate rule that threatens workers, the environment, public health, sustainable development and democracy across the globe.

We at GTW are proud to join activists worldwide in demanding that the existing WTO regime be fundamentally transformed - shrunk or sunk, fixed or nixed - as go the slogans from protests past. The WTO Turnaround campaign features a petition drive, nationwide house parties and WTO-related movie screenings, speakers tours, as well as protests and vigils nationwide on the eve of the WTO ministerial in Geneva in late November.

The first push is an online petition drive. We're helping gather as many signatures as possible to let President Obama know we'll mobilize to support him acting on his campaign promises to push for fundamental change at the WTO. Over a thousand activists committed in the first hours of the campaign, and more are signing on every minute.

Visit the new site today to add your voice to theirs at the WTO Turnaround campaign site, and stay tuned to Eyes on Trade for all the latest on the much-needed WTO-Turnaround.

"Stiglitz Commission" Calls for WTO financial services reform

For folks that have not gotten a chance to look at the final United Nations "Stiglitz Commission" report on the financial crisis, it is will worth a read. Here are just some of the highlights:

• "many developing countries have entered into (North-South) free trade agreements (FTAs), bilateral investment treaties (BITs), and World Trade Organization (WTO) commitments that prevent them from regulating the operations of financial institutions and instruments or capital flows. For example, if a developing country decides to nationalize some services such as banking, this can require compensation if the sector has been liberalized under the WTO GATS Financial Services Agreements (FSA) or under an FTA or BIT. When these agreements and commitments are enforced, developing countries have to pay compensation or suffer the imposition of tariffs on their exports to the complainant if they do not or cannot comply." (at 38-39)
• "The framework for financial market liberalization under the Financial Services Agreement of the General Agreement on Trade in Services (GATS) under the WTO and, even more, similar provisions in bilateral trade agreements may restrict the ability of governments to change the regulatory structure in ways which support financial stability, economic growth, and the welfare of vulnerable consumers and investors (see Chapter 4, Appendix)." at 82.
• "Capital and financial market liberalization, pushed not only by the IMF but also within certain trade agreements, exposed developing countries to more risk and has contributed to the rapid spread of the crisis around the world. In particular, trade-related financial services liberalization has been advanced under the rubric of the WTO’s General Agreement on Trade in Services (GATS) Financial Services Agreement with insufficient regard for its consequences either for growth or stability. Externalities exerted by volatility in the financial sector have severe negative effects on all areas of the economy and are an impediment to a stable development path. Chapter 3 and discussions earlier in this chapter emphasized how inadequate regulation in one country may harm others. Unfortunately, while the GATS Financial Services Agreement provides the only significant regulatory framework for international financial services, it was not conceived and negotiated with these broader considerations in mind but rather was driven by sectoral interests. These special interests often do not realize (or care about) the vulnerabilities that these commitments impose on other aspects of their economy or the international economy." (103)
• "Policy space is restricted not only by a lack of resources but also by multilateral and bilateral agreements and by the conditionalities accompanying assistance. Many bilateral and regional trade agreements contain commitments that restrict the ability of countries to respond to the current crisis with appropriate regulatory, structural, and macroeconomic reforms and support packages. Developing countries have had imposed on them deregulation policies akin to those that are now recognized as having played a role in the onset of the crisis. In addition, they have also faced restrictions on their ability to manage their capital account and financial systems (e.g. as a result of financial and capital market liberalization policies). These policies are placing a heavy burden on many developing countries." (104)
• "Agreements that restrict a country’s ability to revise its regulatory regime—including not only domestic prudential but, crucially, capital account regulations—obviously have to be altered, in light of what has been learned about deficiencies in this crisis. In particular, there is concern that existing agreements under the WTO’s Financial Services Agreement might, were they enforced, impede countries from revising their regulatory structures in ways that would promote growth, equity, and stability."
• "More broadly, all trade agreements need to be reviewed to ensure that they are consistent with the need for an inclusive and comprehensive international regulatory framework which is conducive to crisis prevention and management, counter-cyclical and prudential safeguards, development, and inclusive finance. Commitments and existing multilateral agreements (such as GATS) as well as regional trade agreements, which seek greater liberalization of financial flows and services, need to be critically reviewed in terms of their balance of payments effects, their impacts on macroeconomic stability, and the scope they provide for financial regulation. Macroeconomic stability, an efficient regulatory framework, and functioning institutions are necessary preconditions for liberalization of financial services and the capital account, not vice versa. Strategies and concepts of opening up developing economies need to include appropriate reforms and sequencing. This is of particular importance for small and vulnerable economies with weak institutional capacities. But there has to be a fundamental change in the presumptions that have guided efforts at liberalization. As noted in previous chapters, one of the lessons of the current crisis is that there should be no presumption that eventually there should be full liberalization. Rather, even the most advanced industrial countries require strong financial market regulations." (105)