I remember Halloween, and I have Ways and Means to thank for it

Mama told me there'd be days like this. The Ways and Means Committee just passed the Peru FTA 39-0. We had this to say on this scary day:

Lawmakers’ Efforts to Smooth the Way for Peru FTA Worry the Majority of Democrats, Vulnerable Freshmen and Democratic Base
Statement of Lori M. Wallach, Director of Public Citizen’s Global Trade Watch Program

It is old news that the House Ways and Means Committee supports the Peru free trade agreement (FTA) and that this committee’s votes on trade agreements often do not reflect the views of many other rank-and-file members of Congress.

However, not one Democratic base group supports this expansion of NAFTA to Peru, and scores of unions and environmental, consumer, Latino civil rights, faith, development and family farm groups oppose the deal, along with Peru’s two labor federations.

Democrats won their majority in the 2006 midterm election in no small part due to challengers who successfully campaigned against the NAFTA status quo, and voters replaced NAFTA-supporting incumbents in 37 congressional seats across the country. For these majority-making freshmen, many in vulnerable seats, Halloween offers no scare as frightful as the prospect of a Democratic-majority Congress passing another Bush NAFTA expansion agreement opposed by many of their key constituents.

That the agreement may not obtain a majority of House Democratic votes despite it being supported by the House speaker, majority leader, whip, caucus chair and powerful Ways and Means committee leaders is clear evidence that the Peru FTA is both bad policy and bad politics.

And here's a soundtrack that should give you a good, say 2.3 minutes of release after contemplating this awful vote result. An oldie but goodie:

A good book to read: Dreampolitik

My friend Stephen Duncombe from NYU put out a book about a year ago called "Dream: Reimagining Progressive Politics in an Age of Fantasy." As you put together your post-Peru FTA reading list, I would highly encourage you pick this one up. Here is an excerpt of a review I wrote with my brother, arts activist and all-around Chicago guru Daniel Tucker.

Any progressive activist in recent years would be familiar with the following scenario: a group that has a history of working together is plotting out upcoming actions and campaigns. As they seek feedback on their plans from a wider circle of friends and colleagues, they run into someone – perhaps a public relations leader, perhaps a political communications professor… let’s just call them “framing gurus” for short – who vigorously insist on the centrality of messaging, sound-bytes, and narratives. While any activist group worth its street cred would undoubtedly concur with the importance of adequately representing your platform, such tactical considerations – when pushed to the extreme – can obscure longer term goals and strategies.

A related debate is taking place on the national level, where one of the most influential books for the Democratic Party in recent years has been George Lakoff’s “Don’t Think of an Elephant.” In it, he argues that Democratic candidates could gain support by describing their platform in terms of broad social values that would activate “frames” in voters’ minds, rather just reacting to the GOP. A whole host of Democrats did just that, for instance by describing their opposition to Bush’s “free trade” policies in terms of being “for the future of the middle class.”

But activist Stephen Duncombe argues that much more than just framing exercises is needed if progressives are going to move beyond a few electoral victories and ad campaigns into a vibrant and sustainable movement capable of checking corporate power and pushing elected officials further to the left.

Read more on my bro's blog, and Duncombe's site is here. And since we're still focused on Peru, you can watch the Ways and Means Committee final mark-up right now.

John Edwards Announces Opposition to the Peru FTA

John Edwards announced Saturday in Newton, Iowa his opposition to NAFTA expansion trade policies and specifically to Bush's NAFTA expansion to Peru, which will likely be up for a vote next week in the U.S. House of Representatives. Here's what the campaign had to say:

"I grew up in Carolina mill towns and so I've seen firsthand the devastating impact trade can have on workers and communities," said Edwards. "Presidents from both parties have entered into trade agreements like NAFTA and the WTO promising that they would create new jobs. Instead, in recent years we've lost millions of manufacturing jobs, seen wages stagnate, and run up larger and larger trade deficits.

This comes after an August 4th speech on trade policy:

And from today's Financial Times:

[Edwards'] opposition to the Peru deal will be a setback for congressional Democrats who are trying to build a strong majority behind the agreement on Capitol Hill...

"In short, this agreement does not meet my standard of putting American workers and communities first, ahead of the interests of the big multinational corporations, which for too long have rigged our trade policies for themselves."

The criticism was welcomed by the deal's opponents, who include the heads of Peru's labour movement and Pedro Barretto, the country's archbishop.

Mr Edwards singled out "provisions that could allow US banks to demand compensation if Peru reverses its disastrous social security privatisation".

He also offered a broader critique of the US approach to negotiating trade deals modelled on the North American Free Trade Agreement. "All of these agreements provide the expansive investor rights that literally create incentives to relocate US jobs overseas," he said.

Edwards, pulling no punches, also takes on Stephen Colbert as a corporate candidate:

"Stephen Colbert claims to represent a new kind of politics, but today we see he's participating in the slash and burn politics that has no place in American discourse. The truthiness is, as the candidate of Doritos, Colbert's hands are stained by corporate corruption and nacho cheese. John Edwards has never taken a dime from salty food lobbyists and America deserves a President who isn't in the pocket of the snack food special interests."

Also, a great post at Daily Kos outlines everyone's positions (other candidates, labor, etc.) on the Peru FTA.

(Disclosure: Global Trade Watch has no preference among the candidates.)

Quick food & product safety roundup

The media frenzy over imported food and product safety has died down a little, but of course the problem remains.  A few interesting tidbits:

• Cal Dooley, the president of the Grocery Manufacturers/Food Products Association, said last week that legislation to improve the safety of food imported into the United States would violate WTO rules and "create havoc at the border."  Kind of makes the whole point - about the WTO overreaching into domestic policy-making - for us quite nicely.
• A recent Gallup poll indicates that Americans are "likely to pay twice as much for U.S.-made merchandise than Chinese goods."
• The Center for Food Integrity (which, it should be noted, is a food industry front group) conducted a recent survey showing that food safety issues edged out nutrition as Americans' top concern regarding the food they eat.
• For the research wonks out there, the WTO has launched an online database of sanitary and phytosanitary (SPS) notifications and documents, which deal with food, animal and plant health and safety.

And finally, here's a new old video clip, of our own Lori Wallach making a cameo appearance in a CNN segment on imported food safety.

Breaking News from Oregon: OR and Mexico Labor Leaders Rally Against NAFTA Expansion

For immediate release:

Labor Advocates from Oregon and Mexico Speak Out Against NAFTA Expansion

Event Outside the Portland Federal Building Highlights Reasons to Oppose Pending Bush Administration Trade Deals

Portland, OR — Trade advocates from both the Pacific Northwest and Mexico voiced their opposition to Bush administration proposals to enact new free trade agreements with Peru, Colombia, Panama and South Korea during a rally outside the Edith Green/Wendell Wyatt Federal Building this afternoon. They said that existing trade pacts such as the North American Free Trade Agreement (NAFTA) have hurt working people both in the United States and abroad and that the NAFTA model of trade should not be expanded into South America and Asia.

“Before NAFTA, people in rural Mexico were able to survive growing food for themselves and for sale in local markets. Since NAFTA, most people have been unable to compete with imports from the United States and many have been forced to leave their homes in search of dollars,” said Centolia Maldonado Vasquez, a community leader with the Binational Front of Indigenous Organizations from Oaxaca, Mexico. “Before Congress decides to sign a new NAFTA-style trade agreement with Peru or Colombia, it should consult with Mexico’s indigenous peoples, farmers, small business owners and migrants about the impact that NAFTA has had on them.”

Just like NAFTA, pending free trade agreements require developing countries to reduce tariffs on agricultural imports and other protections for their domestic agricultural sectors. Because many staple foods grown in the U.S. receive large subsidies from the federal government, they can be sold on the international market for less than the cost of production, making it impossible for poor farmers in developing nations who receive no subsidies to compete. This pushes large numbers of people in agricultural-dependent rural areas off their land, compounding problems with drug production, poverty and undocumented migration.

“Many immigrants now living and working in the United States are here because they were pushed off their land by international trade policies that ruined their ‘free market’ systems,” said Andrea Cano, executive director for the Oregon Farm Worker Ministry. “Expanding NAFTA-style trade agreements into Peru and elsewhere will only compound problems with rural poverty and unemployment in those countries. These trade agreements that favor only big business are disastrous for working people on both sides of the border.”

The removal of tariffs also has a negative impact on working people in the United States. According to an analysis of U.S. Labor Department data conducted by the Oregon Fair Trade Campaign in late 2006, 68,000 Oregonians have lost jobs due to offshoring and increased foreign imports since NAFTA was enacted in the mid-1990s.

“We continue to see family-wage jobs in the United States move abroad to wherever labor is the cheapest and environmental regulations are the weakest,” said Gregory Pallesen, vice president for the Association of Western Pulp and Paper Workers. “This is obviously devastating to communities throughout the United States, and it isn’t particularly good for working people abroad either. Congress needs to put an end to this model of trade once and for all.”

“It’s not just folks whose jobs are shipped overseas who suffer from current trade policies. The offshoring of U.S. jobs puts a downward pressure on wages and benefits for all of us,” said Madelyn Elder, president of Communication Workers of America Local 7901. “The issue of jobs and stagnant wages is definitely a voting issue for many Americans. Congress is making a big mistake if it helps the Bush administration advance its trade agenda.”

Labor advocates highlighted their opposition to the Peru Free Trade Agreement, which is expected to reach the floor of Congress in early November.  To date, Congressman Peter DeFazio (D-4^th) is the only member of Oregon’s Congressional delegation who has committed to voting against this trade agreement.

“These trade agreements are being negotiated without looking out for American workers. We need to decline to sign any new agreements, including the Peruvian agreement, and begin to fix the damage existing agreements have caused,” said Joe Kear, business representative with the International Association of Machinists, which represents workers at the Freightliner Truck Plant in Portland. “Half the workforce at the Portland Freightliner plant is on layoff, primarily because the work has left for Mexico little by little since the enactment of NAFTA. This past March saw the last commercial Freightliner truck produced in Portland, as production of the high-end Coronado model, once exclusively built in Portland, moved to be made solely in Mexico.”

###

"Some of these things that come up under free trade are just amazing"

Jane Bussey reports in today's Miami Herald:

A group of U.S. community organizations have entered the fray over free trade, warning that fuzzy language in a trade accord with Peru could penalize that country if it tries to fix its controversial, privatized Social Security system.

A two-page letter from organizations that fought President Bush's plans to privatize the U.S. Social Security system will be sent to Congress Tuesday. It asks legislators to vote against the trade accord, which could lock in a privatized Social Security system in another country when such privatization was rejected by Democrats in the United States...

The letter from nearly 30 grass-roots organizations, including the Florida Consumer Action Network, urged members of Congress to oppose the accord because it ``includes provisions that could lock in [Peru's] failed Social Security privatization.''

''Some of these things that come up under free trade are just amazing,'' said Bill Newton, executive director of the Florida Consumer Action Network...

Citibank Overseas Investment is the largest single investor in ProFuturo, which is one of the leading pension fund providers in Peru.

The letter warned that ambiguous wording in the financial services and investment chapters in the trade agreement could potentially open the way for Citibank to ''claim a large monetary award'' in international tribunals.

You can find a copy of the letter here, signed by Americans for Democratic Action, Arizona Advocacy Network, Campaign for America’s Future, Citizen Action/Illinois, Citizen Action of New York, Citizen Action of Wisconsin, Colorado Progressive Coalition, Connecticut Citizen Action Group, Florida Consumer Action Network, Georgia Rural Urban Summit, Iowa Citizen Action Network, Labor-Religion Coalition of NY state, Maine People's Alliance, Michigan Citizen Action, Missouri Progressive Vote Coalition, NDPeople.org, NETWORK: A National Catholic Social Justice Lobby, New Hampshire Citizens Alliance, New Jersey Citizen Action, New Mexico PACE, Oregon Action, Progressive Maryland, Public Citizen, Rhode Island Ocean State Action, Tennessee Citizen Action, United Vision for Idaho, USAction, Washington Community Action Network, and West Virginia Citizen Action Group. Their conclusion?

Peru FTA is not only a threat to the future well-being of Peruvian citizens, but also a dangerous precedent for the United States and world. Social Security, and the essential protection it provides, should not be limited by U.S. trade policies – either in the United States or in our trading party countries. We urge Congress to reject the Peru FTA and begin a course toward a fair trade model.

This follows an excellent report from Bill Moyers Journal last Friday on the issue. Citibank tells us what it likes about the Peru FTA here, and Bush's financial corporation trade advisory committee likes the precedent being set here. More background can be found at my piece over on Alternet.
 

Who says nothing good comes out of the Beltway?

Two groundbreaking new papers looking at our failed trade policy’s negative impact on American wages and inequality have been written by economist Josh Bivens and quietly released by the Economic Policy Institute (EPI). These papers brilliantly summarize half a century of economics research into the topic, and make fascinating projections of future increases in inequality if current trends continue. The papers expose what has been hidden in plain view: our trade policy is putting substantial downward pressure of all U.S. workers, yet policymakers are trying to push more NAFTA-style trade policy to Peru and beyond despite mounting evidence that it is bad for Americans.

Among the important conclusions of the paper, paraphrased by yours truly:

• The most important negative impact of our trade policy is not the displacement of concentrated groups of workers in manufacturing, but rather the holding down of wages of 70 percent of the population – including those workers whose jobs have not been and/or cannot be offshored. This analysis takes into account the impact of savings from cheaper imported products, and is a NET effect.
• The burden from trade policy-induced inequality now outweighs the burden from income taxes for the average American family. Specifically, the costs from current globalization policies for the median family have risen to $2,135 a year, while income tax costs are by comparison only $1,495. So if you’re concerned about high middle class taxes, you should be doubly concerned about our trade policy.
• If current projections by mainstream economists of the number of offshorable service-sector jobs hold over the next 10-20 years, our trade policy could erase almost all of the wage gains made since 1979 for workers without a four-year college degree (70 percent of the workforce). Trade adjustment assistance – now being debated in Congress – would replace less than 0.2% of the potential income loss to domestic workers in this scenario. Yet, this is the only significant policy response to globalization being discussed on Capitol Hill, and it excludes the majority of workers harmed by our trade policy.
• That much of this negative wage impact was already known by the early 1990s (in fact, since the 1940s), when policymakers were debating NAFTA and the WTO. Estimates produced by mainstream economists found that trade could account for 10-40% of the total rise in inequality that occurred in the 1980s and early 1990s. Many who were advocating for more-of-the-same trade policy often pointed out that trade did not account for a majority of the rise in inequality. But as the paper points out, it was still widely considered to be the largest single factor. (The paper notes: “This is true but uncomforting; a significant minority of a very large number is still a large number. To put it another way, if I threw myself into a chasm that was ‘only’ a fifth as deep as the Grand Canyon, I’d still be dead.”) In any case, the impact is shown to be much larger since NAFTA and the WTO went into effect over a decade ago.
• That anytime a pundit or politician invokes the notion that our trade policy is a “win-win” proposal, they are at worst lying or misleading the public, and at best equating the considerable gains going to the top end of the income distribution with a scenario where the gains are widely shared (something that has not happened, and could not happen without massive tax increases on the wealthy and government redistribution of a magnitude that is not being at all discussed by leading presidential candidates of either party).

The main paper from early October can be found here, and a background technical paper from early September can be found here.

Trade On The Trail Part Six

Here's what happened this week with trade on the trail:

"How pro-NAFTA was and is Hillary Clinton?" asks The New Republic:

The idea that she betrayed her own record by disavowing NAFTA is historically inaccurate. As Sally Bedell Smith's new biography of the Clintons, For Love of Politics, reminds us:

"Liberal Democrats, including Hillary, opposed it primarily because it could take jobs away from American workers. But as an advocate of global economic cooperation, Bill was drawn to its free-trade philosophy."

It is likely that her disagreement with Bill wasn't purely philosophical. Press reports from the time suggest that Hillary judged the politics of the situation differently: She thought a push for NAFTA would alienate the Democratic base, and that--in turn--would drain away resources and support from her health care initiative.

The Miami Herald talks about John Edwards' bid for rural voters:

"Hillary Clinton and the Clintons just flat put the screws to rural America, including NAFTA," Dave "Mudcat" Saunders, a senior Edwards advisor, said in an interview. "Hillary likes to talk about the jobs they created. The truth of the matter, here in Iowa, there were twice as many jobs lost as there were gained."

There's a populist element to Edwards' campaign that several Iowans liken to their own senator, Tom Harkin. Edwards rails against big corporate farm interests, which he says are hurting the small farmer.

And Investors Business Daily details this week's labor endorsements.

Huckabee, in an interview with WorldNetDaily talked about the importance of sovereignty in the wake of trade agreements:

WorldNetDaily: At what point do agreements with other nations begin endangering the sovereignty of the United States, such as the Security and Prosperity Partnership, NAFTA highways and the like

Huckabee: I'm the only candidate that I'm aware of that's come out strongly against the Law of the Sea Treaty. Also I'm strongly opposed to any treaty, any agreement, any accord, that would make us subject to any law other than the Constitution of the United States. A treaty ought to be an agreement that operated within the context of recognizing our own sovereignty as a nation, and the supreme law of our Constitution and our court. Further, I think judges ought to be impeached who use international law as the basis for making court decisions in the U.S.

And finally from the Baltimore Sun's blog, The Swamp on Ron Paul,

Paul says, the U.S. has no place in the United Nations. Speaking out against free trade treaties such as NAFTA and CAFTA, the congressman said: “I do not believe we should be in any of those organizations, including the United Nations.’’

And that's it for this week for Trade on the Trail.

Did you hear the candidates say something about trade this week? Add it to the comments!

(Disclosure: Global Trade Watch has no preference among the candidates.)

Business and environmentalists agreeing on something

Everyone seems to be opposed to the Bush's Peru NAFTA expansion. Well, everyone except for Walmart, Citigroup and Chevron (PDF) that is...

Check out this latest letter from major environmental groups (PDF) opposing the NAFTA-expansions for the incentives they give for oil corporations to drill in the Amazon Rain Forest. And a UNITE-HERE letter that blasts the deal and calls out the labor provisions that everyone from the U.S. Chamber of Commerce to Human Rights Watch says are unenforceable. Rep. Mike Michaud (D-Maine) gave a talk Monday on the House floor noting the Chamber support and calling the Peru deal "the same old model with a little fancy title" (see full statement after the jump).

And the United States Business and Industry Council, a 1,500 member organization of domestic and mostly family-owned manufacturing companies, put out a statement rejecting the Peru NAFTA expansion (sorry, not linkable):

The only U.S. beneficiaries, observed [Council President] Kearns, are the multinational companies that value these trade deals as opportunities to outsource more American factories and jobs.

And even members of Congress who negotiated with Bush to facilitate the passage of these NAFTA-style trade deals in the first place might be starting to feel guilty, as they talk about expanding Trade Adjustment Assistance just in the nick of time for a Peru deal that will create more displaced workers. Quoted in Congressional Quarterly (sorry, not linkable), Lori Wallach says of these efforts:

Up on the Hill, you hear a lot of people laughing about how revealing it is that you have to reauthorize the burial insurance right before passing more job-killing trade agreements.

Where do you stand?

UPDATE 3pm: Just Foreign Policy's Bob Naiman has a great summary of the issues involved over at Daily Kos.

Action Alert: Save the Peruvian Amazon

Check out Public Citizen's latest action alert on the Peru FTA and the environment. Here's an excerpt:

When Big Oil companies are going full steam on a stealth lobbying mission for more access to the Amazon, it doesn't take a geological engineering degree to realize that whatever they are pushing is probably bad for the environment.

So, it's more than a little disturbing that Democrats in Congress are scheduling a vote on one of Big Oil's top legislative priorities - an expansion of NAFTA to the South American country of Peru that would give them powerful new rights to ravage the endangered Amazon rainforest.

Indigenous leaders from the Peruvian Amazon are in Washington, DC right now urging the U.S. Congress to save their Amazon rainforest home and help stop global warming by defeating the Bush administration's proposed NAFTA expansion.[1] But they need our help!

Please urge your representatives in Congress to save the Amazon from Big Oil's Peru NAFTA scheme - and vote NO on HR 3688, the Peru "free trade" agreement (Peru FTA).

Take action here: http://action.citizen.org/campaign.jsp?campaign_KEY=17124

And here's the real kicker: in just the past two years, the percentage of the Peruvian Amazon region zoned for oil and gas exploration has exploded from 13 percent to over 65 percent! This includes national parks and other ostensibly protected areas. The Chapter 11-style foreign investor protections in the Peru FTA would help lock in this outrage, even if a new pro-environment government were elected in Peru. This graphic tells the story in stunning fashion:

Nobelists on trade, globalization

Leonid Hurwicz, Roger Myerson, and Eric Maskin were awarded the Nobel in Economics yesterday for their work in mechanism design theory. Alex Tabarrok at Marginal Revolution has a pretty good explanation of this work, and Maskin told the Times:

Mechanism design, Professor Maskin explained, can be thought of as the “reverse engineering part of economics.” The starting point, he said, is an outcome that is being sought, like a cleaner environment, a more equitable distribution of income or more technical innovation. Then, he added, one works to design a system that aligns private incentives with public goals.

One recent subject of Professor Maskin’s wide-ranging research has been on the value of software patents. He determined that software was a market where innovations tended to be sequential, in that they were built closely on the work of predecessors, and innovators could take many different paths to the same goal. In such markets, he said, patents might serve as a wall that inhibited innovation rather than stimulating progress.

What Maskin is writing about is the textbook theory of the value of free trade. It also complements work in the development economics literature about how "late developers" can adopt the technological advancements of rich countries, thus "leapfrogging" a stage of development. It should be noted that this is something that our current WTO- and NAFTA-enforced intellectual property protectionism regime sharply limits.

Maskin has also written recently on inequality and globalization:

Supporters of the anti-globalization movement argue that “globalization has dramatically increased inequality between and within nations” (Mazur, 2000), and in particular that it has marginalized the poor in developing countries and left behind the poorest countries. Meanwhile, more moderate mainstream politicians argue that the poor must invest in education to take advantage of globalization (Clinton, 2000). Such views are difficult to reconcile with a standard Heckscher-Ohlin trade model with two countries, two goods, and two factors (skilled and unskilled labor, or alternatively capital and labor) [which predicts that] inequality will rise in the rich country and fall in the poor country...

There are, however, at least two empirical problems with the Heckscher-Ohlin story. First, it predicts that bilateral trade will be greatest when factor endowments are most different, ceteris paribus (Vanek, 1968). There is little trade between advanced countries such as the U.S. and very poor countries such as Chad. A second problem with the Heckscher-Ohlin model is that evidence from examination of specific developing countries following trade liberalization and from cross-country studies does not suggest that trade liberalization generally reduces inequality in poor countries and in fact frequently suggests that trade liberalization can increase inequality...

We propose a model of production by workers of different skill-levels (Kremer and Maskin, 1997) that is consistent with 1) the small scale of trade between countries with very different factor endowments and 2) the possibility that globalization may increase inequality in both rich and poor countries.

Their model shows that it's possible that the least-skilled masses in poor countries will be totally marginalized under globalization, and that inequality can thus rise in both rich and poor countries. Maskin and co-author Michael Kremer conclude, "if people measure their status relative to others in their own society, then they will perceive inequality increasing. This analysis corresponds to the view of many anti-globalization protestors that globalization benefits elites in both rich and poor countries."

Corporations and constituents in Oregon

A recent article in The Oregonian gives a pretty clear assessment of Reps. Earl Blumenauer (D-Ore.) and Peter DeFazio's (D-Ore.) positions on the Peru deal. Although he did not support CAFTA and his own constituents protested the NAFTA expansion to Peru several weeks ago, Blumenauer is still supporting the deal. Now sitting on the Ways and Means committee, Blumenauer says he supports the Peru agreement because:

"This is the best trade agreement ever for people who care about worker rights. This will be a model for agreements in the future."

Guess he didn't get the memo that no labor groups actually support the deal or think it's a good model for future deals. Meanwhile, Blumenauer's constituents are not happy. Dan Denvir, a volunteer with the Portland Central America Solidarity Committee (PCASC), says:

"Earl's totally out of touch with Portland. He's viewed as someone who, if enough political pressure is there, he will sometimes do the right thing on trade, but when it comes down to it, he votes for big business interests."

Speaking of big business, Brad Figel, Nike's Washington DC lobbyist, seems to think that Blumenauer is "very thoughtful" on trade issues:

"I know he fundamentally believes trade is essential for Oregon, but at the same time he is interested in making sure labor and environmental protections are adhered to."

Finally, DeFazio, who opposes the Peru agreement and the failed NAFTA model of trade, sums up the issue nicely:

"Sooner or later the policymakers are going to wake up to the reality that the American people know, which is we are undermining the most successful system in the world, that brought the largest middle class in the world, with our trade policies. Unfortunately, a small percentage of Democrats and a large majority of Republicans are still blind to this because the corporations love what's happening."

Enclave Economy v. Straw Men

My friend Kevin Gallagher of Boston University has a new book out from MIT Press with Lyuba Zarsky called "The Enclave Economy: Foreign Investment and Sustainable Development in Mexico's Silicon Valley."

Unlike a lot of the Friedman-ite platitudes about eating sushi with a Bengali venture capitalist while talking on a cell phone, Kevin and Lyuba actually bothered to go to Mexico and talk to businesspeople and others to learn about the impact that NAFTA has had on Mexico's peoples and policies. Their major case study is Mexico's IT industry, and how it stacks up against its counterparts in Asia and elsewhere.

The picture they paint is not pretty. Under Mexico's pre-NAFTA import substitution regime, the country was able to produce a wide variety of electronics, and at one point nearly 95% of the value-added content of television production. In the 1970s, the government laid out a comprehensive policy to build a domestic computer industry, including by limiting foreign ownership and requiring that firms source nationally and locally. Deemed "an extraordinary success," the program began to unravel and domestic firms began to disappear. First when NAFTA facilitate the massive move-in of multinational companies with less long-term investment in the region, but instead only a temporary commitment to take advantage of low wages. And second when the multinationals traded out Mexico's less than $3-an-hour wages with China's less-than-$1-an-hour wages when that country acceded to the WTO in 2001 and also decided to let footloose capital set up shop without committing to China either.

Why did this happen? Kevin and Lyuba find plenty of blame to go around, but a major culprit is flawed trade deals like NAFTA, which "constrict the scope for developing countries to undertake targeted industrial policies":

Rules on intellectual property rights, for example, make it difficult to develop comprehensive innovation policies. Investment rules outlaw the ability of developing countries to leverage concessions from foreign firms such as content requirements for local suppliers or support for local training. Investment rules also allow private foreign firms to sue national governments when new and un-anticipated (by the investing firms) social and environmental  cut into profits under the argument that such regulations are "tantamount to expropriation." Moreover, the macroeconomic policies need to support contemporary trade agreements - high interest rates and tight fiscal policies - also make it more difficult for governments to design effective policy and offer credit to domestic firms.

Kevin and Lyuba have a summary piece of their book over at IRC.

Contrast this with some other stuff floating around DC recently.

Trade on the Trail, Part Cinco

This week was a big one for trade on the trail.

"Clinton Pledges to Revisit Trade Deals" says the Financial Times:

"I think it is time that we assess trade agreements every five years to make sure they’re meeting their goals or to make adjustments if they are not,” she said in a speech in Cedar Rapids, Iowa, which stages the first caucus vote in the presidential nomination process next January. “And we should start by doing that with Nafta.”

"We have to change our economic course just as we have to change course in Iraq and change course when it comes to healthcare,” she said.

In addition to the five-year trade reviews, Mrs Clinton said she would appoint a federal trade enforcement officer who would monitor compliance with trade agreements.

She also pledged to expand the trade assistance adjustment programme, which retrains manufacturing workers who lose their jobs when employers relocate to other countries.

She would extend the TAA to redundant service sector workers, whose jobs have mostly been “offshored” to India, and to workers whose employers have relocated to countries that have no trade agreements with the US, such as China.

Women's Wear Daily does a good job of laying out all of the candidates' positions. Here are some highlights:

Fred Thompson: "I was one of the strictest advocates of imposing restrictions on the Chinese for their behavior of exporting dangerous materials to countries and tying some of our trade policies to what they did in that regard...They still have not done enough...but in terms of turning our backs on free trade, that's not the direction to go."

Rudy Giulliani: "We can't say that because these agreements weren't perfect, because they have problems, we're going to turn our backs on free trade...We're a country that depends on exports and we're also an entrepreneurial country."

Hillary Clinton: "The Bush administration has filed roughly the same number of enforcement actions under our trade agreements that were filed during one year of the Clinton administration...That is unacceptable. When I'm president, we're going to start enforcing them again and we're not going to enter into them unless we think they're going to be good for American workers."

Barack Obama: "We wholly agree with the labor movement that labor and environmental provisions have to be included in the core of labor agreements. Business has said historically that it couldn't be done until now," the [Obama] aide said, referring to an agreement Democratic leaders reached with the Bush administration to include stronger labor and environmental provisions in four pending trade agreements.

Mitt Romney: "has pressed Congress to act immediately on two pending trade deals with Colombia and Peru, a campaign spokesman said."

(Disclosure: Global Trade Watch has no preference among the candidates.)

Nine Inch Nails, Radiohead embrace free trade

Nine Inch Nails just announced that they're following Radiohead's lead and making their music available for download at whatever price fans want to pay. Conversation over at Dani Rodrik's blog has already spoken about some of the economic issues involved.

This is huge. Technological change is unraveling the entertainment industry's ability to use protectionist devices like copyright and patents to have the nanny state enforce their monopolies. As Dean Baker writes:

Whether or not copyright protection is a desirable public policy, it is undeniably a huge government intervention in the market. In the case of prescription drugs, patent monopolies raise the average price of protected drugs by more than 200 percent, and in some cases by as much as 5,000 percent. In the case of copyright protection, items like software and recorded music and movies that would otherwise be available at zero cost over the Internet, can instead be sold for hundreds of dollars. Clearly these forms of protection are substantial interventions in the economy.

The fact that copyright and patent protections are forms of intervention does not mean that they are bad, but it is essential to at least recognize this fact in order to assess their merits. Suppose we eliminated all welfare to needy mothers in the form of cash benefits from the government, and instead assigned them the right to control traffic intersections in major cities. Then we allowed these poor mothers to charge people to make turns from the intersections. These women could have the police arrest anyone who crosses the intersection under their control without paying them their royalty, just as Bill Gates will have the police arrest anyone who sells Windows without paying him a royalty. The royalties they collect could provide enough income to support them without any money from the government. In this way, we could get rid of welfare - the classic big government social program — and still ensure that poor mothers have the income needed to support their family.

Giving people the right to charge royalties to cross intersections is government intervention in the economy and is every bit as much “big government” as if the government taxed people and redistributed the money to low-income mothers. It would not change anything if we declared the right to charge fees at an intersection a “copyright.” Government intervention by any other name is government intervention.

But trade agreements like NAFTA and the WTO, although often described as "free trade" agreements, in fact contain provisions that extend the reach and length of government intervention on behalf of copyright holders. This is not surprising, since these industries are among the top lobbyists for NAFTA-style trade pacts.

Progressives should reject these NAFTA expansions to Peru and other countries. These deals will increase patent protectionism at the expense of the poor and sick in Peru. And while copyrights may seem like a less burning issue, pacts like CAFTA have already cut away at free trade in Central America by forcing a crackdown on vendors engaging in free trade in music and computer programs, much as Nine Inch Nails and Radiohead have done to the delight of their fans.

The Offshoring of Hope

Did you hear about Obama's new book, "The Offshoring of Hope"? According to MSNBC:

Obama said he would vote for a Peruvian trade agreement next week, in response to a question from a man in Londonderry, NH who called NAFTA and CAFTA a disaster for American workers. He said he supported the trade agreement with Peru because it contained the labor and environmental standards sought by groups like the AFL-CIO, despite the voter’s protests to the contrary. He also affirmed his support for free trade. “I am not going to say on a blanket basis that I’m going to vote against trade agreements,” Obama said. “We cannot draw a moat around the u.s. economy b/c china is still trading, India is still trading.”

Funny thing about that... neither the AFL-CIO or Change to Win is supporting the agreement. And Peru FTA critics are not calling for a moat around the economy. In fact, leading Peru FTA opponents announced legislation to make permanent poor countries' duty-free access to the U.S. market.

Waaaayy back in 2005, Obama voted against a virtually identical bill - CAFTA, which nearly half of Costa Rica's population voted against despite Bush's misleading threats of economic reprisals. In his piece for the Chicago Tribune on CAFTA, Obama argued:

I meet these workers all across Illinois, workers whose jobs moved to Mexico or China and are now competing with their own children for jobs that pay 7 bucks an hour. In town meetings and union halls, I've tried to tell these workers the truth--that these jobs aren't coming back, that globalization is here to stay and that they will have to train more and learn more to get the new jobs of tomorrow.

But when they wonder how they will get this training and this education, when they ask what they will do about their health-care bills and their lower wages and the general sense of financial insecurity that seems to grow with each passing day, I cannot look them in the eyes and tell them that their government is doing a single thing about these problems. That is why I won't vote for CAFTA.

Hard to see the government has really stepped up to the plate since 2005. If anything, things have gotten worse, as Bush showed some Texas will and vetoed the Dems' most ambitious domestic policy initiative - expanding kids' health care insurance. It seems very strange to reward that veto with support for Bush's plan to expand NAFTA to Peru.

Hat tip to Sirota for the heads up.

UPDATE: JES' A REMINDER for the sake of context: Democrats came to office in 2006 by responding to their base and swing voters' demands for fair trade, and the latest polling shows this will be an important issue in the general election as well. And just take a looksie here to see how every important base group for the Democratic Party is opposing the Bush's Peru NAFTA expansion, which replicates and expands on NAFTA's harmful provisions. And the kind folks at CEPR have just laid out a reminder of the economics of our status quo trade policy, and why the Dems' working class base have not benefited from these policies.

National Latino Congreso to Congress: Oppose Bush's NAFTA Expansions!

NEWS RELEASE, October 7, 2007

National Latino Congress Unanimously Passes Resolution Calling on U.S. Congress to Stop Signing New Trade Agreements

Latino Leaders Say U.S. Cannot Address Immigration without Changing Course on Failed Trade Policy

Los Angeles, CA – Reflecting on the root causes of poverty and migration in Latin America, the National Latino Congreso has unanimously approved a resolution rejecting new trade agreements based on the North America Free Trade Agreement (NAFTA), and calling on the U.S. to change its international economic policies, which so far are largely to be blamed for producing wealth and income inequalities abroad, as well as at home. In the case of Latin America, policies promoted by the U.S. have also resulted in the impoverishment and displacement of millions of rural inhabitants.

The resolution adopted on Saturday Oct. 6 by delegates of the Second National Latino Congreso , comes at a moment in which the U.S. Congress considers a new trade agreement with Peru, which largely mirrors NAFTA. The adopted resolution reads, in part:

“Therefore, be it resolved that the organizations present at the 2007 Latino Congreso, are strongly opposed to expanding the failed NAFTA and CAFTA through the “free trade” agreements between the United States and Peru, Colombia, and Panama, and will mobilize our constituencies to work in vehement opposition to their passage, and call on the U.S. Congress directly to reject these agreements.”

The resolution specifically condemns national lawmakers who are attempting to push anti-immigrant legislation while continuing to push for expansion of trade and economic policies that force families to emigrate in the first place. More than 1,000 Latino leaders present applauded the passage of the resolution, calling it an important step towards addressing the obvious link between current U.S. trade and economic policies, and migration.

"No" campaign accusing Arias/ Electoral Auth of collusion

This breaking news has the "no" campaign accusing the electoral authorities of collusion with the Arias administration, in particular by allowing campaigning in the media (including about the Bush threats) in violation of the media blackout: 

Among the most serious violations: the "yes" campaign continued to distribute propaganda, organize rallies and placed a great number of TV ads within two days before the referendum, in violation of the Electoral Code (Art. 85(g)), which clearly establishes that "During the two days immediately before and the day of the referendum, it is prohibited to distribute propaganda of any kind related to the issue at hand," a requirement strictly adhered to by the "no" campaign...

Clearly, the national media became channels for the Arias administration and treaty promoters, openly distributing their propaganda; just one instance is the wide broadcast coverage given to [Bush's] U.S. Trade Representative Susan Schwab's statement, where she categorically denied the possibility of renegotiating the agreement, and also suggested that the country's Caribbean Basin Initiative benefits would be lost, if the Costa Ricans voted 'no' on the referendum.

All of the above violations were allowed to take place, without the TSE (the body responsible for organizing and enforcing the referendum rules) taking any steps to avoid their continuation. Costa Ricans are indignant over this attitude, and sees the tribunal as sharing the blame for the aforementioned abuses.

There are also accusations of other irregularities, including:

• The massive utilization of "robo-calls" sent via cellphone voice and text message near the time of the vote, with messages like, "I thought the FTA didn't affect me. But Ana is going to lose her job. Let's help her. Vote yes."
• "Yes" campaign material inside some polling stations.
• The "yes" campaign offering $52.89 for a "yes" vote (This is about 2-3 days' wages for the average Costa Rican, earned on one day when all the business are supposed to be closed.)
• Flower exporting firms told their workers not to show up to work on Monday if the "no" won, the implication being they would have to shut down.
• Some polling stations only had red pens, even though only ballots marked with black ink were considered valid by the electoral authorities.

Read the press release here. We'll have more as it develops.

UPDATE, 5:30 pm: The Washington Post puts the real story front and center, in a piece by Manuel Roig-Franzia entitled "Costa Ricans Vote on Trade Pact: White House Pressed for Approval as Heated Campaign Closed":

Costa Rica appeared headed late Sunday toward approval of a trade pact with the United States after a count of 88.7 percent of polling stations showed 51.6 percent of voters in favor of the trade deal. The balloting follows a contentious campaign marked by a scandal that toppled one of the country's vice presidents and a last-minute push for votes by the White House. (emphasis added)

Close CAFTA Vote Shows Failure of NAFTA Model

Here's our statement on the results, followed by the more recent numbers by region:

For Immediate Release:                   
Oct 8, 2007

Close Tally on CAFTA by Costa Rica in First-Ever Public Vote on a NAFTA Expansion Shows That Bush Administration's Continual Push for These Deals Hurts U.S. Foreign Policy in Latin America

Even After U.S. Threats Aimed at Stimulating Public Fear of Reprisal and Big-Dollar Campaign Pushing ‘Sí' Vote, Result Is Marked by Razor-Thin Margin

WASHINGTON, D.C. – The depth of public opposition to North American Free Trade Agreement (NAFTA)-style pacts was demonstrated Sunday by Costa Rica's massive "no" vote to CAFTA despite a intensive campaign led by the country's president, months of deceptive radio and television advertising in favor of the pact, and a threatening statement issued Saturday by the White House, Public Citizen said today.

The strong vote against CAFTA likely will fuel growing opposition to another Bush proposal now before Congress to expand NAFTA to Peru. The Peru Free Trade Agreement (FTA) contains the same foreign investor privileges, service sector privatization, agriculture and other provisions that fueled Costa Rican public opposition.

"That nearly half the public in Latin America's richest free-market democracy opposed CAFTA despite the intensive campaign in favor of it should end the repeated claims that pushing more NAFTA-style free trade deals is critical to U.S. foreign policy interests in the region or helps the U.S. image," said Lori Wallach, director of Public Citizen's Global Trade Watch division. "This vote also debunks the claim that these pacts are motivated out of U.S. altruism to help poor people in trade partner countries, given that many of the people in question just announced that they themselves don't want this kind of trade policy. This policy, supported by the elite, will help foreign investors seize control of their natural resources, undermine access to essential services, displace peasant farmers and jack up medicines prices."

Despite massive fear-mongering, "No" vote gets nearly half

The results look to be sticking at about 52-48, with the yes winning. It looks like about 55% turnout, meaning about a quarter of registered voters chose "yes" and "no." This despite the massive fear mongering campaign by the Bush admin just hours before the vote, when there was supposed to be a media black-out on CAFTA. We'll be doing more commentary tomorrow. For now, the "no" campaign is still waiting for the final counts from the electoral authorities.

Vote Counts (of around 12:30 AM)

Region	No	Yes	Total
San Jose	283,391	303,900	587,291
Alajuela	143,957	137,543	281,500
Cartago	80,156	103,181	183,337
Heredia	78,945	87,002	165,947
Guanacaste	39,357	35,584	74,941
Puntarenas	53,298	52,626	105,924
Limon	34,475	43,248	77,723
Total	713,579	763,084	1,476,663

Preliminary results

Reuters is reporting a win for the yes based on the preliminary results. About 20% of the polling stations in the urban areas have still not reported; while over 30% in the rural areas - where CAFTA opposition is higher due to predicted displacement of these workers - have still not been reported.

If the percentages for the yes and no for reported balloting stations holds for the region, this would be the vote result (based on a full turnout):

Region	Estimated No	Estimated Yes
Guanacaste	95,605	86,603
Alajuela	250,500	237,234
Heredia	122,903	135,296
Limon	92,285	117,741
San Jose	469,196	497,621
Cartago	134,517	172,471
Puntarenas	121,492	120,332
TOTAL	1,286,498	1,367,297

Map of Costa Rica with registered voters

Region	Registered Voters	Number of polling stations
Guanacaste	182,208	443
Alajuela	487,734	933
Heredia	258,199	430
Limon	210,026	391
San Jose	966,817	1625
Cartago	307,819	542
Puntarenas	241,824	568
TOTAL	2,654,627	4,932

If Voter Turnout (%) is	Then # voters turnout	Then winner needs
40% (minimum necessary)	1,061,851	530,926
65% (estimated)