Press Conference: Mexican labor activist Susana Prieto joined U.S. Rep. Jesús “Chuy” García to demand an end to ongoing labor abuses that undercut the U.S. and Mexican presidents’ celebration of the new NAFTA.
Mexican Labor Activist Susana Prieto, on Eve of Possible Reimprisonment, and U.S. Rep. Chuy Garcia (D-Ill.) Call on Mexican President AMLO and President Trump to Remedy Ongoing Worker Abuses and Low Wages
Celebration of New NAFTA Premature: It Won’t Help Workers Absent Action to Translate the Labor Rights in the Text into Change on the Ground
WHAT: On Weds., July 8th at 11 a.m. EDT/10 a.m. CDT, Mexican labor activist Susana Prieto will be joined by U.S. Rep. Jesús “Chuy” García (D-Ill.) to demand an end to ongoing labor abuses that undercut the U.S. and Mexican presidents’ celebration tomorrow of the new North American Free Trade Agreement (NAFTA). Prieto, a prominent labor lawyer representing exploited workers in Mexico-Texas border maquiladora factories, was released on July 1 after being held without bail for three weeks on trumped-up charges of “mutiny, threats and coercion” after trying to register an independent union to replace a corrupt “protection” union. Her case reflects myriad labor abuses throughout Mexico, where workers fighting for independent unions, better wages and COVID-19-safe workplaces face ongoing abuse and resistance. The conditions for Prieto’s release, including a 30-month internal exile, are designed to end her representation of Matamoros workers seeking independent unions and intimidate workers nationwide seeking to exercise their labor rights. She must end her Matamoros labor organizing, not leave Mexico, and relocate to the state of Chihuahua, where a prosecutor issued new warrants for her arrest. Prieto helped workers win higher wages last year while fighting for independent labor representation that the new NAFTA is supposed to promote. Recently she helped workers demand COVID-19 safety protections after many died from workplace coronavirus exposures. After decades of worker intimidation, Mexican manufacturing wages are now 40% lower than those in China. More background on Prieto is available, here.
WHEN: 11 a.m. EDT/10 a.m. CDT/9 a.m. Juarez time, Weds., July 8
WHO: Susana Prieto Terrazas, Mexican labor lawyer
U.S. Rep. Jesús “Chuy” García (D-Ill.)
Lori Wallach, director, Public Citizen’s Global Trade Watch (moderator)
WHERE: To register for the press conference: https://cutt.ly/koN4s49
(You must register in advance to get the zoom link for the event)
Law Firms Are Recruiting Corporations to Attack COVID-19 Policies in ISDS ‘Corporate Courts,’ Warn 600-Plus Civil Society Groups From 90 Nations
Corporations Could Claim Billions From Taxpayers in ISDS Cases Against Pandemic Protections
The threat of Investor-State Dispute Settlement (ISDS) claims from multinational corporations for compensation from taxpayers for governments’ COVID-19 responses is dire, warned more than 600 labor, consumer, environmental, development and other civil society organizations today in a letter to heads of government worldwide.
In the letter, the groups revealed that numerous law firms specializing in ISDS lawsuits attacks are trolling for multinational corporations to attack government actions, such as restrictions on business activities to limit the spread of the virus and protect workers, requirements for manufacturers to produce ventilators, mandatory relief from mortgage payments or rent for households and businesses, measures to ensure access to clean water for hand-washing and sanitation, and more.
Specialist law journals have speculated that “the past few weeks may mark the beginning of a boom” of ISDS cases. As governments are taking urgent actions to stem the COVID-19 pandemic, save lives, protect jobs, counter economic disaster and ensure people’s basic needs are met, some law firms are advertising about the opportunities to use ISDS to profit from these necessary government actions.
The controversial ISDS mechanism is written into many trade and investment agreements and grants rights to multinational corporations to sue governments before a panel of three corporate lawyers. These lawyers can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits, on claims that a nation’s policy violates their rights. Their decisions cannot be appealed.
The 630 organizations are calling on governments to take practical steps that would immediately suspend the use of ISDS over pandemic response measures, as well as to put an end to the risks of all ISDS cases forever. Organizations signing the open letter include:
- Major U.S. labor and civil society groups, including the AFL-CIO, Sierra Club, Public Citizen, United Auto Workers (UAW), NRDC, United Brotherhood of Carpenters, Communications Workers of America (CWA), Methodist Board of Church and Society and the Presbyterian Church USA;
- International and regional union confederations including the International Trade Union Confederation, Public Services International, IndustriALL, the Trade Union Confederation of the Americas, and the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF);
- International environmental and development groups such as Oxfam, Greenpeace, Friends of the Earth International, Action Aid, Third World Network, the European Environmental Bureau, the Asian Peoples’ Movement on Debt and Development and the Arab NGO Network for Development; and
- Global health networks such as the Médecins Sans Frontières (Doctors Without Borders), Peoples’ Health Movement, Access Campaign and the International Treatment Preparedness Coalition.
As Mexican President Comes to D.C., Abuse of Mexican Labor Activist Susana Prieto Escalates, Casting Pall on New NAFTA
Prieto’s July 1 Prison Release Conditioned on 30 Month Internal Exile, End of Her Matamoros Labor Organizing, Not Leaving Mexico and Relocation to Chihuahua Where Prosecutor Has Issue New Warrants for Her Arrest
The extreme conditions imposed in exchange for Mexican labor lawyer Susana Prieto Terrazas’ July 1 release from jail after three weeks of imprisonment on trumped-up charges undermine the labor rights guaranteed by the new North American Free Trade Agreement.
Prieto revealed the conditions imposed on her for the next two and a half years:
- Banishment to the state of Chihuahua, meaning the end of her labor activism in Matamoros, which is in Tamaulipas;
- A ban on visiting the Labor Court where independent unions would be certified;
- A ban on leaving Mexico; and
- Payment of “reparations” for emotional suffering by government officials who were present when workers protested outside the Labor Court.
Additionally, on July 4, Prieto announced that two arrest warrants had been issued for her by a prosecutor in Chihuahua, where her release order required her to relocate on July 5. “Confirmado. Tengo dos ordenes de aprehension en Chihuahua. La Carcel que me impone ilegalmente la jueza de Tamaloupis,” she posted on Facebook. [Confirmed. I have two arrest warrants in Chihuahua. The prison that the judge of Tamaloupis illegally imposes on me.]
The legal process that resulted in her release – called a suspensión provisional del proceso (provisional suspension of the process) – has never been used in Mexico in the context of labor rights or human rights advocates. Its use in this context sets an extremely dangerous precedent for labor rights and human rights in Mexico. The process is akin to a plea bargain, and in the past has been used to suspend criminal charges pending completion of probationary terms and payment of restitution.
Prieto , a key advocate for exploited workers in border maquiladora factories in Matamoros and Juárez, was held without bail for three weeks on trumped-up charges of “mutiny, threats and coercion” after trying to register an independent union to replace a corrupt “protection” union in Matamoros. Growing outrage about a jailed Mexican labor activist, bogged-down labor reforms and threats to Mexican workers pressured to return to factories plagued by COVID-19 was not the scenario the U.S., Mexican or Canadian governments imagined for July 1, the date the revised North American Free Trade Agreement (NAFTA) went into effect.
U.S. fair trade activists delivered the letter to Mexican consulates nationwide on July 1. After decades of worker intimidation, Mexican manufacturing wages are now 40% lower than those in China.
Prieto became well-known in Mexico for helping maquiladora workers win higher wages in factories along the Texas border last year as part of a growing independent labor movement. Recently, she supported workers demanding COVID-19 safety measures after dozens of maquiladora workers died from workplace coronavirus exposure. Wildcat strikes and mass protests have grown throughout the border region as U.S. companies and officials push for plants to reopen without safety measures. At June 17 hearings, members of Congress raised concerns about Prieto’s arrest with the U.S. Trade Representative, who confirmed he was closely following her case and found it a “bad indicator” of compliance with NAFTA’s revised labor standards. Prieto livestreamed her arrest as she tried to register the Independent Union of Industrial and Service Workers “Movimiento 20/32,” chosen by workers to replace a “protection” union. Last week, Prieto’s daughter delivered a letter from U.S. unions and civil society groups to the Mexican National Human Rights Commission seeking help on Prieto’s release.
Launch of New NAFTA Marred by Detainment of Mexican Labor Activist, Hundreds of Court Challenges Against New Labor Law
Statement of Lori Wallach, Director, Public Citizen’s Global Trade Watch
Note: The revised North American Free Trade Agreement (NAFTA) goes into effect today, July 1. The U.S. Senate passed the new NAFTA in January 2020 by a margin of 89 to 10 after the U.S. House of Representatives voted by a margin of 385 to 41 in December 2019.
On paper the new NAFTA –with improved labor terms added and extreme Big Pharma monopolies and ISDS investor rights removed – is better than the original, but it won’t benefit people unless it’s effectively enforced.
It’s a terrible start that on Day One of a deal Trump said would transform trade, a leading Mexican labor lawyer has spent weeks in jail on trumped up charges for helping workers use USMCA’s labor rights and Mexico’s new USMCA-compliant labor law is bogged down by hundreds of lawsuits aimed at derailing it.
Maybe Trump hoped to distract from myriad failures by spotlighting the new NAFTA on July 1, but it’s also the date that 100 of the 600 legal challenges against the pact’s labor rights rise to Mexico’s Supreme Court and Susana Prieto, a famous Mexican labor lawyer detained for weeks for helping workers organize a union, has a high visibility hearing.
Meanwhile, Trump’s claims that the new NAFTA will restore hundreds of thousands of manufacturing jobs have proved baseless as U.S. auto firms announced plans to increase production in Mexico from Ford’s Mustang electric SUV to GM closing U.S. plants and moving popular vehicle lines to Mexico. But the U.S. Department of Labor has certified more than 175,000 Americans as losing jobs to trade during the Trump administration’s first years while the NAFTA trade deficit jumped 88% under Trump.
The new NAFTA’s greatest impact may be that it began a long overdue rethink of the U.S. trade-pact model. The unusually large, bipartisan congressional votes on the new NAFTA showed that to be viable today, U.S. trade pacts no longer can include extreme corporate investor privileges or broad monopolies for Big Pharma and must have enforceable labor and environmental standards. The 2016 Trans-Pacific Partnership, which failed these tests, never got close to majority congressional support.
Renegotiating the existing NAFTA to try to reduce its ongoing damage is not the same as crafting a good trade deal that creates jobs, raises wages and protects the environment and public health. The new NAFTA is not a template, but rather sets the floor from which we will fight for trade policies that put working people and the planet first. Any new trade deals must include climate standards, stronger rules to stop race-to-the-bottom outsourcing of jobs and pollution, and enforceable rules against currency misvaluation and not limit protections needed to ensure our food and products are safe, our privacy is protected and big banks do not crash the economy.
Susana Prieto Terrazas, a well-known Mexican labor lawyer, has been locked up since June 8 for trying to use the core labor right guaranteed by the revised NAFTA and Mexico’s new labor law; a July 1 hearing is scheduled after several punitive bail denials. Prieto, a key advocate for exploited workers in border maquiladora factories in Matamoros and Juárez, has been held without bail for three weeks on trumped-up charges of “mutiny, threats and coercion” after trying to register an independent union to replace a corrupt “protection” union in Matamoros. Prieto became well-known in Mexico for helping maquiladora workers win higher wages in factories along the Texas border last year. Recently, she supported workers demanding COVID-19 safety measures after dozens of maquiladora workers died from workplace coronavirus exposure. Wildcat strikes and mass protests have grown throughout the border region as U.S. companies and officials push for plants to reopen without safety measures. Dozens of members of the U.S. House of Representatives sent a letter yesterday demanding Prieto’s release. At June 17 hearings, members of Congress raised concerns about Prieto’s arrest with the U.S. Trade Representative, who confirmed he was closely following her case and found it a “bad indicator” of compliance with NAFTA’s revised labor standards. Prieto livestreamed her arrest as she tried to register the Independent Union of Industrial and Service Workers “Movimiento 20/32,” chosen by workers to replace a “protection” union. Last week, Prieto’s daughter delivered a letter from U.S. unions and civil society groups to the Mexican National Human Rights Commission seeking help on Prieto’s release. U.S. fair trade activists will deliver the letter to Mexican consulates nationwide on July 1. After decades of worker intimidation, Mexican manufacturing wages are now 40% lower than those in China. The Department of Labor has certified more than one million U.S. jobs (1,015,948) as lost to NAFTA just under one narrow retraining program called Trade Adjustment Assistance, which represents a significant undercount of total jobs lost.*
The first 100 of 600 challenges to Mexico’s new labor law will hit Mexico’s Supreme Court on its July 1 reopening. The new NAFTA requires that “protection” contracts signed by unions not elected by workers all be reviewed and that contracts be approved directly by workers within four years after the revised NAFTA goes into effect. This requirement is at the heart of the reforms to Mexico’s labor laws enacted on May 1, 2019. Under the new labor law, workers in Mexico could finally have legal protections to fight to raise abysmally low wages. This would also reduce incentives to outsource U.S. jobs to Mexico, benefiting U.S. workers. Within weeks of the new law’s enactment, hundreds of corrupt local “protection” unions and other interests opposed to reform began to file what are now more than 600 lawsuits, which both try to block the law’s application to specific union contracts and workplaces and to gut the law altogether on grounds that it is unconstitutional. Mexico’s judiciary has been out of session since mid-March for COVID-19 precautions. On July 1, the court system goes back into operation, with the first 100 challenges hitting Mexico’s Supreme Court. If the court rules against the challenged terms, Mexico will be in violation of NAFTA labor obligations that are essential if the new deal is to slow U.S. job outsourcing. This memo has the latest updates on the cases.
The Department of Labor has certified 176,982 trade-related job losses during Trump’s presidency, and the manufacturing sector is hurting. Under the narrow Trade Adjustment Assistance worker training program alone, 176,982 workers have been certified as losing jobs to trade since the 2017 start of the Trump administration. The data mainly covers 2017-2018, as there is typically a 12-18 month gap between layoff dates and certification. Whether the new NAFTA can slow ongoing job outsourcing or the 88% increase in the overall NAFTA trade deficit during the Trump administration remains to be seen over time. What is clear now is that the U.S. manufacturing sector has been severely harmed by the ongoing COVID-19 pandemic, with 1.1 million manufacturing jobs lost in May 2020 compared with the same month last year.
*Data Note: The trade data is sourced from the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. We present deficit figures adjusted for inflation to the base month of May 2020. The overall percentage change in the U.S.-NAFTA trade deficit under Donald Trump represent the change in total goods and services trade deficit since 2016, Barack Obama’s last year, and 2019, the last full year of data available during the Trump administration. Manufacturing job data is sourced from the U.S. Bureau of Labor Statistics. The government-certified job loss data is sourced from Public Citizen’s Trade Adjustment Assistance (TAA) Database. The U.S. Department of Labor certified trade-impacted workplaces under its TAA program. This program provides a list of trade-related job losses and job retraining and extended unemployment benefits to workers who lose jobs to trade. TAA is a narrow program, covering only a subset of workers who lose jobs to trade. It does not provide a comprehensive list of facilities or jobs that have been offshored or lost to import competition. Although the TAA data represent a significant undercount of trade-related job losses, TAA is the only government program that provides information about job losses officially certified by the U.S. government to be trade-related. Public Citizen provides an easily searchable version of the TAA database. Please review our guide on how to interpret the data here and the technical documentation here.
Jailed Mexican Labor Activist’s Immediate Release Demanded by Major U.S. Unions, Faith and Civil Society Groups in Letter Delivered Today to Human Right Commission
June 8 Arrest and Detainment of Mexican Labor Lawyer Susana Prieto Threatens to Overshadow Planned July 1 Start Date for New NAFTA
A group of powerful U.S. organizations demanded the immediate release of imprisoned Mexican labor lawyer Susana Prieto Terrazas, who was arrested on June 8 on trumped-up charges for “mutiny, threats and coercion.” Prieto’s daughter delivered a letter from the groups to the Mexican National Human Rights Commission today.
Prieto, an advocate for labor rights of workers in maquiladora factories near the Mexico-U.S. border, has defended workers who are protesting for improved safety measures against COVID-19 in reopened plants. Dozens of maquiladora workers have died after being exposed to the coronavirus. She recently sought to register a new independent union to replace a company-connected “protection” union. This is a core protection guaranteed by the revised North American Free Trade Agreement (NAFTA) and Mexico’s 2019 revised national labor law.
The arrest of Prieto and punitive bail denials that threaten her life given the high incidence of COVID-19 in collective settings such as jails, spotlights the ongoing labor rights crisis in Mexico. Growing focus on Prieto’s detention is overshadowing the July 1 start date of the revised NAFTA.
Members of Congress raised concerns about Prieto’s imprisonment to USTR Robert Lighthizer during a congressional hearing on June 17. Lighthizer said he was closely monitoring the case, “take[s] this very seriously,” found it to be a “bad indicator” of compliance with the new labor standards, hoped “[Mexico] can work it out themselves” but that “we’ll take action if appropriate.”
As well as facility-specific rapid response labor enforcement cases, the revised NAFTA allows NAFTA governments to charge each other with violations of their obligations. The dispute resolution process in the pact could result in Mexican imports to the United States facing tariffs if a NAFTA tribunal determines Mexico is not meeting its labor rights obligations.
The letter, signed by the American Federation of State, County and Municipal Employees (AFSCME), Citizens Trade Campaign, Communications Workers of America, International Association of Machinists and Aerospace Workers, International Brotherhood of Teamsters, Maryknoll Office of Global Concerns, NETWORK Lobby for Catholic Social Justice, Our Revolution, Presente.org, Public Citizen, Service Employees Union International, United Auto Workers, United Brotherhood of Carpenters, United Methodist Church Board of Church and Society and the United Steelworkers, is available here in English and Spanish.
Hong Kong is at a significant crossroads—and its special trade status with the US has become a central point of leverage in determining the outcome of this crisis.
One year ago, millions took to Hong Kong’s streets in response to the Chinese government’s attempts to limit free speech, protest and unions rights. The protests would become one of the largest sustained protest movements in recent history, and would succeed in derailing repressive legislation that Chinese leadership was pushing through the Hong Kong legislature. But last month, China moved to skirt that legislature and impose from Beijing a national security law that threatens the freedoms of the Chinese government’s critics. It would allow HK residents to be arrested for criticizing the Beijing government and jailed in mainland China.
In this episode, Lori and Ryan discuss the protest movement and the central role US trade policies are playing in influencing the future of Hong Kong.
Transcribed by Kaley Joss
You're listening to rethinking trade with Lori Wallach.
Welcome back to Rethinking Trade, where we don't just talk about trade policy, we fight to change it. I'm Ryan, and I'm joined once again by our in house trade expert Lori Wallach. So, Lori, today marks 1 year since the start of these mass protests in Hong Kong. They are against an extradition law that was widely seen as opening the door to people in Hong Kong getting prosecuted and imprisoned in China. Recently, these protests flared up again because of a new national security law that China is imposing in Hong Kong. As we both know, the US-China and US-Hong Kong trade relationship have been a central part of that story on the show. We're going to talk about Hong Kong’s “special status” in relation to the US. We're going to talk about the protests, and how this all has to do with our trade policies. So, first, Lori can you describe Hong Kong’s special status in relation to the US, and what some of the trade issues are that have been involved in the recent discussions around Hong Kong?
Hong Kong has a special treatment in the trade world. Hong Kong has its own seat at the World Trade Organization, separate from China. Also, in US law there's a statute called the Hong Kong relations act which was passed in 1992. This basically guarantees that, as long as China continues to hold up the promises made to Hong Kong in the 1997 agreement between China and England, when England handed Hong Kong over to China, Hong Kong gets treated basically as a separate entity. What that means, practically, is that for instance when China is judged to be dumping products at below the cost of production and a penalty is put on Chinese imports, imports from Hong Kong don't get hit. Or, China has its own tariff schedule, Hong Kong has a different tariff schedule. Other differences are what the border taxes are, and if there's a penalty, like the section 301. But there is a condition to that, which is every year the US government has to certify that Hong Kong is in fact being given those special rights and treatments that China committed to. If that certification ends, then the 1992 Hong Kong Relations Act allows US presidents to basically withdraw that special treatment. That would mean higher tariffs on goods from Hong Kong, limits on investments from corporations incorporated in Hong Kong, and a variety of other penalties would then be able to be imposed.
So, recently, Donald Trump and Mike Pompeo made a move which a lot of people in Hong Kong seem to be supporting, even though it's venturing into unknown territory. Maybe you could talk about what that maneuver was.
So, part of the Hong Kong Relations Act requires a certification every year by the Secretary of State. This certifies that in fact Hong Kong is being treated autonomously, with respect to free speech rights, independent unions and the like. If that certification is done, then the special, preferential treatment included in the Hong Kong Relations Act is continued. For the first time since the act was passed in 1992, the Secretary of State Pompeo did not certify autonomy. This was notable, and was big news. Now, the president could, at any point, start to effectively impose detrimental pressure on Hong Kong, and therefore pressure on China.
This is one of things I'd love to hear your perspective on, because I know you've been talking organizer to organizer with activists in Hong Kong. I'm interested in hearing more details about what's going on in the protests there. I do know the motto of the protests has been “If we bleed you bleed,” which is to say, to mainland China, ‘if you cut off our rights then we're happy to have economic damage befall you’. That seems, maybe, to be part of the reason why the protest movement is happy that the U. S. decertified. Maybe, for once, Trump will actually follow through and do something that creates economic pain for China. That so far has not happened with respect to the Hong Kong actions. It's been shameful actually, but not surprising in the least, because in the whole year of these protests Trump has signaled he's with the president of China Xi as compared with the protesters. But I'm curious, Ryan, what you've picked up as far as why folks on the streets want pressure, and also how those protests are going?
One thing to keep in mind, is that there's been, you know, a year of sustained protests in Hong Kong. Some of these protests have been absolutely massive, with estimates of over 1,000,000 people. On several different occasions there's been lots of violence from the police. Some of the protests have been pretty violent as well. There's been fights between citizens in the streets as well as fights in parliament. It's a very significant situation, and a year of that will obviously harden people. I've spoken to groups from the more left wing progressive groups, as well as more middle of the road groups and the business community. The vibe generally that a lot of people indicate seems to be a general alignment on some big topics: cutting off the special status and seeing what that can do, agreeing with sanctioning targeted officials. This comes too after years of history. In 2014 there were huge protests in Hong Kong, and again back in 2003. This is just a recent development, but I think what's new is China's place in the world. There is a big question right now about what the future looks like, in terms of the US and China, and I think a lot of folks in Hong Kong are asking that question amongst themselves.
One thing that happened at the end of last year- so these protests began on this day a year ago, in June, and within a few weeks it became clear that this extradition law wasn't gonna fly. So, it was suspended. I think about a month later it was actually removed, and then a few months later was it was completely off the books. That was a pretty big victory, but the protest didn't stop because they saw what was coming. They're living in a place where their legislator is only partially elected, part of it is actually appointed by members of the corporate sector, which is really interesting. The results of that have been a pro-Beijing legislator for a very long time. That changed in November.
The elections in Hong Kong really swept pro-democracy people into parliament. It became clear to China that their attempts to pass any sort of an extradition law or any sort of laws governing activity in Hong Kong, wasn't gonna fly. So they just made this move, and said, well, “we’re making a declaration in the name of national security.” Under Hong Kong's relationship with China, they're technically allowed to do that. But, national security, as many people in Hong Kong we tell you, actually doesn't fall under criticizing the Chinese national anthem, or mocking the flag. There's actually strange overlapping interest between the streets, as in grassroots protest organizations, NGOs, student groups and people from the business sector. The interest comes in that there's a lot of people worried about what extradition could mean for them. A lot of people talked about the quote “white gloves in Hong Kong”, referencing Hong Kong's role as a money laundering hub for elites from China, so there's a lot of people who have a stake in the game. That's why I think we've seen such coalescing of people around the specific issues, such as cutting off the special status.
I think it's incredibly powerful and inspiring having watched what's happened in Hong Kong. The stakes are extremely high, as Hong Kong is this tiny island totally surrounded by China, officially controlled by China. China is notorious for not having rule of law or rights for citizens, and yet you have seen this incredible social solidarity of, as you said, a very diverse set of interests. Many of them are for protecting specific rights, a way of life of free speech and freedom. Some certainly are protecting commercial interests, because Hong Kong is operating commercially very differently than China. But, unified in a way that beat [overthrew] a head of state, officially appointed from Beijing. And Beijing made sympathetic leader Carrie Lam, withdraw outrageous policy proposals. So it is both inspiring what they accomplished and then kind of crushing to see how Beijing just, autocratically imposed a new measure which would go into effect. It literally would make a lot of what everyone listening to this podcast, and what you Ryan and I, do every day, a crime, which is criticizing the government. You could be swooped up out of your home and dragged off to a not-real court in Beijing, and then chalked into jail indefinitely in Beijing. For folks in Hong Kong, which is such a different culture that in Beijing, it's a life or death matter. It strikes me at this moment- we're in the United States, where tens of millions of Americans who have also, an incredibly inspiring way, taken to the streets over a life and death matter, which is historic structural racism in this country. It is really really hard, and difficult. Scary confrontations have happened between very established powers and people's aspirations to fight for their rights. There is a way in which the situations are entirely different, but also are both really inspiring examples of people power. Having spent a considerable amount of time in Hong Kong with friends there, but also during the WTO ministerial, their powerful protest movements there, or ‘the year of endless protests’ in a way is probably a foreshadow of the continuing work in the U. S., as we are also in a long term fight for basic rights.
Absolutely, and I think, in a way to look at Hong Kong there's two things. One, it comes as part of this wave of global, unprecedented protests and shifting political events around the world. Especially since the economic crisis. And, it also comes in this time where China is asserting itself globally as a real power. Hong Kongers are looking at that, at their place in the world in between these two super powers, and they're taking initiative to try to create their future in the way they want it, rather than it being dictated from outside. And I think that that kind of ties into stuff that you've been writing about and talking about recently, especially sparked by the covid-19 and the pandemic. But, also it's been coming for a while- there are big shifts happening in the world, and we're in this moment where new ideas or even old ideas that are still good ideas have a new place at the table.
We're pushing some of those in the trade world. Maybe you could talk about the situation out of Hong Kong, in the US and China, conversations you've been having about a progressive approach to China, and how our trade policies with China need to change?
I think that as we look at the economic relationship between the U. S. and China it cannot be divorced from the broader geopolitical dynamic between the US and China. You've described it as sort of a babble of different views about how society and economy should be organized, neither of which are entirely inspiring. However, by many orders of magnitude, the situation in China, with respect to basic rights for people to express their opinions; protest; organize for themselves in their workplaces, as unions or as individuals fighting for control of their communities, of the land that gets grabbed out from under them; fight against pollution- all of those basic fundamental rights are denied in the Chinese system. They’re criminalized, there's no rule of law. And, there are a couple hundred very powerful families who are integrated in the Chinese ruling government system, through the Communist Party in China, and through the economic system. Very government affected and controlled. Many of them owned companies, and as we think forward about what a better relationship between the US and China would entail, the economics of it include something that has to do with us, not China. Which is, as the COVID crisis has shown, the hyper-globalization of our economy through decades of corporate trade agreements has gotten rid of the redundancy of production, and has created extremely long brittle supply chains which are to rely on one country. That country happens to be China, but if that one country were England it would still be a problem. This lesson is we need redundant supply chains in different parts of the world, and we need some domestic capacity. So, that when countries, reasonably, are looking to take care of their own citizens, and send their own supplies to domestic needs, we have some ability in critical goods to make some portion of what we need. That way we can balance the way the global economy production occurs so that we have more capacity domestically. We don't have to be totally self reliant by any means, but some capacity. We cannot have a scenario where we don't make, at all, certain medicines and certain active pharmaceutical ingredients, in the continental size country like the United States. And, we need to diversify the supply chains in trade. So that, heaven forbid, there is a natural disaster or whatever it is, that knocks out production as it did in China, and we see huge crashing imports, we don't end up quickly with major shortages that make our situation worse. But, all of that aside, that's medium term and long term thinking. The short term question is, is the US going to actually do anything to protect people in Hong Kong? Or, is President Trump just gonna stand by, and let the Beijing dictatorship crush free speech and democracy in Hong Kong.
Rethinking trade is produced by Public Citizen's Global Trade Watch, where we don't just talk about trade policy, we fight to change. Visit rethinktrade.org today to get involved in our campaigns and help us fight for global economic justice.
Today, the World Trade Organization is in a major crisis of its own making, with its over-reaching enforcement regime derailed, its Director-General abruptly announcing his resignation and legislation introduced in both chambers to terminate Congress’ approval of the organization.
When the WTO was launched in 1995, we were promised by an array of corporations and politicians that it would usher in a new era of win-win globalization that would deliver higher wages and good jobs. Instead, as activists and union members warned, the WTO has facilitated a race to the bottom in wages and mass job outsourcing, especially after China joined in 2001. The WTO has ruled again scores of U.S. policies, including environmental and consumer protections.
What happens next at WTO affects us all. In this episode Lori digs in the history of the organization and describes the significance of its current crisis.
Transcribed by Kaley Joss
You’re listening to Rethinking Trade with Lori Wallach. Welcome back to Rethinking Trade, where we don’t just talk about trade policy, we fight to change it. I’m Ryan and I’m joined once again by our in-house trade expert Lori Wallach. So Lori, the World Trade Organization protests in 1999, the Battle in Seattle, that was my gateway into political activism. And we just celebrated the 20th anniversary of that event a few months back, but today we’re going to be talking about the WTO right now. Because it’s facing a significant crisis. Before we get into that, maybe you could just tell us what the World Trade Organization is, where it came from, and what some of the major issues have been in the fight against it.
So, the WTO is an international commercial agency. It sometimes gets called a trade agreement, but most of its contents have nothing to do with trade. It is the global commerce agency that replaced an agreement called the General Agreement on Tariffs and Trade, which was a global trade agreement created in the fall of 1947. It was one of the so-called Bretton Woods agreements that came after World War II and the economic and social crisis that followed, where actually a bunch of Keynesians sat around and tried to come up with some good rules. They had a thing called the “International Trade Organization,” it had labor standards, it had currency disciplines, it’s not totally different than the agreement we’ve been fighting for these days. But the U.S. Senate objected—we got the GATT. The GATT was really about trade, border tax cutting, and quota cutting. And that’s what we traded under for many decades. It worked pretty well for the U.S., until in the ‘80s Ronald Reagan and the folks around him who were uber-deregulatory, big about corporate power and rights, wanted ways to get around the fact that there was a durable Democratic majority in Congress.
In Germany, a neoliberal chancellor wanted to deal with busting up his unions, Margaret Thatcher was in cahoots in the same mindset as Kohl and Reagan. And they came up with this really elegant, but rotten, but effective strategy of shifting out of democratically accountable public venues like parliaments to close door trade negotiations, and the Uruguay Round of GATT negotiations was launched in 1982. It resulted in replacing the entire GATT. The GATT becomes one of twenty-plus agreements in force by this gargantuan new World Trade Organization which suddenly sets top-down, one size fits all rules for all kinds of stuff, totally unrelated to trade.
So to start with, there are a bunch of just flat out corporate protectionism. New monopoly protections, classic sort of rent-seeking protectionism for patents and copyright monopolies—monopolies in a free trade agreement. Every country is required to make in their domestic laws certain guarantees for corporate rights and all kinds of new limits on behind-the-border type policies on food safety, product safety, energy policy, banking regulation. In one fell swoop, basically like some quiet, corporate coup d’etat. This thing labelled “free trade agreement” gets rolled in like a Trojan Horse. And actually, what’s on the inside is an enforceable system of global governance literally by, for, and to a large degree (given the revolving door of the staff), of multinational corporations. And every signatory country was obliged to conform it’s domestic laws to these rules. And if they didn’t, they faced indefinite trade sanctions, fines, cash, it was suddenly an enforceable system of governance. And if this sounds like I’m exaggerating, let me actually read the key clause in the agreement established in the WTO. “Each signatory country shall conform its domestic laws, regulations, and administrative procedures to the attached agreements,” and the attached agreements are a whole bunch of rules limiting service sector regulation, food and product safety regulation, giving new corporate rights for investors, for intellectual property, that every country was supposed to make its domestic laws meet. That’s the WTO. It started on January 1st, 1995.
And since the WTO was launched, they’ve tried several times to launch new rounds of talks to expand their power and scope and it hasn’t quite worked out the way they wanted it to. It's becoming increasingly clear now that they’re in a real serious crisis. But there have been a few things recently that have happened as well. What’s going on over there and how significant is the situation at the WTO?
So the WTO’s actual outcomes have helped doom it. It hasn’t helped that it’s tried to grab more power and scope, but it’s the record of what’s actually happened. So, during the period since the WTO went into effect, just for instance with the US, we’ve lost a quarter of our manufacturing jobs, nearly 5 million, with 60,000 factories shuttered. This really took off after the 2001 entry of China into the WTO. The U.S. went from a goods and services trade deficit before the WTO of 125 billion, which was not great but now, it’s 617 billion, as in almost a 400% increase. And then, add to that all of the WTO’s obscene corporate protectionism and bans on common sense consumer safeguards, we have seen law after U.S. law challenged in WTO tribunals. We’ve lost 93% of the WTO attacks against our public interest policies and that’s led to roll backs of country of origin labelling for consumers of meat, rollbacks of protections of dolphins, clean air act regulations and gasoline cleanliness, endangered species acts, sea turtle safeguards and more. And this system is so lopsided that you know, we’ve lost 93% of the public interest cases but we’ve lost 90% of the 79 cases brought against the US at the WTO. Which just is a perverse irony, the U.S. was the biggest pusher of establishing the WTO, and we’re the number one target of the WTO enforcement actions. Just under a third of all the WTO cases are against U.S. policies and laws. So, the WTO didn’t deliver on the glorious and great gains that were promised certainly to people in the U.S. and Europe. And for developing countries, like some of the developed countries, there have been some major problems.
So we’ve seen this gutting out of middle class jobs and the attack on environmental laws, but the attack on public interest laws have been worldwide. So for instance, India Ghandian-era law constitution and laws that forbid the patenting of seeds and medicines were ruled to be a WTO violation. Of course, those policies are about trying to keep a country with a billion poor people being able to have seeds to plant to feed themselves and have access to medicine. Attacks on policies such as Europe’s ban on the use of artificial hormones on raising meat or Europe’s labelling and approval process for genetically modified organisms. There have been attacks on development policy like the banana trade policy that was basically a development policy that Europe had with its former colonies in the Carribean and Africa. So time after time the WTO rules against people-policies for corporate policies, but also how now there is in Congress a new wave growing of bipartisan upset about the WTO. The WTO’s unelected, unaccountable tribunal started also just making up policies, making up laws, and then enforcing them against countries. And that was irritating when it started to actually cause problems for some businesses who had been WTO boosters and then saw the WTO just making up rules and enforcing them that no country ever signed onto.
And what has all that added up to today?
Well, pretty much a meltdown at the WTO. So, starting with the Obama administration the U.S. you know, was furious with the WTO making up policies and sticking them on countries and was criticizing the enforcement system for not being very transparent, or timely or fair, and the Trump administration came in and stepped that up a level yet. Actually, the Bush two administration kinda started it, Obama stepped it up, then Trump went into overdrive. And the Trump U.S. Trade Representative Robert Lighthizer just flat out refused to appoint more judges to the final tribunal of the WTO, and he basically put it out of business at the end of 2019. So right now the WTO enforcement system is derailed, which given how bad its ruins are, is nothing to be too upset about actually. And the WTO hasn’t been able to complete any major negotiations basically since it was established. You know the Seattle Round obviously melted down, there was a 10-year skirmish over what was called the Doha Round of WTO expansion, but that was ultimately derailed. So it’s not negotiating, it’s not enforcing a lot of the rules that are locking in really crazy, extreme neoliberal 1980’s ideas. Meanwhile things that are at the cutting edge of concern, things like climate change, and issues around income inequality and in this COVID crisis access to essential medical goods, are either not covered in the WTO or covered in a way that makes things worse. So given the deadlock on enforcement and the deadlock on negotiations, it was not totally surprising but totally shocking when, just recently, the guy who was the head of the World Trade Organization, which is kind of a coveted position (and the guy still had a couple years on his term—a Brazilian diplomat named Roberto Azevedo) he announced he was leaving this fall. Almost two years early. Now that body that is very jammed will also be headless, so to speak.
Recently Representative Defazio and Senator Hawley introduced a bill to withdraw the United States from the World Trade Organization. Can you talk about that a little bit?
So when the U.S. Congress voted on what was called the Uruguay Round Agreements Act, which gave Congress’ approval to the WTO, it was so controversial that then-Senator Bob Dole (generally a free trade guy) insisted, given all the sovereignty implications of all the non-trade policies being imposed by the WTO, that every fifth Congress have a report on the outcomes and activities of the WTO and a privileged guaranteed vote to reverse the U.S. approval of the agreement. And a privileged vote means the kind of cloture and other rules in the Senate that block things up don’t apply... you get a vote. It gets pushed out of committee after a certain number of days, so the committees can’t block it. It gets a vote. And the agreement, the legislation, Article 125 of the Uruguay Round Agreements Act, has this five year option of withdrawing congressional approval. So first a conservative Republican Senator from Missouri named Josh Hawley put it in the Senate, and then shortly after two Democratic House full committee chairs, Congressman Peter Defazio and Congressman Frank Pallone, submitted the House version.
Now, the way it’s written, both the House and Senate have to send it to the President within 90,what are called, legislative days. It’s not calendar days, it’s a little bit longer. And if they do that within 90 days when the report that’s required gets sent, then it would withdraw the U.S. Congressional consent for the WTO. Now, there are all kinds of complications with that because the House can’t get the 90 days vote in, given when the resolution was submitted. And even if Congress’ approval of the legislation was withdrawn, it’s not clear that it actually gets the U.S. out of the WTO, and that’s assuming Trump wouldn’t veto it. And that’s assuming it would pass, all of which are things that I think you can’t assume. But, the bottom line of the whole situation is, there is a decent likelihood there will be House and Senate votes where members of Congress are going to have to express what they think about the WTO. It’s kind of a free vote to express your concerns without any potential liability. Because of the timing, the technical problems, it’s not a vote to get out of the WTO even if, actually, the House and the Senate both supported the resolution by majorities.
So let’s say that the US did leave the WTO or that the WTO did fall apart. What does the alternative to it look like? You kind of wrote the damn book on it—what could an alternative system look like?
Well first of all, folks can still get that book Whose Trade Organization?. I think the best way to think about it is “what are the rules we want?” So, “what are the goals we want?” Is the first question, and then you think about the rules. Versus the way the WTO was created was: here’s a model, the whole neoliberal smorgasbord of policies, of corporate rights, of corporate protections, of intellectual property rules, of limits on regulation, and service sector and financial deregulation, and let’s see what happens! No, you go the other way around, so what do you want? You want living, family supporting jobs and wages. You want labor and human rights so that people can advocate for themselves. You want an agreement that is compatible with a living planet and doesn’t exacerbate climate crises, in fact, as part of a transition to a lower carbon economy. You want to make that sure food is safe and the services we rely on are reliable and affordable and safe.
So if you think about it that way and you look at the WTO, basically in a certain way, you kinda want to go back to the ITO, the International Trade Organization. Which is, you take all of those WTO agreements, you just whack and bury a bunch of them. You don’t need a trade-related intellectual property agreement. There shouldn’t be protectionist patent and copyright monopolies in a trade agreement—they do not go there. That is just pharma and the content industry trying to ride on the good name of trade. You don’t need rules limiting what kind of food safety or environmental standards or product safety standards—you know the basic rule is as long as you treat domestic and foreign goods the same, the democratic process in the country that’s going to have the stuff in their market decides whether or not it can have pesticides and how much, and whether there should be GMOs and how they should be labelled. That’s not a trade issue. The discrimination treating foreign goods worse, that could be a trade issue. But as long as you don’t discriminate, the level of protection, the level of consumer information, that’s a democratic choice. So a bunch of those things need to get cut out of the system, then the stuff that’s missing needs to be put in. Which comes back around to the ITO.
So that old International Trade Organization connected to the International Labor Organization’s conventions on labor rights- that needs to be the floor on which trade happens. It didn’t have an environmental component—it would be very easy to use the kind of language that’s now in the revised NAFTA that talks about multilateral environmental agreements that countries have, as sovereigns signed onto, becoming the floor on environment that countries have to meet to get the benefits of the trade agreement. Equally, there are human rights standards through the United Nations. We have international rules on the people’s side that should become a floor on which trade is predicated. And then things like currency manipulation—there were rules against currency manipulation in those days relating to the IMF, which had a different kind of function then, that were in the ITO. We definitely need to make sure there are currency rules. There were also antitrust rules to break up anticompetitive practice, which obviously in the global economy we need. And we need rules (and there are various versions of these in some places) to stop tax cheating and the use of tax havens to get an advantage and starve governments. So if you take out the stuff that shouldn’t be in there and you put in the stuff that should be in there, it focuses mainly on trade—trade and what the terms should be for when trade happens. Those are the kind of agreements that could really get the benefits of trade without all the corporate baggage attached.
You know, when I think about what’s happened to the WTO and what we want, it makes me think back of walking around the Senate building with Ralph Nader during the fight in 1994 about approving the WTO. And he used to say to Senators, “if this darn agreement were ever fully implemented, the results would be so outrageous that people would want to get the hell out of it. And hopefully we don’t have to go through all the pain and suffering that’s going to ensure before we know it was a bad idea and we get out.” Well, it’s been 25 years and it is overdue to get out. But the other thing he said regularly was, “it’s not that there is no alternative, there are many alternatives. We just need rules that actually work for people and the planet, not corporations.” So stay tuned to the news about what’s going to happen with the WTO, could be at a turning point, sure would be overdue time to see something different as the rules of the global economy.
That’s all for today, thank you all for listening. Rethinking Trade is produced by Public Citizen’s Global Trade Watch. I would encourage you to visit rethinktrade.org as well as tradewatch.org to educate yourself, as well as find out how you can get involved in the work we’re doing to fight for fairer and more equitable trade policies.
Rethinking Trade - Season 1 Episode 7: The Loophole That Lets Amazon Deliver Uninspected Imports to Your Door
Nearly 2 million imported products we buy online every day enter the United States and are delivered to consumers’ doors without any inspections. That’s thanks to a trade law loophole that also lets these imports dodge the fees that brick-and-mortar stores pay for the same products.
Amazon and other E-commerce giants pushed for this change to what is called de minimis import policy, and it has facilitated a new flood of fake and unsafe imports that threaten consumers while undermining local businesses.
Transcribed by Lauren Martin
Welcome back to Rethinking Trade where we don’t just talk about trade policy, we fight to change it. I’m Ryan, and I’m joined once again by our in-house trade expert, Lori Wallach. With all of us sheltering at home, more and more people are reliant on e-commerce for their shopping needs. So today, we’re going to talk about a little-known piece of the e-commerce world, which is because of a sneaky change to trade to trade laws, a lot of products we’re bringing into our homes are not even inspected. Lori, maybe you can describe this situation and explain kind of why it matters to folks like us?
So normally when we think of the products that we buy, we assume that they’ve been inspected by the Consumer Product Safety Commission or the Food and Drug Administration or the USDA depending on what they are. And typically, that applies to imports, not at the level you’d want, it’s too low of an inspection rate, but the way that this is done is things that are most worrisome get targeted by risk for deeper inspection for imports. Except, thanks to a sneaky change to trade law, anything that comes in — most of e-commerce shipments, I might add — at under $800 of value totally skirts normal customs procedures and all inspections from any U.S. safety agency. That is called “de minimis” importing. De minimis refers to the amount below which an import isn’t subject to customs laws. And for years, it was $200. So anyone who’s travelled into the U.S. before 2015 will remember that customs form, that paper form they made you fill out on the plane before you got back into the U.S., and it said “are you bringing back more than $200 worth of stuff?” That was the de minimis, and as long as the stuff you were bringing was less than $200, you just wrote “no” and that was the end of it. If you were over $200, you had to list what it was and you might have to pay a border tax on it, a tariff, and it might be subject to getting you pulled aside for inspection. In 2015, there was a push to change that from $200 to $800. What that means now is that an enormous amount of stuff — including a bunch of things that are potentially very hazardous, like car airbags and fancy safety devices for kids from car seats for kids to fancy jogging strollers, to the really high-end helmets for motorcycles and biking, to a lot of different athletic equipment like hoverboards — all of those things now come in under the de minimis which means none of it’s inspected. And it meant an explosion of imports. It’s called Section 321 under the statute that sets up de minimis. But today, about 1.8 million shipments, individual packages, are released every day, being imported without being inspected thanks to raising the de minimis from $200 to $800. And all the new things that can come in. Today about 1.8 million shipments a day are being released as de minimis with no inspection for safety, actually really no recording of what they are. That includes a million-plus air shipments, so air express, small packages, from e-commerce purchases just coming from China every day. None of this stuff is inspected.
When you say not inspected, you mean literally not inspected at all, not inspected for safety, not inspected for anything?
I mean, you can bring this stuff in, listing only the most basic information. You don’t know where it originated from, you don’t know technically what it is. You can describe it in vague language. There’s none of the import codes, so you can’t have an idea if you’re an inspector that it’s in that category of dangerous things. It isn’t inspected for safety, it isn’t inspected for even what it is, and it gets around normal border tariff taxes, it’s just a huge loophole.
And I’m assuming it wasn’t parents that were lobbying for bike helmets that weren’t inspected, and it wasn’t drivers who wanted seatbelts that weren’t inspected. Who was pushing for this change to be made in the de minimis rules?
So in 2015, folks will remember there was a knock-down, drag-out fight over trade authority, over Fast Track trade authority for the Trans Pacific Partnership. And there were other bits and pieces of the legislation that was written to extend Fast Track. But the fight and the focus was on Fast Track. One of those pieces was a change from $200 to $800 of this de minimis standard, and it was quietly but ferociously pushed by two sets of interests: the express delivery industry — so the UPSs, the Fedexs, the DHLs — and by the e-commerce industry — so the Amazons, the Walmarts, etc.. Both of those sectors said “hm, we actually if we got this higher, could be bringing in lots of stuff from China and other countries, much cheaper and much more quickly without the bother of inspections.” That is otherwise the rule of thumb for every brick-and-mortar store, and that was the rule for every package over $200 in value.
And the way they do this is, just on the business end when I order something from Amazon, I’m considered the importer, and so legally it’s me that’s importing this product directly and Amazon’s acting like they’re not involved.
Part of the problem is the change in the statute from $200 to $800. And that happened before the Trump administration. Part of the problem though is the ruling that was issued during the Trump administration which allows the importation of entire shipping crates full of individually addressed packages creating a myth that when Amazon in a fulfillment center in China makes 10,000 individual packages and puts them in a multi-ton shipping crate, each individual consumer is the person who is importing. So each individual package has to be under $800 to sneak in under this loophole. The whole shipping crate isn’t considered. Yes, every time one of us makes an order, we’re the “importer of record,” not the big e-commerce platform that on any given day is importing hundreds of dollars of goods.
So companies like Amazon are obviously making a lot of extra money because of this. Who’s being harmed by this? How is this affecting other businesses, brick-and mortar-shops?
This scam of importing through this de minimis, hundreds of millions of dollars of potentially unsafe, potentially fake — when I say fake, I don’t mean knock-off Gucci bags, I mean it says it’s an airbag, but it’s not really one, and you rely on it and die. It says it’s the fancy $800 stroller that’s impact resistant but it isn’t and your kid gets hurt. Those goods coming in not only expose us all to safety risks, but also, brick-and-mortar stores who are selling the same stuff are put at an enormous disadvantage relative to the Amazons, the Ebays, etc. Because, if say, your favorite local bike store decides they’re going to sell a very high-end bike, a $700 bike, and they want four of them in stock, and they buy the four of them, and they’re subject to tariffs, it’s $2,800. The ability for you as a consumer to buy the $700 bike online, and bring it in under the fake Amazon platform, under the fake notion that you are the importer versus Amazon, means you never have to pay that border tax. So, Amazon ends up undercutting the brick-and-mortar guys, who actually, you probably went to the brick-and-mortar place to check out the bike but then, the reason why it’s so much cheaper on Amazon than in the brick-and-mortar places is this de minimis cheat. And what is that money? Those are tax dollars that aren’t going into U.S. infrastructure, social security, other programs that we like and care about. Instead it goes into Amazon’s profit margin.
And some of these companies like Amazon, they’ve actually built infrastructure around this loophole. There was this great piece in ProPublica talking about these warehouses along the Canadian and I think also the Mexican border for packages going into the U.S., but they were all subject to the loophole, right?
So the big online monopolists have figured out numerous ways to exploit this loophole they created in the 2015 bill. First, they put fulfillment centers in China — and it’s not just them — the original ruling on this stunt came from Zara, the women’s clothing store. Any online package fulfilled directly in China from the Zara fulfillment center — same thing for Amazon — you can put 10,000 of those individual packages into a shipping crate and each individual purchaser of an item is considered the importer, not Amazon who arranged the shipping crate. So that’s scam number one. Scam number two — and that required getting a special exception from the Trump administration from the customs department. Scam number two: They have created warehouses, as you said, along the border with the U.S. and Mexico and the U.S. and Canada. So the way that one works is they bring the goods into Mexico or Canada, and they keep them what’s called “in bond.” That means it’s landing there, but it’s on it’s way to someplace else. So it’s not going to be entered into customs in Mexico or Canada. Because the actual ultimate consumer is in the U.S. So they bring in big shipments of whatever is the good, and then it’s packaged into individual consumer packages, which are put on trucks, driven across the border to a U.S. post office in a U.S./Mexico or U.S./Canada border town, and because of NAFTA there is no tariff when a good crosses from Mexico to the U.S. or Canada to the U.S. Therefore it goes into the U.S. system under the de minimis — so no inspection and duty-free — and it enters basically from big warehouses full of large amounts of these goods that basically the package gets picked and packed there and then shipped on a truck across the border and put in U.S. mail. The third sort of related scam is using the de minimis, basically online platforms using third party sales, so not even like an Amazon fulfillment warehouse, basically is setting up an avenue for a tsunami of goods from totally unregulated, mysterious, and often unknown fulfillers. The third-party stuff is kind of the scariest of all, where basically because of the exponential growth of e-commerce as a means by which Americans buy products, consumers are being widely exposed to serious health and safety risks by fake products produced anywhere in the world, which get millions of potential customers for sales and delivery. That’s not just made easy and quick by listing as a third-party seller on a well branded e-commerce platform, but has an air of legitimacy and a false sense of security so that a good that would normally be pulled from some unreputable third-party seller whizzes right through with no inspection, and frankly the consumer doesn’t even know. Those are three really scary ways that the big online giants are using this loophole.
So how do you tackle a problem like this? What are potential solutions to this and how can they be implemented?
The simplest fix is just to take the de minimis level back from $800 down to $200. That was a sneak attack amendment. People weren’t paying attention. No one even thought through necessarily what it would mean. Now that we see the outcomes, it should be brought back. But that would require Congress to pass it, House and Senate, and the prospect of that happening anytime soon is not great. And not only because of the big express shipment lobbying operations and Amazon and Ebay and Walmart and all the companies that would object, all the retailers, Zara and everyone else who enjoys using this loophole, but also cause right now even as people are more and more reliant on e-commerce because of the COVID crisis, Congress’ bandwidth to do stuff that isn’t immediate urgent COVID disaster is more limited. So, in the interim, the Trump administration can fix this by executive order. They have it within their hands, the Buy America, Hire America alleged administration, to fix this major trade scam. And the way to do it is basically Section 321, the way it’s written, gives enormous discretion to the Treasury Secretary to decide how the program will be administered. So you can’t unilaterally change that $800 is the amount, but you can basically determine what should or shouldn’t be subject to the waiver. So for instance, it seems pretty obvious that every good that is on the Consumer Product Safety Commission’s High Risk List — because they do a risk assessment, they know of products like the hoverboards that were blowing up, burning, and burning down people’s houses. That’s on the list. Car seats, because there have been so many dangerous fakes brought in, that’s on the list. Certain other sports equipment, like helmets, where there’s so many dangerous bicycle fake helmets, etc., that’s on the list. Lots of toys with magnets in them, which little kids will swallow then have their guts ripped up internally — there are right this day things that have allegedly been taken off these websites, these e-commerce platforms, you can find all these things if you look on these websites because these third-party marketers keep popping back up. All of those products should just not be subject to de minimis. Zero of those products should be getting in through this loophole. And it’s easy because the Consumer Product Safety Commission has a specific list. And so all those goods should not be subject. Similarly, if you’re thinking about fairness just as far as brick-and-mortar stores, and you’re thinking about the income lost for the government, it makes a hell of a lot of sense to say something like, “no product subject to more than a — pick your amount-ten, percent border tax — should be subject to de minimis.” That way you’re not making a huge thumb on the scale against brick-and-mortar companies, and you’re making sure you’re not gutting out revenue. And you could say, you know, the standard of Section 321 is for the convenience and the efficiency. Alright, you could say it’s inconvenient or not very efficient to bother collecting tariffs if it’s less than a 10% tariff on an $800 value good. But when it’s actually $100 of revenue versus $80 or more, hm, that makes more sense. So you could limit the amount of the tariff category and you’d knock a bunch of stuff out. Those are some things you could do right away as well as reversing the customs order that allows the scam of having whole shipping crates of individual packages somehow pretend not to be the e-commerce platform’s import, but pretend to be the customer’s import. Those three changes right away would fix about 90% of the problem. So given those three things would fix 90% of the problem, and the executive branch, the Trump administration, can do it solo, and they claim to be standing up for American companies and American consumers and trade, guess the big question is, what the hell are they waiting for?
That’s all for today, thank you all for listening. Rethinking Trade is produced by Public Citizen’s Global Trade Watch. I would encourage you to visit rethinktrade.org as well as tradewatch.org to educate yourself and to find out how you can get involved in the work we’re doing to fight for fairer and more equitable trade policies.
To date, more than 100,000 people are dead in the United States, and more than 30 million Americans have lost their jobs. Decades of corporate-rigged trade deals – paired with Trump’s inability to coordinate an effective COVID-19 response – are making the pandemic’s effects more devastating. COVID-19 and the shortages of critical medical supplies and shattered supply chains spotlight everything wrong with both the Trump administration and the current rules for the global economy.