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Indispensable reading: Why We're Signing a Panama FTA

In case you wondered why the Bush administration would go through all the trouble to sign a trade pact with Panama (where, as we've been reporting, major FTA-related labor disputes are underway), you MUST read Peter Riggs' latest piece for Tax Justice USA. Here's a sneak peak:

The proposed bilateral trade agreement with Panama has skated through without much attention at all. But the agreement with Panama is highly significant. The problem is, the trade agreement with Panama isn't really about trade. It's about foreign investor rights, money laundering, and tax dodging. And the United States should in no way reward this notorious offshore tax haven with a "gold star" Free Trade Agreement...

Panama has two major areas of "economic comparative advantage" in the region. One, obviously, is the Canal. But the other is much more insidious-and major U.S. corporations are hoping that no one draws any attention to it.

Panama's other economic comparative advantages are in the area of tax and banking secrecy, and the ease with which U.S. companies can create subsidiaries in Panama for purposes of dodging taxes.

Panama is already home to a lot of U.S. corporate subsidiaries. How many? Tens of thousands of U.S. corporations have hung out a shingle-or should we say, set up an email box-in that country.

Panama boasts a total of 400,000 registered corporations-second only to Hong Kong as a home to corporations and corporate subsidiaries. Subsidiaries whose sole purpose, in many cases, is to help transnational companies avoid taxes...

A final consideration is this-with the text of the Free Trade Agreement as it now stands, Panamanian investors would get new rights in the United States, with no new disclosure responsibilities at home. We have a situation where it is very, very easy to set up a business subsidiary in Panama. Panama's "corporate" specialists advertise the country has having the most favorable and flexible incorporation laws in the world, in addition to some of the strictest banking secrecy laws available.

So the FTA will just encourage more U.S. businesses to pursue a strategy for tax purposes, designed solely to evade taxes in the United States. But then the text of the Panama agreement allows corporations and investors with a "substantial business presence" in Panama-that is, registered subsidiaries of multinational corporations-to use provisions found in Chapter 10 of the agreement to bring a claim against U.S. laws using an international investor tribunal. Panamanian-registered corporations would be able to bypass the U.S. courts system altogether in the case of an investment dispute involving the United States.

That's right, Panamanian corporations-as well as Panamanian subsidiaries of U.S. corporations-would be able to bypass the U.S. legal system, and take their claims to an international investor tribunal. Historically, these tribunals have proven much more sympathetic to corporate interests than they have to public-interest regulation.

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Claiming the Moral High Ground on Product Safety

In the ongoing debates about how to strengthen food safety - a GLOBAL problem, not just a Chinese problem - one aspect is often ignored in the public discussion. From Inside U.S. Trade,

[Consumer Product Safety Commission commissioner Thomas] Moore pointed out a hole in current U.S. statutes on CPSC oversight of goods bound solely for export. “Our agency, through our governing statutes, cannot claim much moral superiority over the Chinese, or any other foreign country, when it comes to our own export policy. As long as a product has not been offered for sale in the United States, but is only made for export, our statute gives us practically no authority over it,” Moore stated. CPSC does not have the resources that would be required to know every country’s mandatory or voluntary product standards, and ensure that American exporters comply with them, he said.

“Given this background, it is somewhat hypocritical of us to berate any other country for not requiring their manufacturers to abide by the myriad U.S. mandatory and voluntary product safety standards,” he said. In light of this, Moore asks Congress to reexamine export policy and consider giving the Commission broader powers to prevent the exportation of products that have been recalled in the U.S.

Bathtub2_3 As the Basel Action Network has been raising for years, there is a major problem in this country with exporting trash and other undesirable items to developing nations. This must certainly be one prong in any CPSC overhaul.

That, and, oh yeah, did I mention that the CPSC only has 15 STAFF to monitor imported procuct safety at ALL PORTS OF ENTRY INTO THE U.S. MARKET!!!!!!!!!!!!!! Witness, just one more lovely outcome of neoliberals' brilliant and enlightened view of government.

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Why is NAFTA interfering with our transportation policy?

Forget the NAFTA Superhighway for a second and think NAFTA Trucks. That's right, multinational trucking companies are trying to use NAFTA to deregulate our transport safety regulations.

Five groups sued today in federal court to block a Bush administration plan to allow Mexico-domiciled trucks to roam the country’s highways as soon as Saturday.

The suit, filed in the U.S. Court of Appeals for the Ninth Circuit in San Francisco, maintains that the Bush administration’s pilot program, which authorizes up to 100 carriers based in Mexico to perform long-haul operations within the U.S., violates several key congressional requirements. The groups filing suit include Public Citizen; the International Brotherhood of Teamsters; Sierra Club; Environmental Law Foundation; and the Brotherhood of Teamsters, Auto and Truck Drivers, Local 70.  The groups filed an emergency motion asking the court to delay the pilot program before it goes into effect in a matter of days...

In 2001, a NAFTA tribunal ordered the U.S. to fully open its border to Mexico-domiciled trucking companies. In response, the Bush administration said it would implement a pilot program to allow up to 100 motor carriers from Mexico full access to U.S. highways. However, the project violated U.S. laws governing the conduct of pilot programs, in addition to a 2001 congressional mandate that Mexico-domiciled trucking companies meet U.S. safety standards regarding hours of service, driver training and licensing, and vehicle safety before being allowed access to the nation’s roadways.

Congress this year held hearings examining the plan to allow trucks from Mexico to travel beyond the border zones. Lawmakers uncovered serious safety deficiencies and deemed the pilot program a sham and in violation of existing law. In response, Congress passed a measure designed to ensure that any pilot program does not circumvent safety standards or congressional oversight and that such a program is conducted within strict parameters designed to facilitate informed decision making.

On Aug. 6, the Department of Transportation Inspector General released a report finding that the system used to monitor Mexico-domiciled carrier drivers with license convictions is not yet adequate. Officials still don’t have the data necessary to identify drivers not permitted to operate on U.S. highways. Further, the system designed to ensure that Mexico-domiciled carriers comply with U.S. motor vehicle manufacturing safety standards is incomplete, and it is not clear whether the drug and alcohol testing program is functional, the inspector general found.

This ain't about Mexican or American people, folks, cuz its mostly U.S. multinationals that operate in Mexico and are the ones pushing the NAFTA attack on safety standards. Welcome to neoliberalism, where any channel is as good as the next if the cause is deregulation.

Read more from Sen. Sherrod Brown's (D-Ohio) office after the jump.

Continue reading "Why is NAFTA interfering with our transportation policy?" »

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Mattel haltingly tries to self-correct, as WTO-nourished outsourcing mania continues

The Times had this interesting story this morning, again raising questions of exactly where the buck stops for consumer protection in the global economy, and whether corporations can meaningfully self-correct in this rotten system they helped build:

Mattel makes its best-known toys, like Barbie dolls, in its own 12 factories. But even as it has increased the share of toys it makes itself to about half, it still relies on roughly 30 to 40 vendors to make the other half. Mattel now realizes it was not watching those companies closely enough, executives here said.

Mattel vetted the contractors, but it did not fully understand the extent to which some had in turn subcontracted to other companies — which in turn had subcontracted to even more. Mattel required its vendors to list subcontractors, so Mattel could visit them, but Mattel is investigating whether that procedure has been followed. A number of companies whose factories Mattel had never visited may have had a hand in making the toys that were shipped around the world...

Mattel executives in Hong Kong are trying to figure out how many subcontractors became part of its lineup...

“There aren’t many companies that own their own factories,” Mr. Eckert said in an interview in his office, “and there aren’t many companies that manufacture outside of China.”

Mattel closed its last American factory, originally part of the Fisher-Price division, in 2002. The bulk of its products have long been made in Asia.

Indeed, as this graph I put together below shows, since the worst boy band ever helped pass China PNTR, China (with all the accompanying safety/transparency problems common to authoritarian states) is rapidly overtaking all other countries (especially North American and Western European countries) in U.S. toy imports.


This comes on the same day as a report about rising Chinese wages, which American companies have tried to suppress.

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We are the "world's biggest loser"

Manufacturing News today (sorry, not linkable) says that the U.S. is the "world's biggest loser - by far" in terms of the WTO dispute resolution system.

The World Trade Organization has ruled against the United States in 40 of 47 cases... That number is "astounding," according to Robert Lighthizer, a partner in charge the international trade group at the law firm of Skadden Arps Slate Meagher & Flom. The United States "has suffered disproportionately from the problems with the WTO dispute settlement system, having been named as a defendant in far more cases than any other WTO members."

(Note that Public Citizen's dispute database shows that the United States has lost 43 of 50 cases. Since Manufacturing News doesn't elaborate further on its statistics, we're not sure where the discrepancy arises.) Lighthizer goes on to say,

"As a result of this judicial activism, our trading partners have been able to achieve through litigation what they could never achieve through negotiation... The consequent loss of sovereignty for the United States in its ability to enact and enforce laws for the benefit of the American people has been staggering. The WTO has increasingly seen fit to sit in judgment of sovereign acts running the gamut from U.S. tax policy to environmental measures to public morals."

All this is true, but it's not just the United States that loses at the WTO. Pretty much all defendants lose WTO disputes. According to Public Citizen's WTO disputes database, while the United States has lost 86 percent of its cases as a defendant under the WTO Dispute Settlement Understanding (DSU), out of all DSU cases, the defendant loses 88.7 percent of the time. So the United States is roughly in line with the rest of the world in terms of having its domestic laws overriden by the WTO.

So claiming the United States loses at the WTO is accurate, but also misses the bigger picture a bit. As Dani Rodrik says as quoted in my earlier post, what's really needed is to rethink the whole system.

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CAFTA socks it to Aderholt

Our last update on the Aderholt-sock situation was a few months ago. Today, Inside U.S. Trade (as usual, not linkable) has this:

"Honduras this month rejected U.S. proposals aimed at reaching a negotiated settlement in advance of the public announcement of the injury investigation that could pave the way for the U.S. to invoke a Central America Free Trade Agreement (CAFTA) textile safeguard that re-imposes duties on Honduran wool, man-made fiber and cotton socks, according to a Honduran official... Honduras, the official said, was not receptive to any of the proposals and did not make any proposals of its own."


As we've described before both on this blog and in a 2005 release, this is mostly about a promise that Rep. Robert Aderholt (R-Ala.) received from the Bush administration that they would seek to limit CAFTA imports of socks by phasing out tariffs over 10 years instead of immediately. Aderholt, in return for this promise, voted for CAFTA despite expressing concerns that it would kill jobs in his district just weeks before.

Now, to no one's surprise except maybe Aderholt's, CAFTA is killing jobs in the U.S. sock industry and the promise made to Aderholt remains unfulfilled, and seems like it will remain that way for a while. In the meantime, the jobs they're a-movin':

The Federal Register notice states that of all three sock import categories, Honduras’ imports rose from 6 percent in the year ending June 2006 to 8.3 percent in the year ending June 2007, while U.S. domestic market share in all three categories has fallen from 36.6 percent in the year to date March 2006, to 29.1 percent in year to date March 2007.

P.S. sorry about that groaner of a pun.

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Peruvian labor unions skeptical that "deal" will have real impact

Last week, Inside U.S. Trade published an article (sorry, not linkable) on Peruvian labor unions expressing concern that the labor improvements to the Peru FTA mandated by the Deathstar Deal might be more mirage than reality. House Democratic leaders have conceded that the Peruvian government does not have to implement the necessary changes through legislation, but instead by "supreme decree" from President Alan García.

"[Labor union sources] said the commitment is limited because it does not change Peruvian labor laws through legislation, and because many of the problems regarding labor rights are related to a lack of capacity or political will for effective enforcement. For these reasons, one source said the decrees would only be a 'gesture' to the United States.

"These labor sources said real improvements in labor rights would be achieved by the completion of a new, consolidated general labor law. Negotiations on the law, conducted between employers, employees and the government for the past five years, stalled one month ago despite having finished about 90 percent of the substantive negotiations. One of the issues that remain unresolved involves the terms under which employees can be fired, sources said."

Also, just a few days ago, the Peruvian labor movement released a letter to the U.S. Congress (PDF, translated to English) expressing these concerns and explicitly asking members of Congress to vote "no" on the Peru FTA.

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WTO dispute system under fire

Today's New York Times has a lengthy article about the U.S.-Antigua gambling case at the WTO. It's unclear why they chose to run the article today, given there isn't any actual new news right now, but it's an interesting story about the dilemma that the WTO faces in trying to enforce its own rules.

On his blog, Dani Rodrik responds to the article by questioning whether the WTO should have jurisdiction over this kind of domestic policy at all:

To me, this is another example of how existing WTO practices are leading to the narrowing of policy space to the detriment of legitimacy (and economic logic). When the system serves to enforce new restrictions on domestic policy autonomy that would be wildly unpopular at home, it is time to rethink the system.

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Murder in Panama

We all know that Colombia doesn't exactly have the best track record when it comes to labor rights or prosecuting goons who murder trade unionists. But flying a little lower and escaping any major press coverage are the recent murders of labor union workers in Panama. In the space of three days last week, two members of the 60,000-member construction workers' union SUNTRACS were killed, one by a police officer and one by a "company union goon" (reports our staffer currently in Panama, where he is supposed to be on a surfing vacation). There have since been several protests, including a massive strike called by SUNTRACS yesterday.

We are tracking the labor situation in Panama (which is extremely convoluted), and will post updates as new developments happen. Obviously this should have ramifications for any serious Panama FTA debate if and when it happens.

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Barbarous Baby Bibs, Stupid Supply Systems, and the Worst Boy Band Ever

The Times had this gem this morning: 

Separately, laboratory tests have found that some Chinese-made vinyl baby bibs sold at Toys “R” Us stores appear to be contaminated with lead. 

Industry analysts said Mattel’s woes are part of a much larger problem. 

“If I went down the shelves of Wal-Mart and tested everything, I’m going to find serious problems,” said Sean McGowan, managing director and the toy analyst at Wedbush Morgan Securities. “The idea that Mattel — with its high standards — has a bigger problem than everybody else is laughable. If we don’t see an increase of recalls in this industry, then it’s a case of denial.” 

Even Mattel executives said  repeatedly  yesterday that the company may have more recalls. 

“No system is perfect,” Robert A. Eckert, Mattel’s chairman and chief executive, said in a conference call. “There’s no guarantee that we will not be here again.”

N_sync2_2 Wow. Before yesterday, these mega corporations were saying, oh, it's just a few bad apples caught up in the supply chain. (Kinda like Enron... remember that?) Now, we have the mega-corps admitting that - no, actually it's part of the design of the system.

System?! You mean it's not just a few bad apples? How could such a "system" have ever been devised? Did anyone ever vote on this "system", because I can't imagine it would be popular among anyone that, well, eats or consumes. Oh, that's right - thanks Billy, Joey, Chrissy, Johnny, Sammy, Freddy, and Johnny, also known as the boy band of former and perhaps future presidents. (They unfortunately lack many of the redeeming qualities of those other boyz' bands.)

For an excellent read into what a stupid (in the dictionary definition of the term) SYSTEM we have now, please check out Barry Lynn's piece in Harpers on the madness of mega-corporations' unregulated, global sourcing strategies.

Continue reading "Barbarous Baby Bibs, Stupid Supply Systems, and the Worst Boy Band Ever" »

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Choking on Barbie and Pixar Toys? - Thank the WTO

Mattel just announced its second August recall - one of history's largest with over 18 million toys globally, about 12 times the size of its previous recall. From Reuters:

The new recall involves 18.2 million magnetic toys globally, including 9.5 million in the United States. All have magnets or magnetic parts that can be dislodged.

The U.S. Consumer Product Safety Commission said it had received hundreds of reports of magnets coming loose. It said it had previously received reports of three children Evilbarbie swallowing more than one magnet and suffering intestinal perforations that required surgery. When more than one magnet is swallowed, the magnets can attract each other and cause intestinal perforation or blockage, which can be fatal.

In the United States, the recall includes 7.3 million Polly Pocket dolls and accessories with magnets, 1 million Doggie Day Care magnetic toys, 683,000 Barbie and Tanner magnetic toys, and 345,000 Batman and One Piece play sets.

About 253,000 Pixar Sarge die-cast toy cars with lead paint were also recalled. Lead has been linked to health problems in children, including brain damage.

Earlier this month Mattel's Fisher-Price unit recalled about 1.5 million preschool toys made by China-based contract manufacturer Lida Toy Co. because the paint on the toys might contain excessive amounts of lead. The global recall included products based on popular preschool characters from "Sesame Street" and "Dora the Explorer."

These import safety scares are the direct result of a trade policy that has off-shored more and more food and product production to countries with weaker regulation than our already inadequate domestic regulation. 80% of our seafood now comes from abroad; 80% of toy production is now Made in China.

It’d be easy to blame China, but the problem is much deeper. For decades, both Republican and Democratic administrations have pushed trade agreements which put limits on our ability to inspect imports. Under World Trade Organization rules, negotiated by the first President Bush and pushed through Congress by President Clinton, we can’t treat products differently if they come from outside the U.S., and we can’t demand higher rates of inspection for problem countries. Clinton also pushed China into the WTO – a move that was supported by all the senators now running for president that were in office in 2000 – so that means the bad rules apply to mega-manufacturer China as well. Now, Congress is poised to lock in more-of-the-same through NAFTA expansion agreements to Peru and Panama - countries with severe food safety problems. As Newt Gingrich would say, “Had enough? Call your congressperson!”

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The NAFTA Superhighway: Myth and Reality

At Global Trade Watch, we get a lot of panicky calls from folks worried stiff about the so-called NAFTA Superhighway and its sinister cousins, the Security and Prosperity Partnership (SPP) and the North American Union (NAU).  (Almost as many as people wanting information about how to "get their goods out of the docks" - seriously.) What exactly are these things?  Stephen Colbert gets truthy with it:

Humor aside, there actually are pieces of this story that are worth taking seriously.  As described in an excellent Christopher Hayes article in The Nation, the "Trans-Texas Corridor" (TTC) is exactly like the NAFTA Superhighway, except it's real.  At an estimated cost of $185 billion, the TTC is proposed to be "4,000 miles of highway, rail and freight corridors... up to four football fields wide at points, paving over as much as half a million acres of Texas countryside. The first section will be built and operated by a foreign enterprise, and when completed it would likely be the largest privatized toll road in the country."  Read the Hayes article for the full background on the TTC, as well as background on the SPP/NAU conspiracy theories.

There are much more concrete problems that require our attention, as Hayes describes after the jump:

Continue reading "The NAFTA Superhighway: Myth and Reality" »

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USTR Stumping in Oregon

The presidential candidates aren't the only ones on the campaign trail talking about trade these days.  Evidently, U.S. Trade Representative Susan C. Schwab has decided it's a good use of her time and our taxpayer dollars to be stumping for the Bush trade agenda, calling NAFTA-expansion deals to Peru, Panama and Colombia "no-brainers" while she was in Portland, Oregon.

Crazy_nuts_copy Who is she kidding?  After having lived through over a decade of NAFTA, we know these types of trade agreements simply have not helped regular people. They've resulted instead in the off-shoring of American jobs and the suppression of domestic wages - not to mention providing outrageous rights to foreign corporations through NAFTA Ch. 11-type investment chapters, prohibiting "Buy America" or anti-off-shoring policies here at home and exacerbating our imported food safety problem.

Arthur Stamoulis from the Oregon Fair Trade Campaign sums it up by saying, "Any member of Congress from the Pacific Northwest would be nuts to support the Bush administration trade agenda."
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Why is the WTO interfering with our food safety??

As we detailed in our recent food safety report, the WTO and pending NAFTA expansions to Peru and Panama place sharp limitations on a strong and flexible food safety inspection system.

And now that some members of Congress are actually trying to do something to improve our food safety, WTO/trade rules are getting in the way. This from today's Inside U.S. Trade:

Durbin has also made an effort to explain ... his pending legislation that would increase Food and Drug Administration (FDA) inspections in the wake of tainted food imports from China. The bill would impose an import user fee to pay for increased FDA inspections to ensure food safety and require foreign exporters to be certified as meeting standards equivalent to those of the U.S...

If a domestic user fee system was also implemented, it could take care of some questions over World Trade Organization (WTO) compliance, as sources said that a user fee for importers could violate international obligations to give foreign producers national treatment in Article 3 of the General Agreement on Tariffs and Trade.

An informed source pointed out that unless 100 percent of all import shipments are inspected, the measure could be challenged in the WTO as importers could allege they did not receive the ‘service’ of having their shipments inspected and therefore, should not be obliged to pay for it. A previous WTO case against U.S. customs user fees established that they can be charged as long as they are based on the cost of performing the service and not based on the cost of the good.

Regardless of one thinks of the Durbin bill - or whether one even knows anything about it (some parts are good, but the user fees are controversial, and the "equivalent" rather than "equal" standard is very problematic - read our report for more) - it is clear that WTO rules which require that a country either:

  1. do nothing (inspect nothing, make no charges) or
  2. do the logistically/politically impossible (inspect ALL imports and domestic products,  charge EVERY producer foreign and domestic a user fee - let's see how the food companies ramp up lobbying on that one) or
  3. do the highly byzantine (require an already underfunded and understaffed federal agency to keep records on each shipment, whether they were inspected, how much it costed them to perform the inspection, whether a fee was collected, etc. - but do so in a way that doesn't single out problem countries, etc.)

make any improvements in imported food safety in the real world a very difficult if not impossible proposition. The WTO and NAFTA expansions are coming to dinner (PDF), and it's not pretty.

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How the prez candidates actually vote

The blogosphere has been alight with analysis of the presidential field on trade, both on the right and the left. But how have these candidates actually voted on the major trade issues?

Here are their fair trade vote records of those candidates that served in Congress, with a listing of where they went right, and wrong. And with so many candidates that served before 1990 (where we usually cut off our vote counter), we decided to go digging into the archives back as far as we could… to Richard Nixon’s original Fast Track House vote in 1973.

I make no attempt to weight the votes, or to account for the number of votes. So Joe Biden, who has made 15 bad trade votes, is listed as having a higher fair trade percentage than 2-bad vote Mike Gravel. Obviously, the number of bad votes would matter to most observers, so I’ll just list for you all of the information.

Democrats (from least fair trade to most):

  • Gravel – 0% fair trade voting record (0/3 votes). He voted wrong on Fast Track 1973 and 1974, and didn’t vote on Fast Track 1979.
  • Richardson – 10% fair trade voting record (1/10 votes). He voted right on the Canada FTA; wrong on Fast Track a whopping 5 times (1983, 1984, 1988, 1993, and 1998), and on Israel FTA, Fast Track disapproval, NAFTA and the WTO.
  • Biden – 25% fair trade voting record (5/20 votes). He voted right on Fast Track 2002 (once), and right on NAFTA expansions to Chile, Singapore, Central America and Oman. He voted wrong on Fast Track a whopping six times (1974 (twice), 1979, 1984, 1993, and 2002 (once)), on the Canada FTA, NAFTA, WTO, NAFTA for Africa (twice), China PNTR, Australia FTA, and Fast Track disapproval. He didn’t vote on Fast Track 1988.
  • Dodd – 39% fair trade voting record (7/18 votes). He voted right on Fast Track 2002 (twice), Fast Track disapproval, and on NAFTA expansions to Chile, Singapore, Central America and Oman. He voted wrong on Fast Track 3 times (1984, 1988, and 1993), and on Canada FTA, NAFTA, WTO, NAFTA for Africa (twice), China PNTR, and the Australia FTA. He did not vote on Fast Track 1979.
  • Clinton – 43% fair trade voting record (3/7 votes). She voted right on Fast Track 2002 (twice) and CAFTA. She voted wrong on NAFTA expansions to Chile, Singapore, Australia and Oman.
  • Obama – 50% fair trade voting record (1/2 votes). He voted right on CAFTA, wrong on the Oman FTA.
  • Edwards – 63% fair trade voting record (5/8 votes). He voted right on NAFTA for Africa (twice), Chile and Singapore, and Fast Track 2002 (once). He voted wrong on China PNTR and Fast Track 2002 (once). He did not vote on the Australia FTA.
  • Kucinich – 93% fair trade voting record (14/15 votes). It seems wrong to even give less than 100%, because he just didn’t show for the Morocco FTA vote (meaning one non vote). But in order to be consistent, I’ve got to have non-votes not count towards your fair trade percentage. On everything else, he voted the fair trade position (Fast Track 1998, 2001, 2002, NAFTA for Africa (twice), China PNTR, WTO withdrawal (twice), NAFTA expansions to Chile, Singapore, Australia, Central America, Bahrain and Oman).

Now for the GOP field. Same deal.

Continue reading "How the prez candidates actually vote" »

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Free Traders Trying Desperately to Compete

WisBusiness.com reports today,

Free Trade Stuff launches its website and a new line of free trade-related products today. The new company, formed by three recent University of Wisconsin alums, will focus on apparel in its initial stages. The company hopes to expand its line of products to cater to consumers tired of Fair Trade rhetoric.

The company’s first two t-shirt designs include a red shirt with the slogan “tariffs are for wussies” across the chest and a white shirt with a blue hand logo and the words “You’ve been slapped by The Invisible Hand,” a reference to the work of famous economist Adam Smith.

Unfortunately for this entrepreneurial business, in Wisconsin it will be hard to find a market for anti-fair trade products where during the NAFTA/WTO era almost 100,000 manufacturing jobs alone have been lost - and outsourcing continues to climb the skill ladder.

One might say that their business model is not very competitive at least in Wisconsin or perhaps in all of the United States where during the 2006 midterm election there was overwhelming support for fair trade policies and candidates, with 37 seats flipping from NAFTA-supporters to candidates who called for a new direction on American trade policy, including the election of one of the most outspoken members of the freshman class on this issue, Rep. Steve Kagen, a Democrat from Northern Wisconsin.

PS Looking at the website each shirt is $15! Looks like a massive ripoff to me, especially when they're willing to pay the lowest price for labor that they can find anywhere in the world!

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How to be a pacesetter on trade

Did anyone see the debates last night? I gotta say, after Monday's statement from the Edwards' campaign, you could really tell many of the candidates taking it to the next level on trade policy. Read Edwards' messaging from Monday, followed by other candidates' messaging from last night, and you'll see that a lot has been cribbed.

In one category of remarks were Edwards’ trade critiques that other candidates gladly also made. This includes reforming trade adjustment assistance (a perennial DC favorite), labor standards, and hiring some trade prosecutors to “enforce” the agreements on the books. Some of these are fine ideas, but they are unlikely to be either meaningfully implemented or to affect the nature of the U.S. workplace in a fundamental manner. Then there were the category of remarks on currency, tax codes and food safety, which are a little gutsier because they do challenge the corporate bottom line. But some of the candidates followed Edwards' lead on these as well.

So what was new in the debate? For me, the clearest example was Edwards' challenge of corporate power per se, which was picked up on by Obama: 

  • Edwards: "NAFTA was written by insiders in all three countries, and it served their interests - not the interests of regular workers."
  • Obama: "And the problem that we’ve had is, is that we’ve had corporate lobbyists, oftentimes involved in negotiating these trade agreements, but the AFL-CIO hasn’t been involved; ordinary working people have not been involved. And we’ve got to make sure that our agreements are good for everybody, because globalization right now is creating winners and losers. But the problem is, it’s the same winners and the same losers each and every time."

Obama was the only other candidate that picked up on Edwards' point. Many candidates talked about their strong support for labor legislation, picket lines and the like. But only Edwards and Obama were willing to draw those class lines, suggesting corporations are pushing for one interest in trade policy, while workers are pushing for another, and then suggesting that they would take the side of the workers.

Continue reading "How to be a pacesetter on trade" »

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Will you scrap NAFTA or fix it? Answers courtesy of the AFL-CIO Democratic presidential candidate debate

Trade is coming up again and again and will be a crucial issue in the 2008 election.

From last night's AFL-CIO Democratic presidential debate:

What do you think of the answers? Post away!

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On Trade, Democracy Is Speaking

Polls in developing countries are notoriously unreliable, although you occasionally find some good work coming out of universities. This latest poll from the University of Costa Rica shows that nearly 60% of decided voters will oppose CAFTA in the upcoming referendum there. Costa Rica is the only one of the 7 CAFTA nations not to have ratified the pact, and CAFTA critic Otton Solis came within a percentage point of becoming president (after being thought of initially as a long shot candidate). Keep in mind, the level of opposition to CAFTA is very high in all the CAFTA countries, it's just that Costa Rica - thanks to the lack of war and U.S. intervention there - has developed political institutions (including a very forward looking referendum mechanism) that allow popular views to be more clearly articulated.

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Deathstar Deal Meets Incan Mathematics

As the congressional recess begins, pro-Deathstar Dems including Reps. Charles Rangel (D-N.Y.), Sander Levin (D-Mich.), and others have traveled down Peru-way for a meet-and-greet with the local pro-FTA forces.  As Congress Daily PM reports,

In Lima, Rangel and Levin met Monday with business groups that favor the deal and with Garcia, sources said. Today's meetings included members of Peru's parliament and other government officials. The only group opposed to the deal that secured a meeting with lawmakers was the General Confederation of Peruvian Workers, a leading trade union, according to Luis Zuniga, president of CONVEAGRO, an agricultural consortium critical of the deal. Zuniga said he welcomed the efforts by U.S. lawmakers to push Peru toward implementing labor reforms in advance of consideration of the deal. "The problem is, those who want an FTA in Peru are the same ones who do not want labor laws to be reformed in Peru," Zuniga said through a translator.

And while some press in advance of the trip suggested that pro-Deathstar Democrats were going to require that some changes be made to Peruvian labor law before the U.S. Congress take up consideration of the pact, this too appears to be slipping.

According to Inside U.S. Trade, the deal that the pro-Deathstar Dems hammered out with the Peruvian government will let Peru off the hook for changing most of its laws, instead allowing the president of Peru to make a series of decrees that  "will likely not outlaw" bad labor practices, "but clarify that they do not serve to undermine labor rights." Overall, Peru will only address "six out of the 11 issues that House Ways and Means Democratic staff had identified as needing action."

Now, Congress Daily reports that "mock markups" on the Peru FTA could happen in early September.

So, let's get this straight. The Deathstar Deal made less than half of the changes demanded by fair trade groups to the Peru FTA (just to get them not to oppose it). According to these reports today, only about half of the changes demanded on labor rights by the pro-Deathstar Dems are actually being addressed by Peru, mostly through decrees and clarifications rather than by law changes. Now, for those more specialized in Incan mathematics than I, what percentage "good" is this deal?

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Drinking, Dieting, Industrial Policy

As I recently noted, Ha-Joon Chang is coming out with a book very soon in the US - "Bad Samaritan: Rich Nations, Poor Policies and the threat to the developing world." The book has spawned a sharp debate over at the Financial Times over the desirability of active trade and industrial policies.

After having studied industrial policies myself, I remember being surprised to hear a presenter at the American Enterprise Institute say that "the arguments for industrial policy don't hold up to closer scrutiny." Granted, any argument for or against industrial policy has to be sensitive to local conditions (landlocked Chad is unlikely to build a successful shipbuilding industry, as Martin Wolf notes), so I didn't quite understand what the presenter was referring to... was the statement meant to discredit the boom years of Latin America in the 1960s, Korea in the 1970s, China in the 1990s? It couldn't have been to celebrate the experience of Latin America or Africa for the last quarter century - during which time practically no industrial policies were practiced (except in Chile, as I talk about here.), right?

So I have still been waiting for further clarification from orthodox economists about what is meant by this pooh-poohing of the lessons of history. Here are the arguments, summarized from the FT debate, with the quick and dirty response taken from Ha-Joon:

  • Orthodoxy: Dude, industrial policy is so 19th century. Sanity: Latin America, Asian, and Scandinavian development did not happen in the 19th century, dude.
  • Orthodoxy: Korea didn't use industrial policy (that's why it grew before the late 1970s), except when it did (that's why it didn't grow in the late 1970s, early 1980s). Sanity: That is so 1980s of you. Korea used industrial policy before, during, and after the period in question, and it grew the whole time, except when it didn't, and that was due to a little something called a world recession.
  • Orthodoxy: Free trade is the best! But if you practice free trade and you don't grow, blame it on on some other policy. Sanity: Where are we, Middle Earth?

The whole debate is worth a read, and it is not as idiotic in tone as I have made it seem. But the days when orthodox economists could shove facts under the rug for 20 years is gone, and you can tell it's causing some growing pains. To part, here are some choice Hajoonisms:

  • I feel like a man being accused of promoting a copious consumption of vodka when all I have done is to recommend moderate amount of red wine as a part of balanced diet.
  • It may be possible to dismiss the US as an "exception", but if there are another two dozen countries that have to be dismissed as "exceptions", then the theory has simply too many holes (the exercise reminds me of the pre-Copernican practice of drawing "epi-circles" in order to square evidence with geo-centrism).
  • I think it is wrong to dismiss one’s opponent’s theory by labelling them with negative words (‘nineteenth-century’). How would Alan feel if I described him and his colleagues as "defenders of free-trade theory that was so strongly advocated by American slave-owners and opium-trafficking British imperialists"?
  • I am a man whose book recommending the Mediterranean diet has been reviewed by a well-known anti-fat dietician, who unintentionally misrepresented me as praising beneficial qualities of all fats, when I had only praised olive oil. This was bad enough, but then a few other anti-fat dieticians read the review, go into a Pavlovian reaction on seeing the word, "fat", and accuse me of promoting excessive consumption of all fats, brandishing American obesity figures and Scottish heart-attack statistics. I regretfully have come to conclusion that I was absolutely right to say what I said at the end of chapter three in the book – "Trade is simply too important for economic development to be left to free trade economists".
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Ivory Tower Meets The Campaign Stump

Once, many of the issues we talk about on this blog were discussed mostly among Rust Belt labor unions or in street demonstrations. But tough questions are increasingly being asked in a variety of places, from the ivory tower to the campaign stump... and in both instances, the focus is on a change in the rules of globalization, rather than perpetuating the stale debate about whether "yes" or whether "no" on globalization. Witness Harvard's Dani Rodrik's new paper, articulating what he says is now the "new orthodoxy" on trade:

We can talk of a new conventional wisdom that has begun to emerge within multilateral institutions and among Northern academics. This new orthodoxy emphasizes that reaping the benefits of trade and financial globalization requires better domestic institutions, essentially improved safety nets in rich countries and improved governance in the poor countries.

Rodrik goes on to push this new orthodoxy further, articulating what he calls his "policy space" approach, allowing countries to negotiate around opting-in and opting-out more easily of international rules and schemes as their development and domestic needs merit. Citing the controversy around NAFTA's investor-state mechanism and the WTO's challenge of Europe's precautionary approach in consumer affairs, Rodrik poses the following challenge to the orthodoxy:

Globalization is a hot button issue in the advanced countries not just because it hits some people in their pocket book; it is controversial because it raises difficult questions about whether its outcomes are “right” or “fair.” That is why addressing the globalization backlash purely through compensation and income transfers is likely to fall short. Globalization also needs new rules that are more consistent with prevailing conceptions of procedural fairness.

And this focus on a change of rules hit the political arena today, with a major policy speech by former Sen. John Edwards (D-N.C.).  See here. Among the important points, that thus far are only being articulated by Edwards among the top candidates:

  • For years now, Washington has been passing trade deal after trade deal that works great for multinational corporations, but not for working Americans. For example, NAFTA and the WTO provide unique rights for foreign companies whose profits are allegedly hurt by environmental and health regulations. These foreign companies have used them to demand compensation for laws against toxins, mad cow disease, and gambling - they have even sued the Canadian postal service for being a monopoly. Domestic companies would get laughed out of court if they tried this, but foreign investors can assert these special rights in secretive panels that operate outside our system of laws.
  • The trade policies of President Bush have devastated towns and communities all across America. But let's be clear about something - this isn't just his doing. For far too long, presidents from both parties have entered into trade agreements, agreements like NAFTA, promising that they would create millions of new jobs and enrich communities. Instead, too many of these agreements have cost us jobs and devastated many of our towns.

  • NAFTA was written by insiders in all three countries, and it served their interests - not the interests of regular workers. It included unprecedented rights for corporate investors, but no labor or environmental protections in its core text. And over the past 15 years, we have seen growing income inequality in the U.S., Mexico and Canada.

  • Today, our trade agreements are negotiated behind closed doors. The multinationals get their say, but when one goes to Congress it gets an up or down vote - no amendments are allowed. No wonder that corporations get unique protections, while workers don't benefit. That's wrong.

So, our movement has made real progress when things like Chapter 11, Fast Track and the precautionary principle are even being discussed by politicians and academics in the context of trade policy debates. And hopefully Edwards' raising of these issues will put pressure on the other candidates to follow suit. In the meantime, you can help turn the nice words into action by clicking here.

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From YKos: Andy Stern and Harold Meyerson Keynote

Live blogging from Yearly Kos: Harold Meyerson interviewed Andy Stern, president of the Service Employees International Union (SEIU) about the impact of globalization on America's workforce.

Andy Stern gave an inspiring speech focusing on the domestic policies that will help organize workers, and support workers like health care and pensions but only briefly addressed the root of the problem - NAFTA-style trade agreements (this avoidance of the underlying issue unforrtunately seems to be a recurrent theme here at Yearly Kos).

Stern did say that countries not companies are making the rules of the global economy and that of the list of the 100 largest economies, fifty are corporations and fifty are countries. He also gave a brief nod to a new direction on American trade policy when talking about the difficulties of organizing. He explained that current trade rules hold unions and governments hostage. Corporations threaten to leave with their jobs rather than have a unionized workplace and corporations threaten to leave if the public interest laws conflict with their bottom-line.

He continued, "We need to find a way for global progressives to fight global corporations."

Click here to join the global fight.

More to come from Yearly Kos in Chicago...

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Gene Sperling: "[trade adjustment] assistance is the pre-nup of public policy"

Live from Yearly Kos - Panel: What it Means to be a Progressive in a Global Economy with Thea Lee, Chief Economists, AFL-CIO, Austan Goolsbee, professor of economics at the University of Chicago graduate school of business and Gene Sperling, senior fellow for economic policy at the Council on Foreign Relations and the Center for American Progress and moderated by Andrei Cherney, founder and co-editor of Democracy: A Journal of Ideas.

As you may have guessed at first both Sperling and Goolsbee sputtered off the talking point that globalization is inevitable (WRONG/BESIDE THE POINT: of course we could change the rules if the political will existed) and that technology has at least been a cause of the economic insecurities workers in this country feel - and the cause of the loss of jobs, etc. Sperling said that we can not ignore the huge productivity gains and consumer benefits (click to read about the Center for Economic and Policy Research's research that proves the losses in wages far outweigh the gains).

Goolsbee and Sperling insisted that we must shift the focus to what to do now about the inevitable globalization. Some ideas: universal healthcare, energy independence which will drive down gas costs and trade adjustment assistance (though Sperling said he would not instruct a presidential candidate to talk about this first - because it's the equivalent to the "pre-nup of public policy" and to workers it's "a great idea for what I do after I lose my job and am scared to death").

But when the questioning started these guys were just out of answers. Sperling said apologetically that he admits "the final word was not in on globalization." Goolsbee, when asked about the investment rules, shrunk in his seat and said that "this really backfired." Sperling added that progressives should be against international agreements that undermine our domestic environmental and health policies.

Goolsbee continued, "when domestic regulations are challenged on a widescale" in trade tribunals and the US loses, "that will be the end [of these provisions in trade agreements]."

You heard it from him. Tell a friend, tell your elected officials - don't keep making more NAFTA-style agreements that contain these expanded investor rights provisions that even according to NAFTA-advocates have "really backfired."

More about this breakthrough panel and more panels at Yearly Kos to come...

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Food safety policy on the move

Inside U.S. Trade had some good news on the food safety front:

The House of Representatives at press time (Aug. 2) was scheduled to take up an agriculture appropriations bill that included more money for the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) and report language asking USDA’s Animal and Plant Health Inspection Service (APHIS) to outline a plan for its international activities with its 2009 budget request.

On food safety, the bill granted the full request for FSIS for an increase of $38 million from fiscal year 2007 spending. The committee report called the U.S. food safety system “dangerously inadequate,” pointing as evidence to spinach, seafood, pet food and peanut butter recalls.

The bill also blocked the use of USDA funds to import poultry products from China, which the accompanying report says is due to fears of the H5N1 virus causing avian influenza. The report stated China has “weak government controls,” as well as a high incidence of H5N1, and that there is infrequent U.S. oversight at Chinese processing facilities.

The prohibition would apply to the rule currently in effect that allows imports of U.S. poultry processed in China, and a rule being drafted to allow imports of processed poultry from animals raised in China, the report said.

The poultry news is probably of more consequence. As a group of famous Canadian philosophers once put it, "Chickity China the Chinese chicken; You have a drumstick and your brain stops tickin."

On the funding "increase," $38 million is equal to only 0.004% of discretionary spending, or about 0.0000775% what we will spend on defense spending that year. Most Americans would probably think that the safety of the food we eat is a lot more important than overseas adventures. Hat tip to the CEPR Budget Calculator for the calculation, and to Tony Corbo at Food & Water Watch for working this issue of Chinese chicken for over a year.

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Machinists formally come out against Peru and Panama FTAs

We've posted a full letter from the Machinists - a leading AFL-CIO member union - to Congress demanding members' opposition to the Peru and Panama FTAs. You can find the PDF here. Here's an excerpt:

We are writing on behalf of the International Association of Machinists and Aerospace Workers (IAM) to express our opposition to the Panama and Peru Free Trade Agreements. While we applaud the efforts to improve worker rights, these agreements fall far short of satisfying the concerns we have repeatedly raised with respect to a number of issues. In view of the significant losses that IAM members continue to suffer as the result of bad trade agreements, we give especially close scrutiny to any new proposals...

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