Dead parrot vendors in charge of morning after pill safety?!

No, this isn't spam, even if you can't tell from the title. The New York Times had a stellar piece in this morning's edition that looked at how the "morning after" pill is now exclusively made in China, by a company linked to serious poisonings from leukemia and cancer pills. This follows on an equally important story from earlier this week about the FDA's inability to guarantee drug safety:

Computer systems at the drug agency are so inadequate that it can only guess the number of the plants, and it cannot produce a list of those that have not been inspected. The situation is particularly dire in China, which has more drug and device plants than any other foreign nation but where F.D.A. inspections are few.

Because the factory profiled in today's story exports to the US and many other countries, consumer advocates, including our own Dr. Sid Wolfe, are saying, "Every one of these plants should be immediately inspected." I would add to that that we need to overhaul our trade policy to allow our regulatory authorities to bar imports from any country it chooses without running afoul of WTO rules that limit our ability to do this.

Meanwhile, the pharmaceutical industry has been waging a major campaign to push for ever stronger government enforced monopoly patent protectionism and barriers to drug reimportation - a major reason why drug prices in the US are so high. They've been using the boogie man of drug safety problems to keep us from importing from Canada, or Australia. Egats! Not Canada! What this story shows is that we're already as exposed as anyone in Canada could be to the risks from the current drug production system, while not benefiting from the substantial cost savings in their system.

But the story really shows how far we have to go. As an aside, there's been an epidemic here in Global Trade Watch land, with virtually all of our staff coming down with some bug or another that has kept us from coming into work. I can't speak for the others, but I've been spending my time away from the office watching, well, "The Office," and my favoritist Christmas gift, Monty Python's Flying Circus 16-ton Megaset. One of the most famous sketches from the show is the so-called "Dead Parrot sketch," where a salesman attempts every implausible cover-up for the fact of having sold a customer an "ex-parrot":

The explanation of Chinese overseers sounds a lot like this:

Describing the cover-up at the factory, Ms. Zhou, the regulator who led the investigation, said workers did not tell investigators that vincristine sulfate — a drug too toxic for use in spinal injections — had been stored in a refrigerator with materials for other drugs.

“At the time, we didn’t think they had lied to us,” Ms. Zhou said. The deception sent investigators on a two-month hunt for other possible causes of the adverse reactions. “If they had been open about the vincristine sulfate in the beginning, maybe fewer people would have been harmed,” she added...

Mr. Zheng at Peking University said that producing multiple drugs in a single workshop was risky, but that some Chinese companies saw it as a way to save money. “It was an accident,” he said of the Hualian case. “But it was bound to happen.”

That's right, before you buy a parrot, it's your responsibility to ask if it's dead. Corporations simply can't be held responsible for selling you products that will kill you if you don't first ask if they'll kill you. Caveat emptor b4 you dead murderedod. Duh.

In short, it's a complex issue, and the case shows we should be having a national discussion about the costs and regulation surrounding drug safety, and where it makes sense to produce these and other products. Some more international redundancy would seem to be only prudent. Couldn't the morning after pill be made in multiple locations? Should drug makers be able to make pills that cost pennies and sell them to us for hundreds of dollars, while cutting corners on safety to save pennies that harm people? Is it time to overhaul the bizarre incentives that are shaping this protected industry?

Communism for capitalists: WTO limits on global warming policy

There is little doubt that government will play THE leading role in stopping further global warming - no other institution in society has the police power or administrative economies of scale to make it happen, regardless of the specific combination of mechanisms to be used. All of the Democratic candidates (see here, here, and here) crib some portion of their climate change / green jobs proposals from the ambitious Apollo Alliance project, which sees a primary role for government, even it its more voluntary aspects. Portions of this agenda are also in a bill co-sponsored by all current senators of both parties running for president.

Well, as this stunningly candid report from the pro-corporate National Foreign Trade Council attests in explicit detail, virtually every component of a response to global warming is WTO-illegal. NFTC recounts the history of environmental policy at the WTO (and GATT), including the past successful challenges to our Clean Air Act and corporate average fuel economy (CAFE) standards. They go on to explore how every global warming bill in Congress - elements of which are reflected in the candidates' plans as well - violates WTO rules.

Among the possible WTO violations: energy efficiency regulations and standards, government-administered eco-labeling (even voluntary labeling, as Andrew Green has argued and which is cited in the NFTC paper), public procurement of climate-friendly goods and services, and possibly even emissions trading or auctioning - long seen as one of the most market-friendly way of addressing global climate change. This is mostly because of the challenge in finding a way to require domestic manufacturers to comply with costly reforms while importers importing from less-regulated countries don't have to comply.

The Colombian Corporate Agenda... from the inside

Today, at an event at the Council of the Americas, a corporate organization, I was introduced to a delegation of corporate CEOs from Colombia: David Bojanini of South American Insurance, Manuel Carvajal of the Carvajal Corp., Antonio Celia of Promigas and Francisco Diaz of the Corona Organization.

The event was introduced as a discussion of whether the "free trade agreement" would help improve Colombia, but amongst the diverse panel made up entirely of CEOs of Colombia's corporations (but from different geographic regions, perhaps? Though not even sure about that...), no one said that the FTA would be a bad idea, omitting the perspective of most civil society groups in Colombia and not leading to much of a discussion.

Each businessman outlined their commitment to improving life in Colombia. Antonio Celia said, "we provide jobs...hoping that they [workers] will be compensated with commitment and personal reward." (I'm sure most Colombians would prefer a living wage)

They also said that as opposed to Mexico pre-NAFTA, Colombia's corporations have a real sense of social responsibility and the problems were different in Mexico. (a  reminder that drugs were one of the major issues during the NAFTA debate and last I heard most of our cocaine still comes from Colombia...?)

Bojanini said that he is "very concerned about the well-being of our employees. We have deep respect for our labor unions - many of our companies have unions. We support free association." (and still the most dangerous country for unionists in the world)

After going on about all the contributions of what they admitted was not a representative sample of Colombian CEOs, Francisco Diaz strained to say, "we're trying to tie this into the FTA..."

There was also the obligatory exchange about Venezuela and Chavez (that "purveyor of false populism" Bush mentioned last night in the State of the Union). The CEOs cited that the #1 market for Colombia corporations is the U.S. and #2 is Venezuela. The businessmen also said that the private sector has no control over this and will continue to send the "wrong signal" by exporting to Venezuela, but the government can't send the "wrong signal" by rejecting the trade agreement, because the top two exporters might switch places and then the world will end!!! ahhh!! This was an especially interesting statement given the frame of this forum as about Corporate Social Responsibility, but I guess by this point they had forgotten the corporate responsibility part...

The CEOs were also excited to announce that they were adopting a few conventions of a Human Rights Code of Conduct that they had written. I would think that since they wrote it they would sign up for all of it, but apparently some of the private-sector written Human Rights Conduct just went too far in supporting human rights.

And then they assured the people around the table including a few reporters that this forum and this trip was in fact "not a PR effort." (Well, at least with only the two reporters who showed up and the arguments full of holes, it wasn't a very successful PR effort.) 

Fun sleepover game: who would you rather have as president?

Bush didn't mention unionists' murders once on SOTU! He did draw that funny conclusion: "If we fail to pass this agreement, we will embolden the purveyors of false populism in our hemisphere." Well, it's nice to know that he believes there can be such a thing as true populism. I wonder what he could be thinking about?

As we've shown time and time again, if avoiding populism is the goal, it's best to not pass trade deals that limit development policy space. Zapatista uprising - born with NAFTA. Chavez's rise to power - born with IMF structural adjustment policies. The same is true country-by-country, across the hemisphere. If take everything away from people but their chains, they're going to have less to lose in rising up against you.

Sadly, it's not only Republicans that buy this Bush line. Democrat Greg Meeks (D-N.Y.), one of the CAFTA 15, also buys much of the same line, and is trying to get more Democratic support. Judge for yourself in this speech in Colombia whether he is up for it. In Meeks' endorsement of Uribe for the U.S. presidency, he presents us all with a major moral quandary: do we want Bush, or Uribe? It makes my head hurt something awful, like I'm reading some sort of poisonous zen koan.

Lotta nice fluff. Also no mention of union murders! If you want to get the other side of the story to the Colombia FTA - the side that does talk about the rampant murders there -  please take a moment and watch this video on the Afro-Colombian struggle there, and also this video "letter" by Chicago activists to Sens. Dick Durbin and Barack Obama.

UPDATE 2:15pm EST: RuthG leaves us a better YouTube link for the Chicago letter, and Public Citizen publishes its detailed response to Bush's state of the union!

"WTO-perfect": enemy of the perfect and the good

Given the massive asymmetries of power in the world today, how does progressive reform happen? Consumers and workers want to have a cleaner environment and better jobs, but the corporations calling the shots stand to lose out over the time horizon they consider relevant.

Jack Knight, one of the top political economists out there, argued that the spontaneous emergence of institutional or policy changes will tend to benefit the powerful. In those rare instances where an outcome not unfavorable to the less powerful emerges, it's through a complex bargaining process where the "little guy" can impose sufficient costs on the "big guy" to make his life miserable unless he changes, or alternately where the "big guy" can somehow be paid off in a big way to not fight the change.

Progressives and reformers in general who want to see change in their lifetime are always looking for openings in these regards. It'll take many lifetimes to re-build the union and consumer movement to where it needs to be, but some short-term successes can embolden us to keep our organizing going - even if they are clearly the sloppy outcome of bargaining processes where the deck is stacked against us.

So the writers' strike, for instance, is about imposing costs on the "big guy" to get him to bargain. But environmentalists around the world have found some clever ways to increase the rewards for change. (More on this in coming days.) The problem with our trade policy, unfortunately, is that it precludes many such strategies in the name of facilitating ever-expanded corporate trade. To paraphrase Voltaire: the "WTO-perfect" is both the enemy of the perfect and the good.

Such a partial strategy was targeted in the recent case where the EU successfully bashed Brazil at the WTO over its import ban on retreaded tires. According to Inside U.S. Trade, "Brazil claimed it needed to ban retreaded tires because they become waste tires more quickly than new ones, and that their disposal poses risk to the environment and human health." But at the WTO, you have to prove that such a environmental policy is "necessary," which means, among other things, convincing panelists who specialize in trade and not environmental policy that there is no less-market restricting option even conceivable that could be applied instead.

When will people get embarrassed about Colombia?

Nobody could accuse the Washington community of lawyers that is responsible for our trade policy of being overly concerned with social justice.

But, c'mon, give me a break. Usually when we have trade debates in this town, they center around making one-way streets into two-way streets, keeping the bicycle of trade moving forward, bashing protectionists and isolationists, engaging not retreating, etc.

Enter the debate around the Colombia FTA. Back in the 1990s, even some Clinton administration officials were cited in the Christian Science Monitor as thinking NAFTA expansion to Colombia was a bad idea - precisely because of the country's ongoing civil war and drug problem. Today, it's no secret that a majority of members of Congress and the entirety of the Democrats' base is utterly opposed to a Colombia FTA, both on the grounds that it's a NAFTA expansion and that it's the biggest unionist-murdering country in the world. In most popular discussions of the pact, this latter fact is THE talking points - people murdered. Thousands of them. With total impunity.

So when the advocates of the Colombia FTA take to the stage, they're rarely talking about bicycles or exports. Their main talking point is that UNION MURDERS HAVE GONE DOWN. Is there no shame?? Who cares if they're up or down... if you had to lead with that fact, you have a problem. In Europe, they have a whole host of social and developmental criteria before you can join the European Union. Not here. The bigger the freak social problems you have, the better.

A Republican at an event I was recently at put it bluntly: how many fewer murders do you want to see before you pass the FTA? What's the specific target? Some Dems in attendance had to respond that they would be glad to expand NAFTA to Colombia, but "more progress [on murder] needs to be made." It's like the saying about porn, I guess the Dems'll know sufficient murder reduction when they see it. Problem is, none of us'll know beforehand. Might it be time to get beyond the country-specific critique and blast the failed model instead?

A new American trade policy by Austan Goolsbee, Gary Gensler, Kevin Hassett and Leo Hindery

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

Maybe this sounds like a bad joke, but what do Austan Goolsbee, Barack Obama's economic advisor, Gary Gensler (Clinton campaign) Kevin Hassett (McCain) and Leo Hindery (Edwards) have in common? (hint: it's not exhaustion from the campaign trail or a common love for walks on the beach...as far as I know)

They all want CHANGES TO OUR TRADE POLICY!!

Today at the New America Foundation, 2008 presidential campaign advisors discussed their visions for the economy in an Obama/Clinton/McCain/Edwards administration.

When asked about trade, here are the highlights (loosely transcribed or listen to the MP3 of the full event - fast forward to about a quarter way thru for these answers - or video below)

Gary Gensler (HILLARY CLINTON): "Sen. Clinton is very much an internationalist. We're all part of the global world. Whatever everyone's definition is of globalization is, it's here and part of the fabric of the world and what we're dealing with. On trade though she has stated and believes in smart trade, but it's not really worked for all Americans. Listening to people, to middle income Americans we should look at every trade agreement and make sure it's working for America. This administration has brought only 16 enforcement actions- the same as Bill Clinton brought in one year. We need to add enforcement, make sure we address labor and environmental standards as was the case with Peru - that it was equally enforceable alongside the commercial agreements, that we assess where we are in all these trade agreements at least every 3 years after they're entered into and every 5 years thereafter. Just take a moment to look at how they're working for Americans. And move forward with smart trade to make sure it works for Americans."

 

Austan Goolsbee (BARACK OBAMA): "I'm a University of Chicago economist and no one is ever going to be more in favor of open markets and free trade than an economist, so you would presume I'd be for anything that has the words 'free trade agreement' in it and all I'll tell you is this: I do believe there's no one more in favor of open markets than me and that said, if you look at a free trade agreement - if you have never read a free trade agreement I encourage you to go read it - because it is as close to the economists' case for free trade as our tax code is to the economists' case for the ideal tax system. If you look at these 900-page agreements, they're two pages of what every economist says "yeah, that's great" - opening tarriffs - and then 898 pages of loopholes. It looks just like the tax code - of protect this company and make sure they're getting their money and these investor protections - and so I think that the case for open markets is different than what you think about this, that or the 146 trade agreements that were signed in the 1990s. And Obama has been trying to get us away from what I call the false choice that either you're for every single thing the administration has done or else you're a protectionist and you're against America's role in the international economy, but neither of those is true. There are perfectly grounded things oriented around opening markets and expanding American presence in the world that I think we can have pretty general consensus on and I agree with Garry - one thing that we should have general consensus on is if a country signs an agreement with the United States that says they're gonna do a, b and c, that they should do it. If they don't do it, we should pursue the means in the WTO or otherwise that makes sure everybody abides by the agreements that they sign, so it strikes me that there is common ground here."

 

Kevin Hassett (JOHN MCCAIN): "I think that the trade area is one where you need to be very very careful allowing thoughts like smart trade to leak in, because there's so many politically important interests that are opposed to free trade and the fact is that free trade benefits millions and millions of Americans a little bit at a time and harms specific big money interests like a textile mills and a lot of other examples - like a sugar company in a very very focused way and so there are all of these parochial interests opposed to trade that can be very politically important, and so Sen. McCain is an unabashed free trader, and I think he agrees with Austan's analysis that it would be better if our free trade agreements moved towards being a couple of pages rather than 900, but I've found during this campaign the discussion of trade the most disturbing for me as an economist. I thought the part of President Clinton's record that I respected the most was his trade record and very aggressive pursuit of free trade, and it seems to me that all the Democratic candidates but especially Mrs. Clinton have kind of apologized for that record when the right thing to do for all of the little people - the guys out there who benefit from free trade - is to celebrate it."

Democracy, science, class

An ongoing debate in legal theory related to trade policy is the use of the so-called "precautionary principle," variably formulated as "better safe than sorry" or "putting the burden of proof" on industry before it introduces new medicines, technologies or processes on the market.

Consumer and environmental groups tend to invoke this principle, based on the notion (however articulated) that corporations, left to their own devices and ability to sway policy outcomes, will advocate for courses of action that devalue human suffering or environmental damage in the name of making a buck. But some legal scholars don't like the precautionary principle. In The New Republic's Cass Sunstein's words:

The precautionary principle should be rejected, not because it leads in bad directions, but because it leads in no direction at all. The principle is literally paralyzing - forbidding inaction, stringent regulation, and everything in between. The reason is that in the relevant cases, every step, every inaction, creates a risk to health, the environment, or both.

Happily for Sunstein and comrades, the precautionary principle is not what prevails under our trade law. The WTO's Sanitary and Phytosanitary Standards agreement - one of 17 that the WTO maintains - reads:

Members shall ensure that any sanitary or phytosanitary measure is applied only to the extent necessary to protect human, animal or plant life or health, is based on scientific principles and is not maintained without sufficient scientific evidence [emphasis added]

There's a lot of background on how to define what is "necessary" under international trade law, but suffice it to say that it's a lot more restrictive than how it reads here. Europe has been learning the hard way about how some of their food policies influenced by the precautionary principle have taken a beating at the WTO.

Michigan Voters Decide and More

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

Michigan voters chose Mitt Romney in yesterday's Republican primary. The economy was the top issue (again). CNN says,

About 41 percent of those for whom it was the top concern cast their ballots for former Massachusetts Gov. Mitt Romney, compared with 29 percent for Arizona Sen. John McCain.

During the campaign, Romney said he believed he could bring back lost jobs and pledged that in the first 100 days of his presidency, he would convene a summit to rebuild the Big Three automakers.

McCain, on the other hand, said many of the auto industry jobs were gone forever and vowed to focus instead on retraining for jobs of the future.

You may remember that Mitt Romney also said in last week's Republican debate:

I've seen jobs come and go; I'll make sure that jobs come to America.

I'm going to fight for every single job, Michigan, South Carolina, every state in this country. We're going to fight for jobs and make sure that our future is bright. We're going to protect the jobs of Americans and grow this economy again.

Candidates everywhere - even some unlikely ones - are running on trade!

And Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies asked today, Will Dems Follow Thru on Promises to Fix NAFTA? She concludes:

Latin America's leading free trade opponents should not hold their breath over the prospect of a bold new ally in the White House. The long slog to overhaul our trade and investment policies didn't end in Iowa or New Hampshire and it won't end on Nov. 4 -- no matter who wins. In fact, the most positive likely outcome may be that the United States takes to the sidelines of the globalization debate. And yet even this would be welcome, after so many years of attempting to carry the ball in the wrong direction.

To judge for yourself, read the candidate statements here.

On art, confronting corporations and regulatory chill

I've been rocking out to some Rage Against the Machine lately. They're a band I had kinda forgotten about for much of the last decade, although like many people of my generation, they were my first exposure to a politics that went beyond the staid participation in ballot box politics that characterized many of the older folk in my life. While my hometown of Louisville was a center for "straight edge culture" much of the early 1990s, RATM had lyrics that addressed that went beyond personal politics and to the interconnections between oppression at home and abroad, and was unflinchingly committed to social change. For instance, take this lyric from 1999's "Ashes in the Fall":

Ain't it funny how the factory doors close
Round the time that the school doors close
Round the time that the doors of the jail cells
Open up to greet you like the reaper

This perspective fits very comfortably with that of HBO's "The Wire," another recent obsession at my household. Art, unlike some of the politics of the policy-making process, can make a clarion call for change that is not bogged down in wonkish qualifications on legislation, for instance. It seems that the art community is way out ahead of the broader progressive community in terms of ability to communicate a message and create a popular desire for change.

By contrast, industry holds hegemonic sway in Washington. At an event held this morning at the Ronald Reagan International Trade Center, representatives from the Bush administration, and toy and retail industries - despite a year of record outcry about imported product safety - brazenly held forth about how, in their opinion, the public and the government has little to no role in regulatory checks and balances. Corporations can do it better. Among some of the choicer quotes:

• "While we welcome lower lead standards, they are difficult to implement in the next year. We may have already placed our Christmas orders months ahead. We will be covered this year by the same high lead standard that has protected consumers for years."
• "We think that the recent recalls do not indict the system. On a
  strict numerical basis, we’re consistent with past years. The CPSC is
  getting more efficient… like the private sector, the public sector is
  getting better at doing more with less. The recalls of the last year
  show that the current system of self-reporting is working."
• "We’ve heard from our supply chain that the costs of complying
  with duplicative testing – and a CBO study confirmed this – increase
  the costs to consumers by 10%. This is not a good thing for consumers."
• "there’s no credible report of injury from lead inside the
  products… we should focus on hazards that post the biggest threat… it
  would be shame if parents were looking through their toy box while
  ignoring their window sills."
• "Our economic viability has to do with confidence of consumers,
  with our brand integrity. There are specific complexities to sourcing
  overseas, in addition to the efficiencies and cost savings from this
  vast production capacity. The worst thing that could happen is that we
  turn inward, that we turn protectionist. The marketplace is much more
  complex than the 1950s’ model of domestic supply."
  
  
• There were loads of other good nuggets on the ongoing attemptsby
  Congress to put together a Consumer Product Safety Commission bill,
  including slams on CPSC disclosure to the public of company
  information, on efforts to create a STOP button to block unsafe imports
  at the ports, on an increased role for state attorney generals (who are
  apparently "political people" in contrast to Bush appointee Nancy
  Nord), and the Senate for not getting permission from industry before
  writing their bill.

That industry lobbyists feel they can even getting away with suggesting that parents' safety concerns are not real, or that the industry can self-regulate, just indicate how far we've come from any sense of shared societal responsibilities and class co-existence.

But what's even more disheartening is the reaction from "the other side of the aisle." Progressives on our side are often having the debate while looking at their own feet, fixated on the legislative details while corporations rule the roost.

From inside the halls of Congress, it's even worse. Even though the import safety crisis is THE reason why there's a major CPSC debate this year, the House Energy and Commerce Committee admitted that it wouldn't be addressing the public outcry over imports in its CPSC legislation because World Trade Organization rules block them from addressing the issue.

A lawyer for the committee said that, after consulting with USTR, the Democrats could not come up with a way to increase CPSC's authority over imports, to establish a STOP button that could halt unsafe imports at the ports, or to establish that importers post a bond to cover the cost of recalls - VERY minimal reforms I might add - because 

"We were very concerned that when it came to the trade authority process, we wanted to ensure that no provisions would run afoul of the WTO’s Technical Barriers to Trade agreement ... [on the STOP button] it made us uncomfortable to halt imports under mere suspension of non-compliance. The arbitrary use of this authority might be an unwarranted barrier to trade... [and on the bonding requirement] Our committee staff looked at this issue, and we weren’t able to find a WTO-compliant method of doing this."

It's pretty rare that a policymaker is so candid about their reasons for not adopting progressive domestic legislation. As we document in our latest reports on toy and food safety, the threat from the WTO and other FTAs is real. But the answer isn't to back off of pursuing progressive legislation - the answer is to move forward with, while also renegotiating the international rules. Indeed, the total cave-in of the House on this issue in the latest bill illustrates the folly of moving along just one of the tracks. In short, we need to take away the excuse that our elected officials have for not meeting our desires.

Trade on the Trail - to SC, Michigan and beyond...

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

This week the candidates are really trade talking.

From last night's Republican presidential candidate debate in Myrtle Beach, South Carolina (transcript and video):

Romney said,

I want to make sure that in this time when our economy is a little fragile, not sure where we're heading, that we strengthen that economy. That's what I know how to do. I've seen jobs come and go; I'll make sure that jobs come to America.

And I know that there are some people who think, as Senator McCain did, he said, you know, some jobs have left Michigan that are never coming back. I disagree.

I'm going to fight for every single job, Michigan, South Carolina, every state in this country. We're going to fight for jobs and make sure that our future is bright. We're going to protect the jobs of Americans and grow this economy again.

And McCain,

One of the reasons why I won in New Hampshire is because I went there and told them the truth. And sometimes you have to tell people things they don't want to hear, along with things that they do want to hear.

There are jobs -- let's have a little straight talk -- there are some jobs that aren't coming back to Michigan. There are some jobs that won't come back here to South Carolina.

But we're going to take care of them. That's our goal; that's our obligation.

And from Huckabee,

The first one is fuel prices. When gasoline gets as high as it is, and oil goes to $100 a barrel, it impacts the way people live. It may not impact people at the top, but people who barely make it from paycheck to paycheck know that it doesn't just affect the fuel going to and from work.

Everything they reach for on the shelf of their store costs more because it took more money to transport it to that store.

So that's the first thing we have to realize, is with our dependency upon foreign oil, if we don't begin to reverse that and become energy independent, we well could continue this enslavement to foreign oil, and ultimately wreck our economy.

And from Huckabee in the Detroit News,

Q. John McCain says free trade has helped created jobs. You have been more critical of Bush administration trade policies. What is your position?

A. I have been accused of being a protectionist. I'm not. I believe in free trade. I supported NAFTA (North American Free Trade Agreement). I supported CAFTA (Central America). I'm not trying to be clever, but I said that's fine. But then we need to make these nations "have ta" live by the same agreements that we live by and exercise strict enforcement of them.

And from Obama's final New Hampshire speech:

Our new majority can end the tax breaks for corporations that ship our jobs overseas and put a middle-class tax cut into the pockets of the working Americans who deserve it.

And now to congressional races –

In an Illinois Democratic primary to replace Rep. Hastert as reported in the Beacon News, trade is becoming a big issue:

Laesch took the opportunity to criticize the Bush administration for its "message of fear." He suggested repealing the North American Free Trade Agreement and instituting labor standards for U.S. trade partners. That, Laesch said, would eliminate a lot of the incentive for immigrants to come to the U.S. illegally. When asked, Stein and Foster both agreed that America's trade agreements need work.

And in an Iowa Democratic primary challenge to Rep. Boswell, Fallon has brought up trade again and again. From CQ,

The war is not the only issue on which Fallon is opposing Boswell. He said he disagreed with Boswell's vote in November to implement a free trade agreement between the United States and Peru that a slight majority of Democrats opposed. Boswell supported the measure because he believed it will benefit Iowa farmers in selling their products to Peru, noting that the accord included provisions on worker rights and environmental protection.

Fallon — who also expresses opposition to the 1993 North American Free Trade Agreement, better known by the acronym NAFTA — takes a different position on the Peru measure.

"The word 'free' — and I put that in quotes — is an inaccurate description of what's happening, where we have treaties that offer no protection for our own jobs," Fallon said. "Workers are seeing their jobs head overseas left and right thanks to these trade treaties, and there are minimal environmental protections and minimal worker safety issues."

The Iraq war and trade, Fallon said, are "just two of many, many issues that we disagree on."

That's it for this week. Happy Friday!

Inefficiency of redistribution

Dean Baker, in his new lecture on trade and inequality, raises an interesting point:

Most of the supporters of the current trade agenda, and especially the more liberal supporters of this agenda, do make a point of advocating redistribution from winners to losers, so that in principle at least everyone can gain from trade. As noted, this redistribution usually takes the form of retraining or readjustment assistance for workers who can demonstrate that they directly lost their jobs due to trade. Although, it has never really appeared as a serious proposition in political debate, in principle it would be possible to tax away enough of the gains from the winners to compensate all the people who lose from trade...

Most forms of trade readjustment assistance are relatively small items in the federal budget. For example, the 2008 appropriation for trade adjustment assistance is less than $200 million, approximately 0.006 percent of the federal budget.

By contrast, suppose that trade had the effect of lowering the wages of the bottom 70 percent of the wage distribution by an average of 2.0 percent, a relatively conservative estimate of the impact of trade on inequality. In this case, the amount of money that would have to redistributed from higher income people to low wage workers would be close to $50 billion annually, or 1.6 percent of the federal budget. This would be a qualitatively larger sum to raise in taxes, which perhaps explains the reason that no politician has championed this effort to date.

There is a second more fundamental point that needs to be addressed in assessing such large redistributions from the standpoint of trade policy. The argument for trade liberalization depends primarily on the claim that it increases economic efficiency. However, any revenue that is raised to pay for compensation from winners to losers will require taxes. These taxes will themselves be distortionary. While it is easy to say that the distortions that result from the taxes necessary to fund a $200 million job retraining program will not create enough distortions to offset the gains from trade liberalization, it is far from obvious that this is true if it’s necessary to raise $50 billion to redistribute to the losers from trade...

All these change agents, and I still can't break a 20

The growing usage of the phrase "change agent" has to be the oddest and most incongruous adaptation of radical thought into recent American political discourse. For many folks on the left, some variation of the phrase "change agent" has denoted the working class, the multitude, oppressed nationalities, etc. Overnight, everyone from Mitt Romney to Hillary Clinton assumes the mantle previously given to very large, very strategically placed groups of people.

Whatev. Here at Global Trade Watch, as we are apt to disclose, we have no preference among the self-designated change agents. What we are concerned about is how the struggle for a break from the neo-liberal policies of the past is informing or being informed by the horse race now moving on to South Carolina, Nevada, Michigan and beyond.

The good news is that many of the candidates, including last night's victor Hillary Clinton, are coming up with specific ways that they would change trade policy, as the Iowa Fair Trade Campaign documented in the letters it received from the candidates.

One of the major issues that a new president will likely have to deal with is an economic recession, and they will have to come up with ways to deal with the problem. Corporations have worked hard to ensure that constraints are put on the ability of people to democratically determine how they get themselves out of a recession. Thus, while many of the candidates banter on about international labor and environmental rights that are largely unenforceable in current trade policies, relatively short shrift has been given to the ability to break from NAFTA-WTO style policies during times of national crisis.

In last year's debate over the Peru FTA (and the 2006 debate over the Oman FTA), some attention was given to trying to come up with policies that would safeguard the ability of the U.S. government to block without FTA challenge any takeover of U.S. ports by foreign entities. The "great leap forward" given by our fearless leaders in Congress (they're like 535 little change agents!) was to insert a clause into the "revised" Peru FTA that read:

"Nothing in this Agreement shall be construed: ... to preclude a Party from applying measures that it considers necessary for the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests."

Some are claiming that this allows "full non-challengeable authority" for the U.S. to do whatever it wants if it invokes this so-called "national security" exception.

Unfortunately, the history of these clauses are a little murkier, as this law review article shows. Take the case of Argentina. In 2001-02, the country of my childhood went through an economic recession on par with the Great Depression. The government took a series of measures that it deemed necessary to insulate it's citizens from the worst aspects of the recession - a regulatory move that has made it the target of countless challenges from multinational corporations. These corporations, including Enron, have used NAFTA-like provisions in so-called bilateral investment treaties (BITs) to go after the country in foreign courts and demand billions in Argentine taxpayer dollars. Their gripe? Argentina making use of these so called "non-precluded measures" during a time of national emergency.

As the aforementioned article by William Burke-White and Andreas von Staden argues, even though the U.S. and other countries have tried to move closer to a clearly "self-judging" standard on these "non-precluded measures", the case history shows a lack of agreement among the corporate trade elite about this discretion.

When Enron sued Argentina, for instance, the corporate trade tribunalists ruled that Argentina could not decide for itself what measures it could take during an economic recession (and avoid challenge and compensation claims). But in a very similar case brought by LG and E, the tribunal ruled the exact opposite way. (See pages 106 and 4 respectively). Both these cases were brought under the U.S.-Argentina BIT, which is like the investor-state regime inserted into NAFTA-style trade agreements.

Anyone still think we're immune from what our corporations have gotten written into pacts that we're party to? Anyone who still thinks it's a good idea to offer up sovereignty to such a fickle, unelected grouplet of trade specialists? Anyone who still buys the idea that you can offer up whole swaths of the U.S. economy and regulatory structure to FTA dictates, and then hope and pray that clever exceptions will stand up when the corporate class wants to teach democratically elected leaders a lesson? (As Sirota points out, they're already in the ginger phase one of that lesson here in the U.S.)

New(ish) intelligence on trade

When Congress is in recess, it's always a good time to catch up on some of the academic and think-tank writings on globalization. Hey, it's definitely more interesting than the horse-race among the 2008 candidates for president, now in it's second year.

• Bruce Campbell of the Canadian Centre for Policy Alternatives takes a look at the corporations operating in Canada that pushed for the Canada-U.S. FTA in 1988, which paved the way for NAFTA in 1993. (Here in the U.S., the Canada FTA counted among its supporters: John McCain (and Biden and Dodd), and had among its opponents Duncan Hunter and Bill Richardson (in a rare fair trade vote).) Campbell finds that, despite the promises of these companies at the time, they have actually reduced their number of employees by 20 percent, while increasing revenues by nearly 130 percent. (CEOs have also seen their pay relative to workers more than double since 1988, during which time workers' wages have not budged in inflation adjusted terms.
• Ann Helwege and Melissa Birch from the Global Development and Environment Institute at Tufts University take a look at Latin America under neoliberalism, and find that the claims that poverty has been reduced are highly suspect. Namely, once you exclude Mexico and pre-96 Brazil (and even these are contested), most major economies in Latin America have seen rising or stagnant poverty. Moreover, as they point out, no one should be getting a cookie for modest poverty reduction even where it may have occurred: the lives of folks making $2.01 a day versus those making $1.99 a day are broadly comparable and desperate, even though $2.01 is considered above the poverty line. Moreover, if income is increasing (which it nearly always does), we ought to see poverty decline. The rate of improvement is what matters. In some of these cases where poverty has actually increased (in some cases while income has increased), we have a major problem.
• Josh Bivens at the Economic Policy Institute summarizes some of his recent work looking at claims of benefits from trade from major trade boosters, and finds them sorely wanting. The point made by Josh and in related work is that, if we're going to pursue a trade policy that contributes to massive stagnation of incomes of the majority, the chattering classes should at least expect to see a massive increase in national income. As Josh shows, a high growth figure from trade is questionable. So on both normative and positive analytical grounds, the status quo is pretty unattractive.
• Nancy Birdsall at the Center for Global Development does a fairly comprehensive mainstream literature review for the case that high levels of inequality can actually hinder growth, primarily through creating or interacting with failed markets and institutions.

Divorced from reality

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

With last night's win for Obama and Huckabee, there will be increased scrutiny on the record of these candidates. (This has already begun over at IELP and the Custom House and here in the press.)

Huckabee has some comments on globalization and is perceived to be running an economic populist campaign. People will be looking for more detail. As governor of Arkansas, Huckabee was one of only 8 governors to explicitly put their state onto the procurement chapters of pending trade agreements including CAFTA (in 2004) and the NAFTA expansions to Peru and other Andean countries (in 2005).

Regular readers of this blog will know that there's a great deal of opposition to these procurement and other harmful trade pact provisions. Common state economic development and environmental policies are prohibited by trade agreement procurement rules. Such policies include:

• Measures to stop the offshoring of state jobs;
• "Buy Local" or "Buy America" policies;
• Preferences for recycled content, renewable energy, alternative fuel vehicles and more.

Obama, for his part, has been further articulating his trade position over the last few months, after supporting the Peru FTA, and another past vote on a NAFTA expansion. As we've reported here, Obama has been taking increasingly specific positions on product safety, and made other comments in a note to the Iowa Fair Trade Campaign. All in all, trade is playing a major role in this race, as it did in 2006 as well. (For more on this argument, see David Sirota and John Nichols.)

But aside from some of the insightful analysis that's taken place, there's this from David Brooks in today's NYT:

Huckabee understands how middle-class anxiety is really lived. Democrats talk about wages. But real middle-class families have more to fear economically from divorce than from a free trade pact. A person's lifetime prospects will be threatened more by single parenting than by outsourcing. Huckabee understands that economic well-being is fused with social and moral well-being, and he talks about the inter-relationship in a way no other candidate has.

Stumo already took a jab at Brooks, but I asked an economist friend who specializes in labor and family economics to break it down a little more for me. Here's what she had to say:

Middle class families fear divorce because it put them at risk of poverty and bankruptcy. The problem, however, is not the failure of families to stick together, it's that the it now takes two incomes to raise a family. A generation ago, a single breadwinner could support a family, but this is no longer the case. The overwhelming majority of children living in married-couple families have no stay-at-home parent. This means, that today when a family gets divorced, the incomes are cut in half, whereas a generation ago, the mother could enter employment and thus the income fall would not be as large. Families with only a
male-breadwinner have incomes that are the same, in inflation-adjusted terms, as they were in the mid-1970s, whereas it is only families with a working wife who have seen their incomes rise. Trade policy certainly plays a role here, as median male wages are currently barely above their 1973 level.

And if you don't believe her, here's a nifty graph to prove it.

Rain on the scarecrow as the border blockaded

January 3rd, you know what that means? Only 40 more days until the Dee-Cee presidential primary vote! I can't wait! D.C. has always had a unique role in the nation for our role in the presidential primary process. Sure, there's SOMETHING happening in Iowa today, but it's not until a candidate wins the D.C. primary that they're truly considered anointed.

In all seriousness, voting in America's last inland colony is not today's top news. No, just wanted to remind everyone about the Iowa Fair Trade Campaign's excellent web resource on the candidates' positions on trade, available here.

There's been a lot of paeans to corn ethanol during this season, and with good reason: Iowa's farmers are taking it on the nose. As we've written before,

While the volume of U.S. corn and soybean exported increased as predicted by NAFTA’s proponents, the prices received by American farmers declined to the lowest levels in recent memory. While American farmers received $12.64 per bushel of soybeans (in inflation-adjusted terms) when the NAFTA predecessor Canada FTA went into place in 1988, that price halved to $6.30 by 2006. In inflation-adjusted dollars, farmers received $4.29 a bushel for corn in 1995, the year the WTO went into effect and a year after NAFTA went into effect. But a decade later in 2005, the bushel price was at a low of $2.06, and only started increasing with the recent ethanol boom  – a development that is threatened with derailment as Brazil and other agricultural exporters plot WTO challenges against U.S. corn ethanol subsidies. 

But don't take my word for it... after all, there's a reason that John Cougar Mellencamp is a political figure on par with Oprah in Iowa.

The corn issue in Iowa is connected to the corn issue in Mexico, which has been a lot in the news recently. (See our fact sheet for more.) In particular, the final phasing in of NAFTA tariff cuts in Mexico happened, and folks in Mexico were none too happy about it. (video in spanish)

As we've written about before, Latino civil rights groups are calling attention to NAFTA-style policies, which are destroying the Mexican countryside, which has led to massive displacement of people towards the United States.

As the AP reported,

Mexico's Roman Catholic Church has warned that the changes could spark an exodus to the U.S.

"It is clear that many farmers will have a difficult time competing in the domestic market, and that could cause a large number of farmers to leave their farms," the archdiocese said in a statement issued on New Year's Day.

Dozens of farm activists in Ciudad Juarez blocked one lane of the border bridge leading into El Paso, Texas, to protest the unrestricted imports of U.S. corn, as part of a 36-hour demonstration that started in the first minutes of the New Year.

They had pledged not to allow any U.S. grain into the country...

"The open battle against NAFTA begins," read a banner headline in the daily La Jornada.

In Mexico City, activists announced plans to march through the capital and hold a nationwide conference on Jan. 14 to plan further protests.

"This is going to be a complicated year, and there will certainly be a lot of demonstrations," said Enrique Perez, a spokesman for the National Association of Farm Distributors, one of the groups organizing the marches.

Mexico, the birthplace of corn, obtained a 15-year protection for sensitive farm crops when NAFTA was negotiated in 1993. That protection period ran out on Jan. 1. Mexico still grows almost all of the corn consumed here by humans, but imports corn to feed animals.

Mexican politicians from all major parties agree that a NAFTA renegotiation needs to happen. An area where there might be some common ground with the candidates for president, many who are talking about doing something that sounds an awful lot like renegotiation of NAFTA.

Bush to circumvent Congress on Colombia FTA?

Just before the break, Inside U.S. Trade reported that the Bush administration is internally debating whether to submit the Colombia FTA to Congress without the consent of the Democratic leadership. Rep. Wally Herger (R-Calif.), who is a likely candidate to be the GOP's top rep on Ways and Means once Rep. Jim McCrery (R-La.) retires this year, said the prospect "is continually being debated at the White House.”

However, Herger added that submitting the FTA to Congress in such a manner is a “last option.” It is “obviously our first choice” to make the case for the FTA and generate adequate Democratic support for the agreement to have the leadership back the submission of the implementing bill, he said.

Under fast-track rules, Congress is obligated to consider fast-track trade bills in a fixed time frame once they are formally submitted, regardless of the leadership’s position on the bills. However, no administration has yet presented a fast-track trade bill without close consultation with the leadership.

Separately, Rep. Gregory Meeks (D-N.Y.), one of the "CAFTA 15" Dems who voted for the NAFTA expansion to Central America said he will try to get some labor groups to take a “neutral” position on the Colombia FTA. And...

[Rep. Sander] Levin said that if the Administration tries to send the final implementing legislation for the Colombia FTA to Congress without a green light from House Democratic leadership, it would be “very negative” and counterproductive.

Martin Vaughan in Congress Daily had more on this possibility.

lobbyists and administration officials have discussed the option of just sending the Colombia deal up and forcing Democrats to vote on it, if congressional leaders won't take it up willingly. But Democratic aides and opponents of the deal said House leaders might also hold a secret trump card, an "emergency brake" that could short-circuit the fast-track process.

In the event that the White House sent the agreement up, House Speaker Pelosi could write a rule that would make a vote on the agreement subject to the call of the chair. Even though the trade negotiating authority has tools to prevent an agreement from being bottled up in committee, the speaker could, through such a rule change, delay a House floor vote indefinitely. But Democratic aides downplayed that scenario, saying it is unlikely that the Bush administration would risk being repudiated on the Colombia deal by sending it up without the acceptance of Democratic congressional leaders.

If Pelosi wanted, she could face down Bush if he tried to pull this stunt. Normally Fast Track requires a House vote on final passage a maximum of 60 days after the president introduces implementing legislation, with the Senate having 30 additional days to vote. This feature of Fast Track thus forces final action at the latest 90 days after implementing legislation is dropped. However, the 2002 Trade Promotion Authority 2105(c) makes clear that this requirement, as well as Fast Track’s ban on amendments and 20-hour limit on debate,

"are enacted by the Congress—

(1) as an exercise of the rulemaking power of the House of Representatives and the Senate, respectively, and as such are deemed a part of the rules of each House, respectively, and such procedures supersede other rules only to the extent that they are inconsistent with such other rules; and

(2) with the full recognition of the constitutional right of either House to change the rules (so far as relating to the procedures of that House) at any time, in the same manner, and to the same extent as any other rule of that House."

A Congressional Research Service memo makes this even clearer:

Although this [Fast Track] statute is permanent law, it has been enacted as an exercise of the rulemaking power of either House and can be changed by either House, with respect to its own procedure, at any time, in the same manner and to the same extent as any other rule of that House.

So, will Bush attempt to use Fast Track to slip the Colombia FTA past Congress? If he does, will the Dem leadership block the move by changing the rule on Fast Track? Or will the Dems fold their opposition on this NAFTA expansion before the show-down happens? Corporations are celebrating Democrats' caving in on Peru as creating momentum for Colombia FTA, after all. Stay tuned.