Enter State Security, Stage Right

If you were a playwright, you'd wish you'd have written this. As the drug-money laundering indictment against now-infamous pyramid schemer money-launderer David Murcia comes down in U.S. federal court, the Panamanian press buzzes amidst new revelations of links between this illicit businessman, state security forces and Panamanian politicians.

Some of the highest ranking leaders of the Institutional Protection Service (SPI in its Spanish initials) were arrested for their alleged role in providing the equivalent of Panamanian Secret Service protection to Murcia. From La Prensa in Panama (Spanish only):

The controversial Colombian prisoner was able to penetrate the highest spheres of the Institutional Protection Service (SPI), the specialized entity in charge of security for the Presidency of the Republic. 

Yesterday the disciplinary body of the SPI detained at its operations center in Corozal two agency directors, Joseph Antoine y Luis Almengor, both for links to the network of agents who served as protection for Murcia, without presidential authorization, as the La Prensa put forth yesterday.

Even though it sounds a lot like another country nearby with which Bush administration negotiated an FTA, infiltration of organized crime into the highest levels of the Panamanian state security apparatus should raise eyebrows.

La Estrella reports that agents seems to have been present in meetings between Murcia and Panamanian politicians, and reminds us that it's not the first time the SPI is in hot water:

The image of the Institutional Protection Service (SPI) has been tarnished yet again with accusations of SPI agents who protected Colombian businessman David Murcia Guzman in their spare time, in violation of SPI code.

Key G-20 Item Is Latest Threat To World Trade: WTO's Ever- Expanding Definition Of "Protectionism"

Is anybody else getting the feeling that government public service ads reminding us to eat a balanced diet or funding of school crossing guards will soon be labeled a "protectionist" measure? And that, moreover, Smoot and Hawley are rising from the grave?

There is a narrative that keeps getting repeated in the press and in politicians' speeches that "protectionist' measures are on the rise because of the economic crisis. But where is the evidence?

Take a close read of the actual WTO March 26 report on this subject. What exactly is the cause of the breathless fears about growing protectionism? Would it be the unilateral tariff cuts in the seemingly ominous list of "trade measures" countries have taken since September which is attached to the report? 

It seems that between what's in the actual report and the press reporting about it, a lot of new protectionism has been created - from thin air. Because if you read the small print, you will see that the scary "trade measures" list is just notification of any and all policy actions take by WTO nations. That includes new tariff cuts, filing of anti-dumping cases just like before the crisis when there is dumping, and - heaven forbid - ensuring food and toy safety. 

The first page of the actual WTO report even notes: "There is no indication of an imminent descent into high intensity protectionism involving widespread resort to trade restriction and retaliation."  So, what is on the list?  

Food Safety Measures:

• China's halt of Irish pork imports after Ireland warned importers of dioxin contamination;
• Russia's suspension of pork imports from U.S. plants after on-site inspection of the facilities; 
• U.S. defunding of a carbon-intensive, food safety-threatening program to facilitate U.S.-slaughtered chickens being shipped to China for processing and back to U.S. for sale.

Consumer & Public-Safety Measures:

• India and Argentina's toy-safety policies; 
  
• U.S. defunding of a Bush program that circumvented congressional requirements that Mexican-domiciled trucks must meet U.S. driver and vehicle standards to access U.S. roads.

Economic Stimulus Measures:

• Paraguay's 'Buy Paraguayan' preferences for government expenditures;
• China's encouragement of colleges and schools to buy local; 
• Taiwan's encouragement of buy and hire local on construction projects; 
• Japan's local governments encouraging citizens to buy local; 
• U.S. domestic preference for domestic infrastructure spending.

National-Defense and Immigration Measures:

• The immigration policies of Malaysia and United States;
• India's policies relating to foreign ownership of defense production and aviation.

Whatever arguments can be made about the desirability of any of these domestic policies on questions ranging from food and consumer safety, to national security, immigration and domestic stimulus and infrastructure spending, they are subjects of national political decision-making about which one would find nary a tariff or quota involved.    

Certainly even the most ardent defenders of the WTO see that labeling every other domestic policy "protectionism" will only undermine public support for the policies that really are critical to obtain the benefits of open trade?

Panama-AIG Outrage On All Fronts

Anger is brimming over in diverse corridors over the Bush hangover agreement with Panama, and the new rights it would give to AIG-linked bodies in Panama to sue U.S. taxpayers.

Rep. Mike Michaud (D-Maine) just ran an op-ed in The Hill newspaper explaining what is at stake with the debate around the Panama FTA:

When the House Trade Working Group spoke with President Obama during the campaign, he explained that if he was going to be the one responsible for enforcing a trade agreement, he wanted to be the one setting its terms. In the case of Panama, renegotiating the agreement is a necessary, but insufficient, step.

Removing the special investor rights and limits on Buy America and other non-trade policies is essential. But, no FTA should go into effect with Panama until that country eliminates its excessive banking secrecy practices, re-regulates its financial sector and forces banks and multinational subsidiaries to pay their fair share of taxes.

Indeed, the grassroots is pretty peeved about the whole discussion of this deal. Over the last 24 hours, 9,000 letters were sent to Congress to complain about the AIG-Panama scandal that we reported on last week. You too can let Congress know how you feel about AIG pushing a NAFTA-style deal with Panama, by clicking here.

It sounds like Congress is hearing this outrage, with Chairman Charles Rangel (D-N.Y.) of the House Ways & Means Committee putting out a press release yesterday that says:

“As I have discussed with the Government of Panama and the U.S. Ambassador to Panama, there are remaining outstanding issues that need to be addressed and actions that need to be taken by Panama before Congress considers the FTA.  These include specific actions to meet ILO labor standards and resolution of the tax haven issue now being discussed by our two governments. I hope these actions will be taken soon.”

We should let Congress know that we must also fix the underlying problems with the agreement, such as the provisions granting AIG-linked corporations the right to sue U.S. taxpayers for even more money.

Offshoring Rubbers, Destroying Lives

I have long threatened to start a new Public Citizen division dedicated to the safety of adult products, because, well, no one is bothering to regulate them, as last year's melamine edible underwear scare showed.

Now, this is happening:

In a move expected to cost 300 American jobs, the government is switching to cheaper off-shore condoms, including some made in China...

“Of course, we considered how many U.S. jobs would be affected by this move,” said a USAID official who spoke on the condition that he would not be named. But he said the reasons for the change included lower prices (2 cents versus more than 5 cents for U.S.-made condoms) and the fact that Congress dropped “buy American language” in a recent appropriations bill...

Fannie Thomas, who has been making AIDS-preventing condoms in southeastern Alabama for nearly 40 years in the small town of Eufaula[, says].

“We pay taxes down here, too, and with all this stimulus money going to save jobs, it seems to me like they (the U.S. government) should share this contract so they can save jobs here in America,” Thomas said.

Thomas and others at the Alatech plant said there aren’t many alternatives for them if it closes down, which is a likely result of the contracting switch.

In fact, the government is close to accepting condoms from two offshore companies: Unidus Corp., which makes condoms in South Korea, and Qingdao Double Butterfly Group, which makes them in China.

There's a number of issues here: first, Buy America, last I checked is still intact. But as we pointed out during the debate on the stimulus bill, this can be waived for a lot of reasons, including NAFTA-WTO-style trade agreements. And I believe that the Chinese bid would have to be only 6% cheaper to choose that over the American bid.

Second, given the rampant problems with product safety in China, there are some serious issues about quality control. As the Kansas City Star reports:

Bill Howe, president of PolyTech Synergies in Ohio, a consultant to the condom industry, said China is “learning” to produce better condoms, but their products are still “notoriously suspect.”

Howe, who has consulted for Alatech, acknowledges that the company got a “sweet deal” for years as the only supplier to the U.S. government for international condom distribution. Nonetheless, “they have a high level of integrity, and you don’t get that in China,” he said.

Even Chinese condom makers admit that some of their customers did not care for their products. Chinese buyers have complained their country’s condoms were “too thick, low quality and don’t feel comfortable.”

Problems persisted for some Chinese condom makers as late as 2007. Free Chinese-made condoms passed out by AIDS groups in Washington, D.C., were the subject of numerous complaints about unreadable expiration dates. Sometimes, just opening the packages damaged the condoms, some groups alleged.

Of course, NAFTA-style trade agreements and the WTO put sharp limits on the kinds of product standards and inspections we can apply to imports, while the WTO procurement agreement places limitations on the kinds of product standards or environmental or human-rights qualifications we can put on suppliers to the U.S .government. Read more here, on our section on product safety.

Double Standards for Banks and Builders

The Treasury Department released details of its new Public-Private Investment Program, which will give a massive subsidy to investors to partner with the government to buy up toxic assets.

You too can participate! All you need to pre-qualify is "demonstrated capacity to raise at least $500 million of private capital; demonstrated experience investing in Eligible Assets, including through performance track records, a minimum of $10 billion (market value) of Eligible Assets currently under management; demonstrated operational capacity to manage the Funds in a manner consistent with Treasury’s stated Investment Objective while also protecting taxpayers."

Oh, and you must have "Headquarters in the United States."

But in the WTO's Financial Services Agreement, the United States took on the commitment to treat foreign banks as well as we treat U.S. banks. As we say in a forthcoming paper:

A requirement to provide foreign corporations National Treatment with regard to subsidies is unquestionably part of these obligations. The Guidelines for Scheduling GATS Commitments, adopted by WTO Members in 2001, states:

“Article XVII [National Treatment] applies to subsidies in the same way that it applies to all other measures. ... any subsidy which is a discriminatory measure within the meaning of Article XVII would have to be either scheduled as a limitation on National Treatment or brought into conformity with that Article. Subsidies are also not excluded from the scope of Article II (MFN). In line with the paragraph above, a binding under Article XVII with respect to the granting of a subsidy does not require a Member to offer such a subsidy to a services supplier located in the territory of another Member.”

As Dean Baker points out, it is an outrage that folks in Washington would make such a stink about making sure Buy America is compliant with draconian WTO requirements, but we violate them willy nilly when it comes to subsidizing someone's rich friends on Wall Street.

Drug Money, eh? Not Exactly a Shocker...

Now that the feds are saying it, U.S. media have started to report (as we did weeks ago) that fallout of the latest political mega-scandal in Latin America would reach not just into the slimy depths of Panamanian and Colombia political corruption, but also to the Mexican and Colombian drug cartels.

The Miami Herald reported Saturday on what they now more accurately term the "Panama-Colombia Ponzi drug case":

The principal suspects in a multimillion-dollar Ponzi scheme linked to scandals of alleged illicit payments to officials in Colombia and presidential candidates in Panama have been charged in a New York federal court with laundering drug trafficking profits.

At least 11 properties in South Florida and California have been seized in connection with the case, which involves the firm DMG and its principal broker and owner, David Murcia Guzmán. Six others were also charged.

According to the charges, the organization opened an account at a U.S. branch office of Merrill Lynch and deposited $2.1 million, an amount prosecutors hope to show is connected to money Mexican drug cartels paid to Colombian drug traffickers.

Following the scandal, several Colombian officials and one of President Alvaro Uribe's sons had to explain their links to the suspects.

In investigating if they received money from Murcia, Panama's electoral tribunal on Friday stripped legal privileges from two presidential candidates, Balbina Herrera and Ricardo Martinelli.

It's disturbing to imagine that candidates for the presidency of any country be granted special privileges to conceal their finances, but we might not be too surprised in the case of Panama, a known banking secrecy and offshore tax-haven destination.

The AP says Murcia may face extradition to the U.S.:

A man charged in Colombia with orchestrating a giant pyramid scheme that bilked people out of hundreds of millions of dollars now faces money laundering charges in the United States.

Federal prosecutors in New York brought money laundering charges Wednesday against DMG Group founder David Guzman and six others affiliated with the company.

They say he was laundering drug trafficking profits but don't detail their alleged origin.

Eyes on Trade will be watching and more will be revealed. If the juiciness of recent weeks are any indication, you won't want to miss it!

AIG suing taxpayers for its own Panama tax dodging

Here's a story that will make your blood boil. AIG is suing U.S. taxpayers because it failed to evade as high a level of U.S. taxes as it wanted... in its Panama subsidiary. According to Lynnley Browning at the NYT:

While the American International Group comes under fire from C ongress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens...

A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.

The lawsuit, filed on Feb. 27 in Federal District Court in Manhattan, details, among other things, certain tax-related dealings of the financial products unit, the once high-flying division that has been singled out for its role in A.I.G.’s financial crisis last fall. Other deals involved A.I.G. offshore entities whose function centers on executive compensation and include C. V. Starr & Company, a closely held concern controlled by Maurice R. Greenberg, A.I.G.’s former chairman, and the Starr International Company, a privately held enterprise incorporated in Panama, and commonly known as SICO....

A.I.G. says in part that it is entitled to a refund of $33 million that SICO paid in 1997 as compensation to employees, which it now says should be characterized as a deductible expense.

When U.S. multinationals operate in countries that, I dunno, actually require them to pay taxes and be regulated, then the U.S. Treasury gives them a "foreign tax credit." When they instead shelter income in tax havens like Panama, they can endlessly defer the repatriation of their income, and thus NEVER pay taxes, either at home or abroad. So an accounting challenge is to re-categorize as much of your Panama-hidden income as "expenses," so that they can be deducted if the mother company does repatriate the money. This appears to be AIG's game at the moment.

Under the Panama FTA, AIG-Panama would be able to sue the U.S. taxpayer for cash damages by claiming common regulatory actions were "tantamount" to an ("indirect") "expropriation." Do we really want to be giving these scoundrels more tools to evade their social obligations?

Kirk Confirmed

Mayor Ron Kirk is now Ambassador Ron Kirk, the 16th U.S. Trade Representative (USTR), working for the 44th President. The post of USTR was created in its preliminary form by President John F. Kennedy, and exists to coordinate and lead the trade activities of the Departments of State, Commerce, Agriculture, Treasury, and Labor.

Kirk was confirmed on a 92-5 vote, with Sens. Robert Byrd (D-WV), Jim Bunning (R-KY), Kit Bond (R-MO), Johnny Isakson (R-GA), and Bernie Sanders (I-VT) opposing.

Just miliseconds after Kirk was confirmed, the Citizens Trade Campaign and 350 other civil society organizations sent Kirk a note of congratulations, and called for Kirk to help usher in a "New Day on Trade," moving past the NAFTA-WTO model (and its extensions to Panama and other countries) and embracing fair trade.

He has long been active in trade issues, and is a Fast Track critic. According to the Dallas Morning News (3/8/02), Kirk blasted his Democratic primary opponent Ken Bentsen in the 2002 U.S. Senate race for casting “the decisive vote to give this trade bill a one-vote victory in the House of Representatives without any real guarantee of help for workers who lose their jobs because of trade.”

Is Your Mudda Necessary?

As the U.S. and international climate debate gears up, we are getting a lot of questions about how WTO compliant is this or that climate policy. My colleague Steve Charnovitz and two co-authors recently released a book called Global Warming and the World Trading System that goes into some depth on this topic.

I hope to release a response to this report in the coming weeks or months, but Steve and his coauthors have an extremely useful appendix that summarizes key WTO cases with relevance for environmental protection. Drawing from this, as well as this win-loss chart and our recent report on the WTO compatibility of Obama's green jobs plans, I conclude that the attempts to defend environmental and other public-interest policies at the WTO have failed most of the time.

By way of a background, the WTO's General Agreement on Tariffs and Trade (GATT) prohibits discrimination against foreign products (even some measures not intended to discriminate), and makes difficult all sorts of other environmental policy implementation besides. That grouplet of trade lawyers that claim that the WTO doesn't represent the most significant international legal tripwire against environmental protection rely on GATT's Article 20 exceptions, which read:

Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(b)        necessary to protect human, animal or plant life or health;..

(d)        necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to customs enforcement, the enforcement of monopolies operated under paragraph 4 of Article II and Article XVII, the protection of patents, trade marks and copyrights, and the prevention of deceptive practices;...

(g)        relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption;

As you can see, defending an environmental measure can be cumbersome. There's that pesky "requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade." Then there's also that funny word "necessary." Is the environment "necessary"? Is my awful plaid shirt that my dad gave me that I am offending my co-workers with "necessary"? What about that after-dinner ice cream? We focus on some stats on the necessary test in this post.

It turns out that meeting this "necessary" hurdle is very difficult. According to Joost Pauwelyn, GATT panels never deemed environmental or public-interest policies "necessary" prior to the establishment of the WTO. As we list in our report in footnote 130, there have been 11 post-95 WTO cases where Article 20 exceptions have been invoked.

• In In US - Shrimp 2006, EC - Trademarks 2003, EC - Tariff Preferences 2002, Canada- Wheat 2002, and Korea - Beef 1999, the necessity test was rejected. (This paper identified two pre-95 cases where necessity was invoked: 1989's US-Section 337 1989 and 1992's US - Beer. In both cases, the "necessity" defense was rejected. There were also two other GATT-era cases, US-Tuna Dolphin 1994, and Thailand-Cigarette 1990, where the necessity test was rejected. The Tuna-Dolphin case is one of the most infamous GATT cases, and is being started up again by Mexico now.)
• In Brazil-Tyres 2007, the WTO panel agreed with Brazil on necessity test, but not on the so-called chapeau requirement bolded above. And on EC-Asbestos 1998, the panel accepted EC's necessity defense. This is the first time this was true.
• The other cases, Argentina - Bovine Hides 1998, US-Gasoline 1995, Mexico - Soft Drink 2004,  and Dominican Republic - Cigarettes 2003, relied on other exceptions and did not have to meet the necessity test.

So, out of 11 cases pre- and post-95 where the "necessary test" was invoked, it was only accepted twice. Of the 15 cases listed here, the overall exception was only accepted twice. So environmental and other GATT exceptions failed 80-87 percent of the time.

If you have comments, or know of other cases where the exceptions (and specifically ones where the "necessary" test is relevant), please let me know. This is what I'm cramming together from memory and these few sources.

Panama Denying Charity to Children?

Despite high rates of GDP growth thanks to the canal and banking sectors, over 40 percent of Panama’s population is rural and poor. This population is already squeezed by Panama’s net food-importer status.  UNICEF statistics show that the wealthiest 20 per cent of the population has an annual family income 32 times that of the poorest 20 per cent, making Panama one of the most unequal countries in the world. More than half of children under the age of 5 live in poverty, and nearly 30 percent live in extreme poverty. Most of these children come from indigenous areas. And Panama is one of very few countries in the region that has experienced a rise in child chronic malnutrition, despite rising GDP growth. 

So why is Panama's government putting up roadblocks to the charitable distribution of nearly $50 million to combat child hunger? And not only that, but engaging in an extended harassment campaign against the lawyer designated to execute this will?

Here's the story from the International Herald Tribune's Marc Lacey:

In life, Wilson C. Lucom was not exactly child-friendly. The curmudgeon never had children himself, nor was he especially close to the offspring of his third wife, Hilda. When he opened his ample checkbook, friends say, it was more likely to finance a conservative political cause than to help underprivileged youth.

But Lucom, a native of rural Pennsylvania who spent much of his life in Palm Beach, Florida, surprised everyone in his will, which was disclosed upon his death two years ago at the age of 88. After doling out relatively small portions of his tens of millions of dollars to survivors, he left the rest to a foundation he had dreamed up in secrecy to aid the poor children of Panama, where he spent the final years of his life.

It would be one of the largest charitable donations, if not the largest, in Panama's history, but so far not a single child has had access to the money. The will has set off a vicious legal battle that is playing out in at least four countries. Criminal charges have been filed, insults traded and threats made. The number of law firms involved exceeds 20.

"This is all about greed," said Hector Avila, an advocate for at-risk children in Panama who organized a demonstration of young people in May outside Supreme Court in Panama, calling for Lucom's gift to be honored. Within a week of the protest, Avila survived a shooting. No link to the Lucom case was established.

Richard Lehman, a Florida-based lawyer, is the executor of Lucom's estate, and has set up a webpage describing his legal battle with Panamanian authorities. The situation has gotten so bad that Lehman has requested precautionary protection from the Inter-American Commission on Human Rights. Listen to what Lehman and several charitable organizations in Panama had to say about the case:

I've spoken with Lehman a number of times, and he thinks that signing an FTA with Panama sends exactly the wrong message to a regime that fails to respect human rights, not to mention its disregard for the suffering children within their own national borders.

We'll keep you updated about any developments in this case, and feel free to go to the Lucom - Lehman website to become more informed, and please spread the word!

Fair Trader Wins Salvadoran Presidency

Count one more fair-trade government in Latin America. The Washington Post reports the winner is Mauricio Funes:

Funes, a dynamic speaker and political outsider who compares himself to President Obama and pledged to be an agent of change in the small Central American nation, was leading the polls late Sunday night with 51.2 percent of the vote and more than 90 percent of the ballots counted...

Funes's opponent, former National Police chief Rodrigo Ávila, who represented the Nationalist Republican Alliance (ARENA), was trailing with 48.7 percent of the vote. Ávila conceded defeat, telling supporters, "We will be a constructive opposition."

The Committee in Solidarity with the People of El Salvador (CISPES) is hopeful about the prospects for the country under the new government:

CISPES also wants to pass on a profound congratulations for the Salvadoran people, who today triumphed over fear and joined the countries of Latin America who are proving that indeed another world is not only possible, it is in formation!

Amen to that!

Are Multinationals Down With, or Down On, America?

The Business Roundtable published a report today entitled "How U.S. Multinational Companies Strengthen the U.S. Economy." It's full of information such as how many workers these swell companies have not yet fired all their U.S. workers. But are multinationals good for America? As I told the Financial Times, I would argue not.

1. Multinational companies advocate for policies that are contrary to the economic and other interests of the majority of Americans. Standard textbook economics predicts that the current NAFTA-WTO-model of trade (i.e. opening up markets in products made by most workers, while protecting markets in intellectual property) would lead to upward redistribution of income, and empirical evidence has borne this out. For the 70% of workers without a four-year college degree, the Economic Policy Institute (using standard Heckscher-Ohlin trade models) estimates that current trade policy has cost them an amount annually in excess of their income-tax burden (around $2,000). Such policies have long been advocated by multinational companies, as one can see most recently in the line up of firms pushing NAFTA-style deals with Panama and Colombia. (http://www.latradecoalition.org/portal/latc/default)
2. Multinational companies do not uphold their end of the social contract. U.S. states originally chartered corporations to undertake projects that the government (for whatever reason) was ill-equipped or did not wish to perform. But ever since passage of the 16th Amendment, Congress has had to fight tooth and nail to get corporations to pay their fair share of taxes, instead of simply deferring the repatriation of their income in overseas tax havens like Panama to get out of their social obligations here at home. (Side note: this Panama FTA will give the 350,000 subsidiaries of foreign firms based in Panama the right to challenge U.S. public-interest regulations as "expropriations," claiming U.S. taxpayer dollars in foreign tribunals, for measures not considered expropriatory under domestic U.S. law.) According to the Government Accountability Office, many multinational firms have engineered their global operations so that they face an effective tax rate of virtually zero. In short, many multinationals want the benefits of U.S. citizenship (access to preferential bailouts, recognition of corporate charters) without living up to their responsibilities.
3. Multinational companies have pushed a model of deregulation and global supply chains that socializes risk and privatizes profit. We should never be facing a situation where entities are too big or too globally interconnected to fail. The prevailing multinational business model relies on supply chains that are stretched too thin, across too many countries, such that even isolated occurences (earthquakes, say), can have outsize global economic impacts. This model has also relied on carbon-intensive international shipping that scientists now recognize is one of the fastest growing contributors to global warming. This model of deregulated and overextended supply chains with considerable negative social externalities did not happen by accident: it was the outcome of years of multinationals contributing to politicians' campaigns so as to roll back prudential measures. My colleagues at Essential Information recently completed a large report on the nexus between corporate campaign donations and deregulation.

Fair Traders Hang Tough in Salvadoran Elections

The Salvadoran fair-trade party FMLN (Frente Farabundo Marti de Liberacion Nacional) - vehement in its opposition to CAFTA - is leading the presidential race, but facing typical last-minute shenanigans from the right wing. And given the recent interventions by Republican congressmen - not unlike Bush administration's meddling in the CAFTA Referendum in Costa Rica - the FMLN is holding its breath.

A recent Washington Post piece reveals that while polls show the fair-trade FMLN candidate Mauricio Funes up by 18 points on the CAFTA-fans and privatizers' candidate Rodrigo Ávila of the ruling ARENA party, there's always a chance that something will give.

The February polls show Funes up 49 percent to Ávila 's 31 percent, but Aguilar [a commentator] cautioned that the race remains dynamic. Other polling shows the race to be a virtual dead heat.

That something might just be the not-so-veiled threats made by GOP congressmen yesterday, orchestrated to dominate the Salvadoran headlines the final moments of the campaign. As highlighted by CISPES, the Committee in Solidarity with the People of El Salvador (who also urges you to take action to make the clear U.S. neutral position):

Rep. Dan Burton (R-IN) stated, “Those monies that are coming from here to there I am confident will be cut, and I hope the people of El Salvador are aware of that because it will have a tremendous impact on individuals and their economy.” Indeed, these threats carry considerable weight for Salvadoran voters, as 25% of the Salvadoran population lives in the U.S., and 20% of the nation's economy consists of remittances from those family members.

This sort of meddling was full anticipated, which is why Rep. Raul Grijalva (D-Ariz.) coauthored a letter signed by 33 members of Congress to the State Department, calling for a preemptive declaration of U.S. neutrality in the Salvadoran elections. Now we clearly see why this was necessary.

You can see Grijalva's press conference here, or below on yesterday's Democracy Now:

The Post reports on Funes' own reaction to the scare tactics:

During his speech in Metapan, Funes promised that "we will end the economy of privilege for the few," a reference to the so-called 14 major families of the Salvadoran elite, who have dominated the country for generations. He urged the crowd not to believe ARENA's "propaganda." "They're desperate because they know they're going to lose," he said. "If you vote for me, light is at the end of this tunnel."

Eyes on Trade will be watching and will keep our readers posted.

Two Opportunities to See Ha-Joon Chang in DC Tomorrow

Ha-Joon Chang is a Cambridge economist, author of the book Bad Samaritans, my mentor, and in DC tomorrow at several events you can attend.

Our colleagues at CEPR are organizing National Press Club and Busboys and Poets events for Ha-Joon tomorrow. You can find out more on their webpage.

Live Blogging the Ron Kirk Hearing

I'll be attempting to live blog the Ron Kirk hearing before Senate Finance Committee.

• 5:06 pm: Chairman Max Baucus (D-Mont.) is kicking things off things. "Those who have followed internatinoal trade agreements are battered... your job will be to fight rearguard action on slipping on these commitments."
• Baucus says that Kirk's tax problems should not be a dealbreaker.
• Things are off to a good start with TAA.
• Baucus is introducing customs reauthorization and and an enforcement bill, and a preference bill.
• 5:08 pm: "I want to pursue 3 pending agreements. We should start with Panama. That is the one that is most ready for action and least controversial. I am also ready to set benchmarks on Colombia and Korea."
• We need to export more to Asia. Bilateral engagement is necessary; a regional approach might also bear fruit.
• Sen. Chuck Grassley (R-Iowa): 5:12 pm: You just released your Trade Agenda. You don't have staff to explain to our committee what it means. It was vital that you said trade would play most valuable role in the recovery.
• It raises some concerns. I don't know what president means that we should build on labor standards in existing agreements. I'm reserving judgment on what these issues mean. The May 10 compromise was hard to reach, and we have yet to see 3 pending FTAs approved. IF the president reopens the May 10 compromise, he risks losing support for the trade agenda.
• I was also concerned that the report said trade may not reflect equity and employment. Our trade has reflected that for some time.
• I am concerned about mixed signals on NAFTA renegotiation. If we open up NAFTA, Mexico may want to change tariffs on corn.
• 5:18 pm: Sen. John Cornyn (R-Texas) introducing his constituent Mayor Ron Kirk.
• USTR must be clearly and calmly against protectionism.
• As mayor of Dallas, Kirk supported NAFTA and attracted investors to Dallas.
• Mayor Kirk may not be first choice of those who oppose trade, but he is first choice of president.
• Kirk: 5:22 pm: The president and I believe that trade plays a key role in our economy, and that the US will be a leader in setting the rules. Cheaper foreign products help hard pressed American families, and exports help create jobs. The overarching benefits of trade are diffuse, and the pain is concentrated.
• I am a raging pragmatist.
• We're not going to do deals just for the sake of doing them.
• Our focus will be on enforcement.
• We'll work with our partners in the WTO to advance Doha forward in the right direction. We'll see how we can get pending bilateral agreements moving, and negotiate new ones.
• In an appropriate time, Obama will require authority to negotiate new agreements and bring them to you for approval.
• Restoring the bipartisan negotiation will take time.
• 5:26 pm: Baucus hurried Kirk up, and is asking him the 3 standard questions on his background.

How will you restore biparistanship? I want 45 sec answers.

• Kirk: I will talk to you.
• Baucus: How do you engage China?
• Kirk: This will require a comprehensive strategy. We'll use all resources within WTO, we need to make them a consumer society.
• Baucus: Softwood lumber?
• Kirk: We'll mvoe forward in a collaborative way.
• Baucus : SPS?
• Kirk: We will press EU to get SPS measures based on sound science, and not fear.
• Baucus: Your enforcement prioirites?
• Kirk
• Baucus: Is Panama FTA ready to move?
• Kirk: We believe Panama is closest to being ready, and we're going to do an expedited review of all pending agreements.
• 5:32 pm Grassley: How do we reverse downturn in trade. Implementation of Colombia FTA is my number one prioirity. Will you do it this year?
• Kirk: I cannot commit to a certain timetable. We're going to advance in a strategic, not tactical manner.
• Grassley: There was good faith negotiations two years ago. When you ahve good faith between two political parties, you shouldn't look for other consensus or rengotaition.
• Grassley: It was hard for me to accept May 10 labor compromise. I am worried that it has not yielded 4 agreements. I don't know that I will move from that standard.
• Kirk: we are going to look at all agreements. The 5 elements of the Peru FTA will help move us forward so that people cna believe in trade.
• Kirk: Domestic labor law should be set by Congress.
• Grassley: will you commit to reject agricultural renegotiation in NAFTA.
• Kirk: I don't see how levying new tariffs will help strengthen the agreement.
• Stabenow: I am deeply concerned about Korea FTA on autos.
• Kirk: I realize that there are two sides to the story. I don't have "deal fever," but I didn't accept this job just to enforce what's already there. We need to create that level playing field. It's also a huge market.
• QUESTION ON COOL. 5:40 pm
• Kirk: We want to make sure that foods we eat are safe.
• Wyden: the middle class does not like these trade agreements. What do you plan to increase support of middle class?
• Kirk: We're going to utilize technology to tell the real story. Our website is "so" 1987.
• Snowe: 5:44 pm: USTR has not taken any action on a public petition since 1996. I am worried about enforcement. What actions would you take?
• Kirk: I am going to honor president's commitment to you.
• Cantwell: 5:46 pm: We need a CHina bilateral on energy. What kind of benchmarks on Korea?
• Kirk: Part of restoring America's confidence is to meet benchmarks. We don't have these defined yet. In case of status quo, it's not acceptable.

My editorial note: Wow. That was the shortest and least substantive hearing on ANY matter I've ever heard. And this was for a confirmation for the official responsible for implementing the fair-trade agenda that helped win Democrats their elections in 2006 and 2008. Pretty offensive.

Name-Calling Will Get You Nowhere

Taking a queue from his boss who equates advocacy for human rights with aiding 'the enemy', Colombian Vice President Francisco Santos is resorting to personal attacks against those who disagree with his ideology, even well-respected international dissenters like Rep. George Miller (D-Calif.).

Santos' ad hominem against Chairman George Miller, whose House Committee on Education and Labor recently held hearings on the rampant human-rights violations in Colombia, featured prominently in today's El Pais, a conservative Colombian daily (from Spanish):

Vice President Santos classified as "enemy of Colombia" United States Democratic Representative George Miller because he stated that the human rights situation in [Colombia] is similar to that of Chile or El Salvador of decades past...

According to the Vice President [Santos], statements by Miller, who has visited the Colombian nation on three occasions, are "a rebuff of such dimensions that I do not want to qualify them".

But qualify them he did. Santos called those the remarks of an enemy of his country. Apparently that's just how he and his boss see the legitimate concerns regrading their trampling of their citizens' rights. If Santos' and Uribe's policies are hurting the Colombian people and violating their most basic rights, but Miller is the enemy, then one has to ask: what does that make Santos and Uribe?

The fact is that Bush/Cheney Santos/Uribe and their with-us-or-against-us mentality has cost many their lives. Luckily for us all, it's not likely that Chairman Miller will himself fall victim of the paramilitary death squads that attack individuals the Uribe government alternatively denounces as "enemies" or rebel sympathizers.

Sadly, many have paid the price, and more will, unless U.S. policy shifts away from FTAs and toward a people-first foreign economic policy that creates material conditions for a peaceful end of the 40+ year Colombian conflict.

No Sheep's Clothing for VP Santos

While other Colombian officials bombarded DC hoping to pull the wool over the eyes of Congress and the Obama administration, Colombian Vice President Francisco Santos was on tour throughout the U.S. playing nice with state and local officials.

On the Chicago stop, groups like the Chicago Religious Leadership Network on Latin America (CRLN) rallied citizens of conscience to ensure the public.

See, VP Santos ain't no Little Bo Peep. Not unlike his boss the President, or his brother, the Defense Minister - Santos has been linked to the paramilitary death squads that kill Afro-Colombian activists, union leaders, and indigenous and other social-justice organizers. CRLN Executive Director Gary Cozette wrote up a summary of last Tuesday when they tailed the one of the Colombian government's biggest baddest wolves.

Here are some of the choice excerpts of the report back on their welcoming committee's activities:

Dear Colleagues:  Francisco Santos, Vice President of Colombia, visited Chicago on Tuesday Februray 24, 2009 to promote U.S. investment in and trade with Colombia. With 4 million people internally displaced (nearly 10% of the population), Colombia remains as described by the UN as “the greatest humanitarian catastrophe in the Western Hemisphere.” Paramilitary death squads have reorganized and spread out across Colombia. The Colombian military were exposed internationally last year for systematically killing poor Colombian civilians, then dressing them as guerrillas to collect incentive bonuses and gain promotions. Santos’ visit to Chicago is part of a major diplomatic offensive by the Colombian government diminish the reality of this human rights disaster.

Model Citizen? Zero Discipline?

The U.S. State Department released its annual International Narcotics Control Strategy Report last week, and they published some pretty tasty morsels of the country the Bush administration signed its hangover FTA with:

By virtue of its geographic position and well-developed maritime and transportation infrastructure, Panama is a major logistics control and trans-shipment country for illegal drugs to the United States and Europe. Major Colombian and Mexican drug cartels as well as Colombian illegal armed groups use Panama for drug trafficking and money laundering purposes.

Indeed, Panama has been listed as a "country of primary concern" (the most severe designation) by the Department due to the proliferation of drug-related money laundering in the country:

The majority of money laundering activity in Panama is narcotics-related or the result of transshipment or smuggled, pirated, and counterfeit goods through Panama’s major free trade zone, the Colon Free zone (CFZ). The funds generated from illegal activity are susceptible to being laundered through a wide variety of methods, including the Panamanian banking system, Panamanian casinos, bulk cash shipments, pre-paid telephone cards, debit cards, insurance companies, real estate projects and agents, and merchandise...

Panama is an offshore financial center that includes offshore banks and various forms of shell companies that have been used by a wide range of criminal groups globally for money laundering.

A certain David Lee Roth once wrote some lyrics that indicate a certain familiarity with the national product:

Jump back, what's that sound?
Here she comes, full blast'n top down
Hot shoe, burnin' down the avenue
Model citizen, zero discipline...

She's runnin', I'm flyin'
Right behind in the rearview mirror now
Got the fearin', power steerin'
Pistons poppin', ain't no stoppin' now

Panama, Panama

Today's Excitement: The "Trans-Pacific Partnership" FTA

Today, USTR held a public hearing on the United States-Trans-Pacific Partnership Free Trade Agreement (or, uh, USTPPFTA, hereafter referred to as "TPP" - you come up with a snarky acronym for this sucker!). This is a new FTA that the Bush administration proposed in November and December last year as a parting gift, which would involve the United States, Australia, New Zealand, Singapore, Vietnam, Brunei, Peru and Chile. Read Public Citizen's testimony on the TPP here (PDF).

A long list of folks testified at today's hearing, offering little in the way of anything surprising or unexpected. The most interesting comments came right at the beginning, when a USTR official made two points:

1. Initial TPP negotiations were scheduled to begin on March 30th in Singapore. However, because USTR appointee Ron Kirk has yet to be confirmed, and because he will be undertaking a "review and reevaluation of overall FTA policy" (not an exact quote but close), this date is indefinitely postponed.
2. Today's hearing was to be a "different exercise than that which we've been doing for the past few years," and one of the things USTR wanted to discuss was whether the current FTA template is "adequate and effective" for moving forward and if it is an appropriate means for meeting U.S. policy goals.

It was refreshing to hear questions raised by USTR themselves about the appropriateness of the current model of trade agreement, a big-picture message we've been hammering on for years. Whether actual meaningful debates ensue is a different story, of course - certainly the corporate presenters at today's hearing avoided any sort of questioning of the model - but it's a step in the right direction.

Other fun things: a spokesman for the U.S.-ASEAN Business Council trying to make a bizarre argument that offshoring of U.S. production might increase if we don't enter into NAFTA-style FTAs with southeast Asian countries. (Yeah, I don't know either.) A spokesman for the Coalition of Service Industries saying investor protections and especially the investor-state mechanism are "crucial," and saying that a "broad definition of investment" is needed as well as making investor protections retroactive. I could almost hear him salivating with glee as he read off that little wish list. Same with representatives from NAM and GE asking for "WTO-plus" commitments on intellectual property.

On the flip side, the AFL's Jeff Vogt made a nice case that fixing labor standards in NAFTA-style FTAs doesn't get the job done, and fixing investment, procurement, services and other chapters is necessary as well. Here's hoping that "review and reevaluation of overall FTA policy" takes that talking point into account.

California Calling for Trade Reform

California Assembly Member Nancy Skinner (D-14), Chair of the Assembly's Natural Resources Committee, introduced AB 1276 last Friday. This groundbreaking legislation proposes vital trade reform to help safeguard California's environmental regulations and local economy in future trade agreements.

California, perhaps more than any other state, has seen first-hand how corporations can use trade rules to challenge domestic policies that have nothing to do with trade. California’s Attorney General’s office has already spent several years assisting with the federal defense of a NAFTA Chapter 11 investment case targeting a California ban on gasoline additive MTBE (settled in 2005). Today, California’s regulators are on the defensive again awaiting a decision on Canadian mining company Glamis Gold’s NAFTA Chapter 11 suit over the state’s mining regulations.

The proposed legislation, coauthored by State Senator Loni Hancock, recognizes that current trade agreements establish rules that could have implications for a host of legislative policy priorities, including state procurement policy. AB 1276 would make sure that in the future state legislators have a chance to review some of these potentially contricting trade rules and would require legislative approval before any state official commits California to comply with certain provisions of proposed trade agreements. Similar legislation has passed in Maryland, Rhode Island, Hawaii, and Minnesota.

Testing the Panamanian Waters

Although the Office of the U.S. Trade Representative (USTR) and other trade-related agencies have not been staffed up yet, the annual USTR report to Congress (PDF) says that they hope to move the NAFTA expansion to Panama "relatively quickly." According to Congress Daily PM:

Multinational corporations like Caterpillar, eager to bid on a massive Panama Canal widening project, support that the Panama pact, but skeptics say the country's laws lack transparency and it remains too easy for companies to use that nation as a tax shelter.

Lori Wallach, director of Public Citizen's Global Trade Watch, noted that as a senator, Obama co-sponsored legislation to crack down on overseas tax shelters that specifically listed Panama. "Having a vote on this begs the question of the wisdom of picking a big political brouhaha" while in the midst of sensitive negotiations on health care and climate change, Wallach said. "President Obama certainly doesn't want to have trade policy start with hangovers and leftovers from the Bush administration, if in fact this document represents the Obama trade policy."

And according to Bloomberg,

a majority of Democratic lawmakers voted against a similar agreement with Peru in 2007, and many may not be eager to vote on a Bush proposal.

“It’s a political miscalculation,” Lori Wallach, president of Global Trade Watch, which has organized opposition to Nafta, Peru and other trade pacts. A vote would provoke “huge political unpleasantness,” he said...

More than 50 House members, led by Maine Democrat Mike Michaud, sent a letter to Obama last week, urging him to tear up all three pending trade deals.

Labor unions and many Democrats say they oppose the Colombia deal because of a history of violence against union organizers in that South American nation.