To date, more than 100,000 people are dead in the United States, and more than 30 million Americans have lost their jobs. Decades of corporate-rigged trade deals – paired with Trump’s inability to coordinate an effective COVID-19 response – are making the pandemic’s effects more devastating. COVID-19 and the shortages of critical medical supplies and shattered supply chains spotlight everything wrong with both the Trump administration and the current rules for the global economy.
Rethinking Trade - Season 1 Episode 6: As U.S. Pressures Mexico to Re-open NAFTA Factories, Workers Protest
COVID-19 deaths are still on the rise across Mexico. Despite government orders to close all non-essential firms, some U.S. factories have continued operating–with little consequence. Now the U.S. ambassador and hundreds of multinationals are demanding the country prioritize corporate interests over the safety of Mexican workers – by reopening factories now.
With the new NAFTA going into effect on July 1, how will the COVID-19 crisis impact the deal’s new worker-protection requirements and Mexico’s related labor reforms?
Transcribed by Lauren Martin
RYAN HARVEY: Welcome back to Rethinking Trade where we don’t just talk about trade policy, we fight to change it. I’m Ryan and I’m joined by our in house trade expert, Lori Wallach. Lori, we’ve all been seeing and consuming tons of news about the coronavirus, but one thing we’re not hearing too much about is Mexico. A lot of the products we use everyday are made in Mexico. What’s been going on in Mexico?
LORI WALLACH: Well, there is considerable spread of coronavirus there and COVID illness. It started a little bit later than the U.S. but there was widespread community spread by the beginning of March, on March 30th the progressive president of Mexico, AMLO, called for a basically shelter at home order and shut down all non-essential businesses. The sort of really gruesome story is that a lot of U.S. corporations that are producing in Mexico, many brand name companies that left the U.S. under NAFTA, have stayed open and particularly in the northern part of Mexico what’s often known as the maquiladora. So, in the border cities across from Texas and California and Arizona there have been considerable horrible outbreaks in factories where social distancing wasn’t respected, where personal protective equipment wasn’t given to workers, and where clearly the work was not essential. So, one of the stories that has gotten into the U.S. press (because most of it hasn’t) is the Lear company, they’re making car seats- obviously not essential- over a dozen workers there died after workers started showing up at the infirmary at the plant saying they had symptoms and they were sent back to work, etc. Unfortunately that is not unique, there have been in Honeywell plants, in [can’t tell what company she’s referencing 2:30] Motors plants, there have been a variety of episodes like that and there’s been a lot of activism which is, you know, powerful, inspired, where really workers saw the situation basically corporate greed, NAFTA corporate greed, versus their health and life. And a lot of workers-against really hard odds in Mexico because you can get beaten up at least, if not worse, for exercising your labor rights- workers protested. An inspiring story but unfortunately not the norm is workers at a factory called TPI Composite, they make the wind blades for electric generating windmills, five hundred workers went out on strike as someone in the plant had died and people were sick, and they got the company to basically furlough them all at full pay. And that is not typical- most of the places that are closing, it’s a struggle to get paid. And also, companies keep popping back up, they’re ignoring the order or they have sort of complicity with local officials. And if that weren’t enough, the U.S. and U.S. corporations have launched this really, really, intense pressure campaign for the Mexican government and those plants, the Mexican workers, to basically put these corporations interests ahead of the life and health of these Mexican workers. And the National Association of Manufacturers sent a letter, the U.S. ambassador to Mexico has just played a really evil role, he has been pressuring the government with threats that the U.S. companies will just take off and produce elsewhere if they don’t reopen those companies regardless of the health complications. And maybe one of the most outrageous things he said was in a tweet: “There are risks everywhere,” said Chris Landau, “but we all don’t stay at home for fear we’re going to get in a car accident. The destruction of the economy is also a health threat.” As if somehow going to make non-essential goods, so a U.S. company can profit, at a time when the outbreak in Mexico is growing, growing, growing, is equivalent to the threat of a car accident. Versus industrial suicide by being forced into a dangerous situation. That is the situation of the Mexican government, it’s been uneven in it’s response in some respects it’s stood up to this pressure and in some instances it’s suggested that it will basically be reopening soon.
HARVEY: Speaking of labor laws in Mexico and labor standards in Mexico, one of the reasons we’re talking about this in our podcast about trade is because the new NAFTA is going into effect on July 1st, and in the new NAFTA there are new and somewhat significant labor standards that have also coalesced with a labor law reform in Mexico. Maybe you can talk about what those standards look like and what this current situation might mean for the new NAFTA’s implementation.
WALLACH: So the new NAFTA is slated to go into effect on July 1st in all three countries, and there could not be a less auspicious time. Because the improved labor standards and the really landmark enforcement system on paper in the agreement that the Congressional House Democrats forced the administration to add, so folks will remember in 2018 the NAFTA 2.0 text came out and the Democrats said “no!” The labor and environmental standards aren’t sufficient, nor their enforcement to stop outsourcing, it will just get worse, plus, there are outrageous new giveaways for pharma. The House Democrats basically drew a line in the sand and there was almost a year long stare down and ultimately the administration backed down and renegotiated the renegotiated NAFTA. So, the deal that’s going to go into effect on July 1 now has some useful improvements. But, like everything in life, there’s what’s on paper and then there’s what actually happens. So, there are at least 3 factors. And when I say it’s really inauspicious this is happening during COVID it’s because some of it’s going to be disrupted by the priority necessarily on the COVID response. So, number one, there are a bunch of court challenges against a new Mexican labor law that was passed to basically bring Mexican labor law into conformity with the obligations in the agreement. So, under the current Mexican labor law, there is what’s called a tripartite system where there is a lot of power in the state level in each Mexican state so that, for instance, if there are conservative governments that support the business perspective the tripartite system is one sort of, the decision is about whether contracts are legit, etc, it’s one union person, one business person, and one government person. So already, you’ve got a prospect of the business people and the government people on the wrong side of the workers. But then, under Mexican labor law, there really has not been under the old law, a way to ensure Mexican workers are actually voting to elect their own unions. So there’s this plague of what are called protection contracts, which are contracts typically signed for the first worker enters into the plant, between the boss and these sort of racket unions that are paid to do a contract, to satisfy the requirements of Mexican law, but the workers don’t get to vote on it, the function is to protect the boss and to have low wages. So there are 700,000 of those protection contracts and one of the things that’s in the Mexican new reformed labor law is revoting those and the NAFTA requires they are all reaffirmed over the period of four years. So that the fake contracts get dumped and people get real unions. And then how is it going to be decided if the contract has really been revoted and there’s no real union contract there, it’s more of the same fake stuff, there’s a bunch of new institutions that have to be set up. So the new Mexican labor law sets up the institutions, sets up those new rights, and it’s been challenged over four hundred lawsuits, some have been dismissed but a bunch are still going forward and they're not getting decided. Because, just like in the U.S., the courts are basically shut down for anything but urgent criminal matters. So the labor law itself is still a little bit up in the air and that is necessary for the reforms to go into effect. But then the second thing is, a whole bunch of new institutions need to get set up. And that involves the U.S. coming through with the funding it promised to help do that, and some additional staffing support, but also the Mexican government which promised to increase funding and promised to establish a bunch of new really national labor relations board type institutions which replace these state level tripartite bodies. And so the national system is still plugging ahead but obviously in the way of every country plugging ahead with resources diverted to COVID, with priorities of everyone, I mean obviously with all the worker safety issues the labor department is just focused on emergency labor worker safety issues and COVID as they can be on trying to set up these new institutions. And then the third piece of it has to do with, really, the kind of oversight and political and press really, if you will, spotlighting of what’s going on and pretty much everything is COVID, COVID, COVID. So even some of the high profile labor disaster situations like at Goodyear where a lot of workers were locked out to try to have an independent union and members of Congress who wanted to investigate got locked out, that’s not been resolved. Some of the outrageous conduct in call centers has not been resolved vis a vis contracts at least there’s been now a criminal case filed against a call center in Mexico City that was staying open even as workers were getting sick. But there’s just not the level of focus or attention by civil society, by parliamentarians here or in Mexico, by the press. So all of those things leave a slightly, you know, less auspicious likelihood of the kind of improvements we were hoping for and we’re all going to have to stay on it.
HARVEY: It’s interesting because we’re actually watching in real time a labor law reform through a trade agreement happening and it’s pretty compelling so why is this something, do you think, that people should be paying close attention to, and what does it mean for the future of North American work?
WALLACH: So, we keep hearing in the context of COVID “we’re all in this together.” And that is an entirely true slogan with respect to workers wages, conditions, futures, in North America. Because we are so integrated after 25 years of NAFTA, for U.S. workers and the recovery that’s going to have to happen economically, given the wreckage being caused by the COVID disaster, as we think about both how jobs are going to be restored, what wage levels will be available, but also, we think about how we rebuild our resilience, our ability to make the basic things we desperately need to be safe, both the medical goods that we found ourselves unable to make or get, but also thinking forward to the next potential disaster be it, you know, infrastructure related or weather related, we are, thanks to the system of hyperglobalization, really, really not resilient in the face of any crisis. Part of the answer to that is a North American answer, to move some of that production out of China, obviously a bunch of it needs to come domestically to the U.S., but also with respect to what’s going to happen with workers here, and wages here, this NAFTA rewrite experiment with improved labor standards and enforcement has got to be made to work. Because, unless wages rise in Mexico, the prospect for U.S. workers having decent wages and, or manufacturing being situated in the U.S. for that, two thirds of the workforce that does not have a college degree, that many of whom had previously a middle class union manufacturing job, it is not an either or, it is not the jobs are in Mexico or the jobs are here. As we’ve seen with this crisi, we don’t have any redundancy. Everything’s been moved to one plant far away, if that plant goes down or we need a bigger supply we’re just stuffed. So this is a moment to think about how we rebuild our manufacturing sector in the U.S., but in North America as well, with redundancy and resilience and distribution of jobs in more countries. And so making sure that those hard-fought labor standards in NAFTA and their enforcement actually make a difference, is every damn person’s business in the United States, not just in Mexico.
HARVEY: That’s all for today, thanks for listening. Rethinking Trade is produced by Public Citizen’s Global Trade Watch. I would encourage you to visit rethinktrade.org as well as tradewatch.org to educate yourself and to find out how you can get involved in the work we’re doing to fight for fairer and more equitable trade policies.
To try to address human needs during the COVID-19 crisis, many governments have shredded the concepts and laws underpinning corporate-managed hyper-globalization. A quick return to business-as-usual is not likely.
In this episode, we discuss Lori’s recent piece in Le Monde Diplomatique, where she identifies four main ways in which the current moment provides unique opportunities to win significant structural changes to make the global and domestic economy fairer, more resilient and more sustainable.
What comes next depends largely on how we mobilize today. With many people who had been sheltered from the ravages of hyperglobalization now personally affected and fuming about the United States not being able to make or get essential goods needed to save lives, it’s time for a progressive “Shock Doctrine.”
Transcribed by Lauren Martin
RYAN HARVEY: Welcome back to Rethinking Trade, where we don’t just talk about trade policy, we fight to change it. I’m Ryan, and I’m joined once again by our in-house trade expert Lori Wallach. So Lori, you just wrote this big piece in Le Monde Diplomatique called “The State Steps in To Save Global Economics,” and in the intro you say, "trying to respond to COVID-19 has essentially forced governments to override the rules and the ideological underpinnings that define corporate globalization, and that there are ways that this upheaval could be organized into structural change to the neo-liberal hyperglobalized order." And then finally you describe what the world looked like before this era and how there are already some models from before that could be resurrected. Do you want to explain the piece briefly?
WALLACH: The basic gist of it was that, for all of the horror and pain of this pandemic, it is revealing things about the inherent structural, frailty downsides, damage, inequities of our current so-called neo-liberal, globalized, corporate-led regime that create conditions for organizing for some big structural changes. And in the way Naomi Klein often talks about corporations seizing moments of disaster, “the shock doctrine,” to double down on policies that benefit them, in a certain way in this moment, the things that are being revealed are the things that show the corporate-rigged system is the problem, which means there’s a moment, perhaps (if we do the work) for organizing something like a progressive “shock doctrine,” to use this awareness of the status-quo’s problems to get some of the long-standing structural changes to make the rules of both our national economies and the way they connect globally to work for more people and to safeguard the planet’s environment.
HARVEY: In the article, you list these four main reasons why the COVID-19 crisis could unhinge the current corporate-led, globalization regime. And the first one you bring up is forced solidarity. Do you want to explain this part?
WALLACH: The pandemic has forced most residents of developed countries – many for the first time – to personally experience pain and anxiety from this regime of corporate-rigged hyperglobalization. For a long time, millions of industrial workers and small farmers and their neighbors in gutted communities, typically not in our major coastal cities, in the United States but also throughout the developing world, knew that this system was a disaster. It had hit them personally. But now we are seeing so many other people who haven’t been affected, suddenly realizing that there are inherent, unaddressed menaces to this system that they could ignore in better times, that they thought wasn’t their problem, it was those other people’s problem. That means, in a way, we’ve been forced into a solidarity, a way of the makers and the buyers, to realize this is a system that really doesn’t work for any of us. This is really important for two reasons. First, it’s mainly been the developed countries’ governments that have been pushing the trade and investment agreements that formalized and implemented the system of hyperglobalization, and that the politics in these countries could be shifting because of this experience, is key for change. A corollary to that is that it’s been the marginalized people in the developed countries who have become ripe for the picking by right-wing, nationalist political forces and this forced solidarity of a common problem, could help shift domestic politics. But also it’s the suddenness of the catastrophe—say, in contrast to the slower, frog in pot, climate boil—that can really awaken many people who have felt insulated from the damage of hyperglobalization. This is to the point where you even have publications like The Economist and the Financial Times, that have cheerlead-ed the whole Davos-mentality, neoliberalism, globalization is values in themselves, have suddenly started to editorialize that maybe some more regional and localized production has merits, and that we shouldn’t only think of the efficiency gods, but rather also think about issues like reliability and resilience. That is a tremendous shift.
HARVEY: That kind of is a perfect intro to your second point, which is that there is not likely to be a return to “business as usual,” that this crisis has also seen some of the rules that define “business as usual” tossed out the window.
WALLACH: Well, this is a very pivotal point. On the one hand, people in countries all over the world have just witnessed their governments break every rule that their government said absolutely could not be broken. Because in the face of having to deal with a crisis, no one in the governments are making the usual excuses of, “well we’re so sorry we can’t do that very sensible thing because of the World Trade Organization (WTO) or a free trade agreement or an economic partnership agreement, or investor state dispute settlement.” There is no thinking about what those rules are. There’s thinking about how the heck people’s lives are going to be saved and goods are going to be produced and people’s needs are going to come first ahead of these rules. And it’s very hard to put that genie back in the bottle, because the sort of the self-enforced “we must follow these rules,” “resistance is futile,” that entire concept has been chucked out the window. You do see some really improbable officials, really people who are the high priests of the current globalization system, saying things like recognizing that in the heat of a crisis you can’t let the market allocate scarce resources, that you have to actually make the government make sure that the health sector delivers for people and not allow speculation and concentration.
Well, to a lot of people I'm talking to, they're saying, you know, that sounds really sensible to be the rule when there isn't a crisis, also, when it comes to essential goods. Why should we have rules that promote monopolies, thin unreliable supply chains, inequality, etc.? So in a way, as a practical matter, because the premises have gotten shattered, but also because things are not going to go back to normal in a matter of weeks, there's going to be a period of time where governments are going to have to be much more engaged. And we've just seen dozens of countries, when push came to shove, decide they needed to try and make sure they had medical supplies for their residents. The U.S. was one of the last to look into this, but the rest of the world started thinking about these issues. We have both as an intellectual matter, but as a practice, a context where basically the smashing of the golden calf of efficiency and globalization as a goal is going to be in place for a while. And that creates openings.
HARVEY: And one of those openings, Lori, is what we're seeing now in the debate around corporate globalization. And what you point out in the piece is that this debate is no longer a left versus right paradigm. And you say that while acknowledging the dangers of ceding this critique to the far right. Why don't you tell us a bit about this point, and also how you see progressives engaging in this kind of terrain.
WALLACH: So while all of these paradigms of globalization have been smashed in the short term, team status quo, the corporations, a lot of officials are in a totally tone-deaf way, claiming that the answer is to double down, that we need to cut all the tariffs on all the medical goods, somehow that will make things better. Well, obviously, that's not the problem. The problem is no redundancy, not enough capacity, no system for organizing priorities of where supplies go, where the sickest people are. So while team status quo is trying to use this opportunity to double down, what's emerging is a new dynamic that is, if you will, team status quo for the old policies and the corporatists vs. populists from the Bernie Sanders, Elizabeth Warren progressive populist spectrum all the way over to say the Josh Hawley, very conservative Missouri Republican senator version, all of whom are calling for interestingly similar structural changes that have the government much more involved in making sure that the economy that comes out of this crisis is one that is more resilient to deliver necessary, essential goods to people, that strengthens our national resilience, our national security, in a broad sense, national security, our health, our infrastructure, etc. And that divide is super interesting because you basically have more of a chance of having structural changes when you have broken out of some of the binary left-right dynamics in this country.
The example of this, for instance, is, listen to this: quote, this pandemic also exposed a Grand-Canyon-sized fault in our supply chain. We don't make critical products in America anymore. It's a threat to our health, our national security and our economy. Americans have long known about this problem. Washington is just waking up to it. And Wall Street was hoping it wouldn't get caught. End quote.
So that sounds like Bernie Sanders or Elizabeth Warren, pick your choice. But it is neither of them, could be. That actually was the guy, Josh Hawley, the Missouri Republican. So what's ending up happening is odd combinations of Democrats and Republicans are coming together with solutions where, for instance, you have Pramila Jayapal, co-chair of the Congressional Progressive Caucus, and that guy Hawley, both calling for a guaranteed national income to be paid by the government to basically get around the inefficiencies of all of these different loan programs and bailout programs, or the money goes to the companies, and then they're supposed to pay people's salaries. And that kind of really smashing of partisan lines is the moment when there are opportunities to make really big change. Now, at the same time, we have to be super careful because the left and the right in the populist space can both identify the problem and even identify some of the policies that are to be the fix.
But it's super perilous if it is the right part of the spectrum that owns that, because part of the biggest fix here is accountability and democracy. And you're not going to get those kinds of fixes from the likes of, say, a Steve Bannon who can do the critique of what's wrong with the current system, but also was, you know, in love with authoritarianism. This gets back to where we started, which is this is a moment where progressives need to really step up. It's not going to happen by accident. The changes will happen if we organize for them.
HARVEY: And Lori, point four is a really big point, and obviously this is a really short show, but let’s talk about rebalancing relations with China and decentralizing the global production economy. What could this look like?
WALLACH: Well the fourth factor in all of this is something that was starting to happen before this crisis. And this crisis has sort of shone a spotlight on, which is, not just in the United States but in countries around the world, there’s a growing recognition that the role China, as the government, and it’s government-structured economic system in this current structure of globalized economy is really unsustainable, unhealthy, perilous, to both numerous countries’ essential-goods supply chains like medicine and personal protective equipment (PPE), but also serve more broadly to their infrastructure. Heaven forbid the next crisis is that there is a horrible computer virus, not a medical virus that is introduced that crashes our electric grid. And part of that virus destroys some of the switches and mechanical aspects of the system and we need a lot of new electric-grade steel, and we need to remake a lot of infrastructure. Right now we are way too reliant on imports that could take weeks and weeks to get to us, if they’re available to us, to be able to do that.
There is this notion that interestingly started in the military supply chain world, so there are Republicans thinking about it, about just practically not having us over-reliant on any country. Separate from China, just any country. And I think it really started to come to mind when the Twin Cities had that bridge fail, that horrible disaster some years ago. And that bridge was closed for a lot longer than it needed to be and snarled up that whole community because we couldn’t make that kind of steel to have a long-span bridge. We had to wait for it to be floated up from Brazil or sent over from China. And so that moment had a lot of people who do infrastructure planning and people in the Pentagon saying “Hmm, now that is a problem.” Heaven forbid, from the Pentagon’s perspective, we’re in a war and supply chains got cut. And various people who think about national infrastructure start thinking about, Heaven forbid, we had a major west coast earthquake or name your problem, how would we fix things? So all of that got the right thinking about these practical issues.
Of course, more on the left, there’s been a lot of concern about how U.S. corporations have plotted with the Chinese government in a mutually-beneficial (at the time) co-habitation of the Chinese government wanting the technology, the know-how, the investment, the employment. The U.S. corporations were enticed with “here’s a billion-plus consumers,” but what they really wanted was “here are a billion-plus people who can work with no labor rights and very low wages,” and the result has been a system where in many different sectors there is an over-reliance on production in China, if not of an entire good, some key element or part or component, or input (the raw material- chemical, steel, etc.) that has become really only made in China, or too much of it is made in China so that there really isn’t redundancy, there isn’t diversification. And to some degree, this crisis is making the whole world realize we need redundancy, we need diversification, but it’s really hard to separate the China factor out of that because it has been the Chinese government’s plan over time, as part of a geopolitical strategy, to dominate in different sectors.
And in the same time that the U.S. and most of Europe, not all of Europe, but a lot of Europe have made words like ‘industrial policy,’ i.e. a plan to invest in dominating a sector in the West, it's become a dirty word. But in China you actually saw a government with goals, making plans, and putting a lot of money, subsidies – you hear a lot about China ‘cheating’ – it’s subsidizing that stuff and then trading it. Or reducing the currency value to make goods that could be exported competitive, not by their actual intrinsic value but because you’re rigging the exchange rate to make imports expensive and exports less expensive. All of those tools the government of China has employed, and in the last 30 years it was to get multinational companies to come in. But now that they have the technology, the subsidies are increasingly not given to foreign companies, they’re actually only being given to the indigenous-created Chinese companies that now have the same technology they got from the foreign companies that were enticed by the labor. And you have increasingly some of the U.S. companies that were the big multinationals that were benefitting from the cheap labor and promised the market who are themselves starting to get squeezed. And at the same time as this sort of military, we-need-redundancy, the big companies are less excited about the prospects of their profits in China, because they’re being squeezed out by the now-new Chinese companies that are getting subsidized.
You've always had progressives extremely concerned about issues like corporate concentration and issues around labor rights and human rights in China, where, let's be blunt, lot of workers right now in those Chinese plants, that are exporting things to the U.S., are Uighurs and other politically persecuted groups who are in forced labor situations.
So all of that's come together to have a lot of governments, including across the political spectrum in the U.S., a lot of politicians and people, starting to think about the fact we just need a more diversified way of producing. And some governments have gotten very active in that direction. The Japanese government just announced billions of dollars of government funds to get Japanese companies to move from China back to Japan for the sake of redundancy. I think that that also creates a moment when people are thinking about where things are made, to think about how we can have policies both in the global sphere, but also domestically that can try and revitalize more production in more places. Which is to say, some more robust domestic and regional production, not autarchy, which is just the technical word for self-reliance. But redundancy. So, of course, we're still going to have trade.
The question is, under what rules? And can we diversify the sources of those imports, so we're not only overly reliant on one place or if there's a problem, everything falls apart. But also, can we have some more domestic production, which is not only a matter of our security and resilience, but also could have some great corollary benefits in creating some more middle-class jobs for a lot of the folks who have been partially marginalized by this current system.
HARVEY: Lori, speaking of some of these rules, in the conclusion in your piece, you paint a picture of what the pre-neo-liberal era looked like and you describe some of the older rules that exist that can still be utilized today. And you also talk about new rules moving forward. Why don't you close us out with what some of those rules look like?
WALLACH: I think that the key thing for everyone to keep in mind is, there are lots of policy tools to get different outcomes, some of which we've seen succeed in the past. The real issue is getting the goals right. So if we want an economic regime that prioritizes things like getting people the essential goods they need reliably, that prioritizes having more localized and regional production, which both helps for the redundancy that leads to resilience and reliability, but also has the corollary benefit of more production jobs for more people, which is an income inequality remedy, but also honestly at this point, is an urgent aspect of addressing the climate crisis, to not be schlepping things from one production facility at the lowest environmental standard in one part of the world to the whole rest of the world spewing carbon along the way. If our goals are like that, then the tools we can use our many. A couple that I write about are just things that I think a lot of people have forgotten about.
But for instance, before the mid 1990's, establishment of things like the World Trade Organization and free trade agreements like NAFTA, every trade agreement that had been established, including the GATT, the General Agreement on Tariffs and Trade (the post-World War Two standard of trade) they all treated trade in food differently from other goods. Why? Everyone needs food to survive. So those trade agreements ensured that governments had lots of policy space to determine how to make sure there were affordable, reliable supplies of food. So they allowed things like supply management. So you set up a quota system. You have a certain amount of imports, but you always have a certain amount domestic production. That way you knew, no matter what you had both, if you had a bad harvest, you had imports. And if something happened overseas, you had domestic production or stockpiles or subsidies. And that logic, I think, makes sense for food, as we're about to see now with the [COVID-19] crisis in meat packing and the overconcentration in that sector. But also, it should apply to other critical sectors like medicine. The combination of domestic and regional manufacturing and trade is how you maximize your resilience.
Similarly, as far as how you would distribute around the world this kind of production without it being sort of random or playing favorites of the day between countries or companies, there was a whole system that existed until the WTO went into effect which phased it out. And that's it was called the multi-fiber arrangement. It was a managed trade system that distributed production quota, in that case for textiles and apparel. But it was a way to make sure that either countries with smaller industrial capacity, so the Caribbean islands, smaller African countries, or countries with higher wages, the U.S., Europe, would still be part of producing in that sector, so that all the jobs and investment wouldn't run to the lowest wages like it did as soon as the MFA, the multi-fiber arrangement went away. When the multi-fiber arrangement system went away, the corporate-managed trade logic, within years concentrate production in China and a few other Asian countries that had the lowest wages and standards. And those industries in Africa, the Americas, the Caribbean, obviously the U.S. and Europe, were just decimated. The system of basically negotiating a system of quota guarantees that each country can have some level of protected production so that there's some basic fallback.
And another thing to think about from the past is the kind of rules that we're in, the thing that was supposed to be the WTO before the WTO. That was the thing called the ITO, the International Trade Organization. A sort of quirk of trade history is that the WTO wasn't the first idea of having a global body. The first idea was something that came out of the discussions after World War II. A lot of Progressive's got together and created an agency that—brace yourself, it sounds like, wow, it's taken 50 years to get back to that—sets the International Labor Organization labor standards and competition, anti-trust standards and rules against currency mismanagement as a mandatory floor on which the trade rules were situated. The idea was to elevate human needs without imposing lots of one-size-fits-all dictates. It took international standards. Countries had agreed to as sovereigns and said, OK, here are the other things about equality and wages and fair competition and currency cheating we've all agreed on as countries. And now our trade agreements are cutting of tariffs, are opening of markets. It's going to be premised on our agreement on all that other stuff.
And that ITO, unfortunately, was basically blown up by the U.S. Senate, which didn't want that kind of set of rules. And the GATT was actually just this provisional thing that was just the tariff rules that was in a way like an annex to this ITO that got tanked. But that ITO structure, and there's a full treaty that would obviously would have to be updated, but conceptually it shows how you would re-prioritize different international rules and institutions to create a more lift-up global trade regime, not a race-to-the-bottom one. And, you know, these are just some of the ideas. Entire books, papers, treatises have been written about this. The trick is going to be the fight to win the debate about what the goals are, because these policy tools, there are many of them, lots of good ideas. The battle is going to be really about this moment leading to a more progressive vision of the rules nationally as well as internationally.
Because here's the thing: it could go either way. This crisis is showing the vulnerabilities, but the contest next is of power and politics. It's not a lack of policy options. I think that unless progressives in numerous countries organize to demand an end to business as usual, post the urgency of the crisis, we could see a mildly adjusted version of the status quo. Or we could find ourselves actually subject to some kind of right-wing nationalist alternative. That's on us. Cause like those on the left, the likes of Steve Bannon can critique the extreme failings of hyperglobalization. But the alternatives offered by those who love authoritarianism, like him, certainly will not be the democratic accountability that really is a core antidote to the failings of hyperglobalization.
HARVEY: That's all for today. Thank you all for listening. Rethinking Trade is produced by Public Citizen's Global Trade Watch. I encourage you to visit RethinkTrade.org, as well as TradeWatch.org to educate yourself and to find out how you can get involved in the work we're doing to fight for a fairer and more equitable trade policies.
Civil Society Organizations and Concerned Activists Submit Nearly 7,500 Comments on Proposed U.S.-Kenya Trade Agreement
By Melanie Foley
In March 2020, the Trump administration notified Congress of its intent to negotiate a Free Trade Agreement (FTA) with Kenya after a meeting between the U.S. and Kenyan presidents.
Public Citizen submitted formal comments to the U.S. Trade Representative explaining why negotiating a standard U.S. FTA with Kenya is a very bad idea in general, and doing any trade negotiations that are not focused on COVID-19 response at this time is counterproductive.
The amount of trade between Kenya and the United States is small, but if Kenya negotiates a standard FTA with the United States, it will be forced to give up strong laws banning certain genetically modified foods and protecting consumers’ privacy online. And Kenya will become vulnerable to floods of subsidized U.S. agribusiness products that could wipe out local farmers.
It remains unclear why Kenyan President Uhuru Kenyatta would sign his country up for a raft of new anti-development obligations under a U.S. FTA when Kenya already enjoys largely duty-free access to the U.S. market under the African Growth and Opportunity Act (AGOA).
From comments Kenyatta made after meeting with Donald Trump, it appears that Trump suggested that AGOA would end and Kenya would be left hanging. Yet, barring a coup, Trump will not be the president when the next AGOA renewal is to take place in 2025, so he could not veto it if that was the threat. And second, Congress, not the executive, has the authority to renew AGOA, which it does as a routine matter with little to no opposition. The negotiations should not be an attempt to break up or undermine AGOA or Kenya’s primary trading bloc, the East African Community. Indeed, the mere suggestion of these talks may have already given the appearance that the administration is attempting to do just that.
The European Union’s fateful decision to revoke the preferences under the Lomé Convention should be a cautionary tale for the administration. The Lomé signatories — African, Caribbean and Pacific nations including many former European colonies — could compete in the global market with these preferences and based their economies around them. But in 2000, the European Commission announced the end of Lomé and the beginning of reciprocity-based Economic Partnership Agreements (EPAs). The divide-and-conquer approach of negotiating EPAs with blocs of Lomé members plus the revocation of special preferences not only harmed the economies of these countries, but also proved to be a political blunder, embittering the states against the European Union.
The timing of this FTA is also highly questionable. As the world grapples with the COVID-19 crisis, the United States should not prioritize negotiating a new trade agreement, much less one that could undermine public health and safety protections. The only trade that the countries should be discussing now is how to maximize both nations’ access to urgently needed medical equipment, supplies and medicine. This point was recently emphasized by 400 civil society groups from around the world in an open letter urging governments to halt all trade and investment treaty negotiations during the COVID-19 outbreak and refocus on access to medical supplies and saving lives. It is bad policy and bad politics to take advantage of a distracted public to double-down on the neoliberal, corporate-dominated trade model that has contributed to mask and medicine shortages.
The Citizens Trade Campaign (CTC) — a national coalition of environmental, labor, consumer, family farm, religious, and other civil society groups — also submitted comments on a potential U.S.-Kenya deal. The CTC’s members are a diverse and powerful group, including the American Federation of Teachers, Americans for Democratic Action, Communications Workers of America, Friends of the Earth U.S., Institute for Agriculture and Trade Policy, Interfaith Working Group on Trade and Investment, International Association of Machinists and Aerospace Workers, International Brotherhood of Boilermakers, International Brotherhood of Electrical Workers, International Brotherhood of Teamsters, International Union of Bricklayers and Allied Craftworkers, International Union of Painters and Allied Trades, National Family Farm Coalition, National Farmers Union, Public Citizen, Sierra Club, UNITE HERE, United Methodist Church General Board of Church and Society, United Brotherhood of Carpenters, United Mineworkers of America and United Steelworkers, as well as state-based coalitions, organizations and individuals throughout the United States.
Submissions from the CTC, Public Citizen, and nearly 7,500 individual trade justice advocates outlined the same set of demands. If there is to be a U.S.-Kenya trade agreement, it must:
- Be negotiated transparently, replacing the corporate advisory system with an on-the-record public process;
- Include strong human rights, labor and environmental standards with swift and certain enforcement;
- Exclude Big Pharma monopoly rights that raise medicine prices;
- Exclude investor protections that incentivize the offshoring of jobs and empower corporations to attack democratic policies in unaccountable foreign tribunals;
- Promote balanced agricultural trade that safeguards the interests of small, independent farmers to strengthen rural communities;
- Require imported food, goods and services to meet U.S. consumer and environmental standards;
- Eliminate limits on procurement policy that forbid Buy American and other Buy Local policies, offshoring U.S. tax dollars; and
- Protect digital privacy by excluding e-commerce rules that shrink the policy space of Congress and U.S. regulators.
Even as the timing for the launch of any new trade agreement negotiations are inauspicious and the goals unclear, what the recent debate over the renegotiated North American Free Trade Agreement (NAFTA) spotlighted is that public opinion around what can and cannot be in a U.S. trade agreement has changed. The support the new NAFTA received from both parties in both chambers of Congress and from some sectors of civil society was in the context of revising an existing agreement. Trying to fix an existing bad deal like NAFTA to reduce its ongoing damage is very different from creating a truly good trade deal that generates jobs, raises wages and protects the environment and public health.
Any new U.S. trade agreement being negotiated from scratch – including a potential agreement with Kenya – must build from the floor set by the new NAFTA. That is because the measure of such a new agreement will be whether it can actually benefit people, with the alternative being no agreement. In contrast, the alternative to the new NAFTA was the status quo of the old NAFTA.
For a tabla rasa deal to enjoy support, the bar will be higher than the revised NAFTA. That means no special protections for foreign investors or Big Pharma, stronger rules to stop race-to-the-bottom outsourcing of jobs and pollution, binding climate standards, and no limits on the policymaking processes or public interest protections needed to ensure that our food and products are safe, our privacy is protected, monopolistic online firms are held accountable and big banks do not crash the economy again.
Public Citizen and our allies are poised to monitor these negotiations and outcomes. We will ensure the public is apprised of how terms of a potential U.S.-Kenya trade agreement will affect peoples’ jobs, health and safety and the environment. We will fight fiercely to sustain the improvements for which we have long advocated that were included in the new NAFTA and to promote the critical improvements that remain to be made so that any new U.S. trade agreement actually benefits most people, rather than replicating past failed trade-pact models that have benefited large commercial interests to the detriment of most.
The COVID-19 crisis revealed how reliant the United States has become on imported masks, respirators and other essential medical goods. The latest news is about medicine shortages. Decades of bad trade and tax policies have incentivized pharmaceutical corporations to outsource the production of many categories of drugs – and also production of the Active Pharmaceutical Ingredients (APIs) that are drugs’ key ingredients. Most APIs come from just two countries, China and India. As workers there have fallen ill and plants have been closed for social distancing, production has dropped. In many categories, there is no domestic production to make up the difference.
Transcribed by Lauren Martin
RYAN HARVEY: Welcome back to Rethinking Trade where we don’t just talk about trade policy, we fight to change it. I’m Ryan, and I’m joined once again by our in-house trade expert, Lori Wallach. Lori, today we’re going to be talking about a topic that’s been in the news recently, and that is this forecast that we might be looking at a shortage of medicines in the US sometime soon. What is all this about and what are some of the major issues at play in this forecast?
LORI WALLACH: The prediction that you’re seeing now, that we’ll fall short of the medicines we need, not medical supplies, is related to the broader problem of how our system of hyperglobalization has made us very vulnerable to getting everything we need to be safe and to fight this virus from one or two countries. There are two different, related issues. First is where medicine itself is actually made, and then there is where the things that go into medicine, which are called active pharmaceutical ingredients, APIs, are actually made. There are 156 essential, critical medicines that every hospital has. The stuff on the crash cart, the stuff that every floor of every hospital has,96% of those critical 156 drugs are produced just in China and India. And even before the COVID crisis there were potential shortages and short supplies in 63 of those 156 drugs. China, obviously, has had a big slowdown, because people there got sick. And both China and India have stopped exporting a lot of their medical supplies. So that means, even if there are countries that produce medicine, they can’t get the inputs. And a lot of generic finished medicines actually come from India. So all in all, because there’s no redundancy, because a handful of really big companies have concentrated production and made a lot of money that way in a few very low wage countries, we could end up seeing shortages.
HARVEY: That term you used Lori, redundancy, we’ve talked about that in previous podcasts. Can you just remind the listener what we mean when we say redundancy?
WALLACH: It’s a production issue, and it means that there isn’t just a sole source of a supply, or just one or two. So redundancy is something that, basically, you would think of in every critical system. So if you have an emergency plan, about, say, how to get out of town if there’s a terrorist attack, you have plan A: a car, plan B: the train, plan C: the bicycle. Those are all redundant ways to meet your goal. And so in a lot of companies, for a very long time, they would have redundant production. So in order to make sure they could make the final product, they would have two or three sources. Maybe one that was their own factory and then two other suppliers outside that made the key parts. And so they had lots of different options in case their factory had a problem or one of the other factories had a problem. They had redundancy in their supply chain.
But over time, in the medical sector very dramatically, a handful of really big companies have been buying up their competitors. And once they buy, one pharmaceutical company buys the other one, they don’t just keep running the same plants and making the same stuff and getting double the income. They typically close down the production capacity that’s considered an efficiency. That would mean less costs. Translated out that means they fire all the people who are in the other plant and then they have wherever outsourced work is in India, in China, wherever, they add another shift or they add more people. And now the one company has only its production capacity- maybe a few more hours, a few more workers- but that whole different factory that once existed if something happened to company A’s production, company B’s production was there, now it’s just company A that bought up company B and shut down that production. So we see that for instance, the big pharma companies, they don’t want to change that, because it’s super profitable to basically have all this production in China and India, where people are paid very little, the environmental costs are extremely limited, and then they import the goods back to sell at a high, high price here.
HARVEY: And, maybe we can talk about how this situation came to be. A couple decades ago, what did this industry look like, and how did it change over the last few decades of neoliberal trade policies and other really corporate driven, corporate rigged policies pushed in the international trade arena?
WALLACH: So the pharmaceutical industry looked a lot more like every other industry, which is companies had redundancy in their supply chain so they either made some of the parts themselves or they had two or three sources of it, and there were a lot more competitors. I mean if you’re old enough, you remember a bunch of airlines that don’t exist anymore, and you remember a bunch of telephone companies that don’t exist anymore, and you remember a bunch of car models and brands that don’t exist anymore. So we don’t notice it as often with the pharmaceutical companies cause they’re not really brand names in the way we know, “hmm, there’s no more Plymouth, there’s no more Pontiac, no more Saab, there’s no more Oldsmobile.” But in fact, these companies have been consolidating and consolidating so that there is a really short list of really big companies that both do medicine and medical supplies.
But some of the pharmaceutical companies just do pharmaceuticals, but you know, they buy up and shut down their competition. It helps their monopoly. They have monopoly licenses called patents to sell their medicines for whatever price they want, then heaven forbid another company comes up with something that is a different medicine that can compete, so they buy them up and put them out of business. As a result we have a very limited supply, and right now we need to gear up to make more of a lot of things. So things where the supplies are really short right now are the drugs that are being used for COVID:Like the sedatives that are being used when you have to put someone on a ventilator, because it’s obviously, you’re going to be fighting against having something down your throat. They’re going to put you in an almost induced coma. And the supply chain is both way too concentrated, but also elements of it, like the second stage(not just the active pharmaceutical ingredient but the compounding) ironically for instance, a lot of [them] were made in the Lombardy region of Italy, whichhich has been the hardest hit, the first area where really there was a huge COVID outbreak. So when we have both limited suppliers and limited alternatives for the parts, the APIs and the actual production is too concentrated in a few places- antibiotics in Lombardy- then the whole world can have economic and health problems that are actually worse than the medical problem that the drugs are needed to combat.
HARVEY: So, Lori, you mentioned Big Pharma earlier, but I wanted to talk a little bit more about their role in this whole process. Not just in accumulating large amounts of money and of outsourcing jobs to countries with lower wages and less restrictions to, you know, participate in the race to the bottom, but they’ve also been active in here in the US on domestic policy and also influencing other trade policies. Maybe you could talk a little about that.
WALLACH: So, the big pharmaceutical companies have done a couple different things. One, they’ve pushed for trade agreements that include these extreme monopoly protections and that basically make other countries—poor, developing countries with low wage workers—sign up for the special protections, so that they can outsource their production there and still get the monopoly guarantees. Then, number two, they have fought for tax policies in the US so that they can literally ship their corporate headquarters someplace else and then claim that they get a lower tax rate because they’re a foreign company. That’s called an inversion. So a lot of the big US pharmaceutical companies are incorporated in Ireland because it’s a tax haven. And then number three, they have pushed for other tax policies that have let them actually charge them. American companies can charge the Irish company basically a business expense for the patents that are held in the US. They take it as a business deduction. So they’re dodging taxes basically twice while getting more incentives to outsource. And that whole combination of policies in the face of also no anti-trust policies to speak of, certainly not in our trade agreements and not very strong any place except Europe, means that these companies keep consolidating and consolidating and consolidating until there are just a few, so there’s no competition between them. And they are able to rig the policies so that the countries also aren’t making these companies face market competition terms.
HARVEY: When you brought up Ireland, it made me think. I was looking through the TAA database,which is up on the Public Citizen website, and when I was looking up medical supplies, I was noticing a lot of outsourcing to Ireland. Is that because manufacturing jobs are going to Ireland, or was this part of that process you were describing?
WALLACH: You can see this fluky trend of the pharmaceutical corporations trying to dodge taxes, if you look either at the Trade Adjustment Assistance database that tracks certain certified job losses caused by trade by the government, or if you look at trade flows in pharmaceuticals. So if you look at TAA you see this weird situation where all these pharmaceuticals factories that used to employ workers in New Jersey, in Pennsylvania, in California, in Wisconsin, in Illinois, you see them certified as job loss outsourced to Ireland. Well, the company relocated to Ireland as a corporation to dodge taxes, but they’re not opening big factories there. Then they’re outsourcing the production to some contract company that is, for instance, in India, or in China or some other low wage venue, and that contract company is getting the APIs down the supply chain from some other company almost certainly in India or China, and those companies are sourcing some of the things that make the APIs from within their own countries. So we have basically seen both job loss,but more importantly in the short term now, a lack of reliable supply caused not by acts of God but by specific trade and tax policies. Because you can also see if you look at the trade data of the value of pharmaceutical goods, it looks like Ireland is our number one trade partner. That’s what it most looks like if you look at value of imports of pharmaceutical goods. But that’s just because of the corporate patent licensing scam. In factif you look at the volume, where the stuff actually comes from, it’s all coming from China and India.
HARVEY: On that point, since we should wrap up, what are the solutions here? What’s currently being done regarding securing adequate supply lines of APIs, and also what kind of policies are needed? What could help change this scenario to something a lot better?
WALLACH: Maybe if there’s any good thing that comes out of this COVID crisis it is that governments start to take seriously the warnings that have been issued for years. That they need to have certain essential goods produced closer to home and also to have stockpiles.
So in 2014 the Department of Defense did a study, and it was looking simply at the military readiness in medical supplies for an emergency like a pandemic or, heaven forbid, a war. And what that study (and again, six years ago) determined was that supply chains are so incredibly thin, capacity to manufacture was so limited, and so much of it was relying on China, a country that could be on the other end of a dispute whether directly or through proxies, that the US military was in enormous peril of not having the supply of essential goods and medicines that were necessary. And no one did anything about it.
So what should happen? Different layers. In the short term, we need to figure out where we will have these shortages and quickly start to gear up production using for instance, the Defense Production Act, to turn the kinds of facilities that are making now certain kinds of clean production (because obviously pharmaceutical production has to have very strict controls) to be able to make some of what we may not be able to get in the global market. Number two is thinking forward. We need to think about how both the making of key medicines but also the components of them, the APIs, can have production if not increased in the US, which is in itself a good idea, but also production increase, if you will, in the region. And the importance of that is emphasized by if you look at the critical list. There are 156 drugs that are basically in every crash cart, in every hospital, they’re the medicines you have to have. And right now 96% of those, 96% of those, are produced outside of the US and not even nearby. So if we think of what we want to have here and what we want to have in neighbors, in the Caribbean, which before all the companies started merging the Caribbean actually interestingly and Puerto Rico (part of the US but in that neck of the woods) there were tax incentives and other programs to have pharmaceutical manufacturing there. Or, in Mexico and Canada there is a sort of North American and the Caribbean redundancy in the medicine supply chain with APIs and the actual production. And then the final piece of it is, obviously, the government has entirely mismanaged the situation. We still need stockpiles even if it’s the case that we need to be having the ability to ramp up production and we need more production capacity. I mean that’s the thing about redundancy, there’s a continuum from “it’s lean, it’s mean, it’s super profitable” and the whole damn thing goes to hell if one thing goes out of place, versus having enough redundancy that if you need to gear up production in the face of some crisis, you actually have the hardware to be able to make what you need to be healthy. And there’s short-term and long-term ways in which we can and we really must make those changes. That’s certainly one thing everyone’s learning the hard way from this crisis.
HARVEY: That’s all for today. Thank you all for listening. Rethinking Trade is produced by Public Citizen’s Global Trade Watch. I would encourage you to visit rethinktrade.org as well as tradewatch,org today to educate yourself and find out how you can get more involved in the work we’re doing to fight for fairer and more equitable trade policies.